TRAPHACO JSC (TRA)

April 3, 2015

COMPANY UPDATE: BUY

Current price (4/02/2015): VND 73,000

1Y Price Volume VNIndex
Target price: VND 83,500 '000 shares
change TRA Peers
Short-term (TA) trading recommendation: HOLD 20% 120
Mid-term resistance level: VND 75,800
Mid-term support level: VND 72,000
0% 80
Bloomberg ticker: TRA VN Exchange: HSX
Industry: Healthcare / Pharmaceuticals
Beta: 0.93 -20% 40
52w Low / High (VND’000) 71.0 / 88.5
Outstanding shares (mn) 24.7
Market cap (VNDbn / USDmn) 1,801 / 83.8 -40% 0
Free-float ratio (%) 9.0%
LTM Avg trading vol (share) 4,491
Foreign-owned ratio (%) 45.7%
We upgrade our recommendation for TRA from HOLD to BUY
Dividend EPS
(VND) (VND) and raise our 12-month target to VND83,500 per share (from
2015 VPBS Forecast 3,000 7,284 VND75,500 per share):
2014 1,000 5,910
Investment upsides:
2013 1,000 6,255
 We maintain a positive outlook for industry growth: BMI
2012 3,000 9,432
2009-14A 2015F 2016-19F forecast that Vietnam’s pharmaceutical sector CAGR will reach
CAGR (VND bn) CAGR 16.4 percent from 2013 to 2018. We believe that TRA’s high-
Net revenues 17.2% 1,871 7.0% quality products will allow it to capitalize on the expanding
EBITDA 26.8% 330 10.0%
population and higher level of health awareness among the
Net income 23.4% 180 10.9%
growing middle class.
TRA Peers VNI
2015 P/E 10.0x 10.5x 11.8x  Restructuring work done in 2014 will yield substantial benefits
2014 P/E 12.4x 9.9x 12.1x in the upcoming years. TRA added 8,000 customers to its
2014 Debt/Equity 4.4% 0.0% 114.2% portfolio in 2014 to 18,000 POS. Meanwhile, it significantly
2014 Net margin 8.8% 10.7% 9.5%
reduced the proportion of wholesalers in accordance with the
2014 ROA 14.7% 13.7% 2.7%
2014 ROE 19.8% 19.6% 14.6% new selling policies as outlined in our previous report. The
restructuring work was aimed to control the supplies and
Company description:
retailing prices of TRA’s products.
Core businesses: manufacturing (66% of 2014 net
revenues), and distribution (34%) of pharmaceutical  We forecast strong growth in TRA’s manufacturing revenue
products and net income in 2015. Weak 2014 net income does not
Main product lines: traditional medicines (51% of 2014 concern us. We believe that strong revenues will drive 2015
net revenues) and western medicines (15%)
Key business risks: product offerings are very similar to
earnings. Top line growth will be driven by the planned
competitors addition of 2,000 new customers in 2015 and by higher annual
Customers: wholesalers, retailers and pharmacies across sales per customer (16% according to VPBS’s forecast).
Vietnam
2014 results: Revenues: VND1,651 billion (USD77 Short-term price risks:
million), Net income: VND146 billion (USD7 million),  Pharma stocks have very low liquidities: Traders and big-hand
Equity: VND789 billion (USD37 million). investors might not find the situation attractive and thus keep
the money flow out of pharma stocks in general.
Please see important disclosure information at the end of this report.

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CONTENTS
2015 – The beginning of a new growth phase ....................................................................................................................... 3
Customer portfolio increased from 10,000 in 2013 to 18,000 in 2014............................................................................. 3
We believe that TRA will enter a new growth phase in 2015 .......................................................................................... 4
Key financial assumptions and forecast ................................................................................................................................. 6
Valuation .................................................................................................................................................................................... 7
Technical analysis ..................................................................................................................................................................... 9

Appendix 1 – VPBS projection ............................................................................................................................................... 10

Appendix 2 – Past price peformance .................................................................................................................................... 12

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 2015 – The beginning of a new growth phase
Customer portfolio increased from 10,000 in 2013 to 18,000 in 2014

Fast growths in the recent
years had led to an over-
supply of TRA’s products in
the market. As such, in 2014,
TRA completely revamped
the company’s customer
portfolio, reducing the
percentage of wholesalers
from 70% to 20%.
“Hot” growths in the past had led the over-supply of TRA’s products in the
market in recent years. Indeed, TRA’s traditional-medicine products were (and, to
certain extent, still are) so popular that both wholesalers and retailers often stocked
them in large quantities. When the market is flooded with supply, the law of
economics dictates that profit margins must necessarily collapse, which is precisely
what has happened in recent years. Suddenly, store clerks and wholesalers
discovered that recommending TRA’s products to customers have become less and
less profitable as other stores would attempt to cut prices in order to reduce
inventories. And thus they stopped, switching to other similar products with higher
margins or commissions.

At the beginning of 2014, TRA started to completely revamp its selling

policies by initiating direct relationship with retailers and thereby cutting
down the number of wholesalers. This strategy has two goals: (1) to reduce the
supply of TRA’s products in the market and (2) to stabilize the retailing prices of
TRA’s products across all pharmacies nation-wide.

From 2013 to 2014, TRA’s customer portfolio has increased from 10,000 to
18,000 point-of-sales (POS). However, the customer structure has gone from 70
percent wholesalers to 20 percent wholesalers.

Restructuring works carried out last year had inevitably led to negative
growth for 2014. Specially, total net revenue down 1.8 percent; manufacturing
revenue down 0.5 percent; net profit down 2.4 percent. Net sales actually peaked up
substantially in 2H2014 (+12 percent y-o-y) after a 15 percent y-o-y decline in 1H2014.

Revenue & net profit (VNDbn) Stable gross margins Revenue by channel

Net revenue Manf. Net profit TRA - consol. Manf. Distri.

1,682 1,651
61% 62%
OTC
65% OTC
1,096 1,090 43% 43% 77%

ETC
149 146 8% 8% 35% ETC
23%

2013A 2014A 2013A 2014A 2013A 2014A

Revenue by geography (2014) Expenses, as % of revenue

Selling G&A Pmt. discount

Middle 3%
14% 8% 8%

South
North
23%
63%
20% 20%

2013A 2014A
Source: TRA

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 ETC channel continues to suffer due to difficulties caused by regulations.
Since 2012, TRA’s sales through the Ethical channel (ETC) have experienced setbacks
due to the issuances of Circular 01/2012/TTLT-BYT-BTC and Circular 36/2013/TTLT-
BYT-BTC. In essence, these circulars regulate the drug-bidding process in Vietnam’s
stated-owned hospitals and mandate the selection of the cheapest tender among
bidders of the same bidding category (e.g. GMP-WHO, PIC/S). TRA’s drugs usually
demand higher prices due to their higher production costs compared with other
small-scale local manufacturers. This, in turn, lowered TRA’s bid-winning chances in
the ETC channel.

Higher expenses from channel switching (wholesale to retails) do impact

operating margins. While gross margins remained stable, operating margins fell
from 14.5 percent in 2013 to 12.9 percent in 2014 due to the recognition of VND41
billion (USD1.9 million) in discount payments made in 2013. We believe that this
payment discount expenses was incurred in order to encourage retailers to
recommend TRA’s products to consumers (and hence to increase TRA’s sales
volumes to newly acquired customers). As more than 80 percent of TRA’s customers
are now retailers, we assume that this expense is here to stay and have factored it in
our forecast model accordingly.

Shift to retailers improves cash collection cycle. Faster cash collection from
customers in 2014 led to lower days receivable outstanding (39 days in 2014 vs. 46
days in 2013) and substantially lower debt-to-equity ratio (4.4 percent in 2014 vs. 16.7
percent in 2013). We understand that TRA demands immediate cash payments (less
than a week) on delivery with regard to retailing customers and within-the-month
payments with regard to wholesale customers. As the majority of TRA’s customers
are now retailers, the receivable days were understandably shortened. Taking
advantage of the cash surplus, TRA had managed to pay off a substantial amount of
short-term debt, hence reducing the company’s interest expenses from VND21 billion
(USD1 million) in 2013 to VND4 billion (USD187k) in 2014.

We believe that TRA will enter a new growth phase in 2015

By controlling the supplies and the retailing prices of TRA’s products in the
market, the company hopes to ensure the sustainability of its future
growth. In 2015, TRA plans to increase its POS by 11 percent from 18,000 customers
to 20,000 customers. However, the company’s CEO stated that the company will
maintain the total POS at between 20,000 and 22,000 for the next few years.
Although the Ministry of Health estimated Vietnam’s total number of drug retailers at
between 45,000 to 50,000 by the end of 2012, the CEO pointed out that only 40
percent of those are large enough to become TRA’s customers. Instead, the company
will focus on developing stronger relationships with existing retailers in order to
foster same-customer revenue growth. By regulating the retailing prices of TRA’s
products in the market, the company ensures that retailers earn adequate profits with
them and will keep recommending them to their consumers.

TRA’s top two products remain as market leaders. Boganic and Hoat Huyet
Duong Nao (HHDN) retained the No.1 position in their respective category in 2014,
according to IMS Health’s finding. Both Boganic and HHDN belong in the top 20 OTC
products by revenue in 2014, with the former being in the fifth position and the latter
ninth position. Also according to IMS Health, TRA had 1.2 percent market share in

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 Vietnam’s pharmaceutical market (including both foreign and domestic drug makers)
and 3.3 percent market share in the OTC segment.

TRA’s other products are targeted by management for strong growths.

While Boganic and HHDN remain TRA’s key products in the upcoming years, TRA
also places a revenue target of VND350 billion (USD16 million) for a group of other
prominent drugs in the company’s product portfolio. The strategy to boost sales from
this product group will combine television marketing, conferences and sale
promotions into one coherent campaign and will be carried out starting 2015.
Although TRA is not inclined to disclose the names of products in this group, we
assume the following products might be good candidates:

Didicera Antot IQ Duong Cot Hoan Slaska

Arthritis treatment Nutrition for kids Support bone functions Coughing medicine
2012 Sales: VND46bn 2012 Sales: VND21bn 2012 Sales: VND36bn 2012 Sales: VND18bn

Source: TRA

Management targets 30 percent y-o-y net profit growth in 2015: In 2015, TRA
is targeting manufacturing revenue of VND1,330 billion (USD62 million, up 21
percent y-o-y) out of the total revenue of VND1,860 billion (USD87 million, up 12
percent y-o-y). Net profit is targeted at VND190 billion (USD9 million).

Key investor believes management target is too conservative. During the

2015 AGM, Mekong Capital, which owns 25 percent of TRA, expressed the opinion
that TRA’s financial target should be much higher. Specifically, Mekong Capital
forecasts TRA’s revenue and net profit to grow by 49 percent and 45 percent in 2015,
respectively.

Mekong’s forecast of TRA’s revenue Mekong’s forecast of TRA’s net profit

Consol. revenue
VNDbn VNDbn
Manf. revenue Net income Growth
6,000 Cosol. revenue growth 60% 600 90%
4,874 73%
5,000 50% 500 75%
43%
49% 4,041
4,000 3,526 40% 400 51% 60%
45%
2,823 38%
3,000 30% 300 45%
2,469
551
2,000 1,845 20% 200 30%
364
1,000 10% 100 211 15%

0 0% 0 0%
2015F 2016F 2017F 2015F 2016F 2017F

Source: Mekong Capital Source: TRA, VPBS’s analysis

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 Key financial assumptions and forecast
Revenue (VNDmn) 2013A 2014A 2015F 2016F 2017F 2018F 2019F
(1) Manufacturing 1,105,203 1,099,553 1,282,649 1,560,563 1,717,190 1,863,376 1,992,019
Growth 11.6% -0.5% 16.7% 21.7% 10.0% 8.5% 6.9%
(2) Distribution 584,381 560,722 599,973 617,972 636,511 655,606 675,274
Growth 39.9% -4.0% 7.0% 3.0% 3.0% 3.0% 3.0%
(3) Others 1,500 0 0 0 0 0 0
Growth 29.9% -100.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total revenue 1,691,084 1,660,275 1,882,621 2,178,534 2,353,701 2,518,982 2,667,294
Deduction, % manf. 0.8% 0.9% 0.9% 0.9% 0.9% 0.9% 0.9%
Net revenue 1,682,364 1,650,722 1,866,265 2,159,607 2,333,252 2,497,097 2,644,120
Growth 20.1% -1.9% 12.0% 15.8% 8.1% 7.1% 5.9%
Gross margin 2013A 2014A 2015F 2016F 2017F 2018F 2019F
Manufacturing 61.4% 61.5% 61.4% 61.3% 61.2% 61.1% 61.0%
Distribution 7.6% 7.8% 7.7% 7.7% 7.7% 7.7% 7.7%
Consolidated GM 42.9% 43.3% 44.2% 46.0% 46.7% 47.1% 47.4%
SG&A, % Revenue 2013A 2014A 2015F 2016F 2017F 2018F 2019F
Selling, % net revenue 20.3% 20.1% 20.3% 21.0% 21.0% 21.0% 20.8%
G&A, % net revenue 8.1% 7.8% 7.8% 8.2% 8.4% 8.1% 8.2%
Pmt. disct, % net revenue 0.0% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%

Revenue growth will be driven by increased POS and increased revenue per
OTC customer. We expect TRA’s manufacturing revenue to grow rapidly in 2015
and 2016 as the company increases its customer portfolio from 18,000 POS to 20,000
in 2015 and 23,000 in 2016. We also predict that annual revenue per OTC customer
should increase from VND42 million (USD2,000) in 2014 to VND49 million (USD2,300)
in 2015 and VND57 million (USD2,700) in 2016. Meanwhile, we expect that ETC sales
will continue to decline in 2015 and 2016 – down 15 percent and 10 percent,
respectively. Combining both OTC and ETC results, we forecast TRA’s manufacturing
revenue to grow by 17 percent and 22 percent in 2015 and 2016, respectively.
Between 2017 and 2019, we expect TRA’s customer portfolio to remain constant at
23,000 POS, which is in accordance with the CEO’s strategy. Meanwhile, we expect
that revenue per OTC customer will gradually increase to VND76 million (USD3,600)
by 2019.
We forecast that TRA’s cost structure (gross margins and SG&A as percentage of
revenue) will remain relatively unchanged in the next five years.
Key balance sheet assumptions

DSO, DIO, DPO 2012A 2013A 2014A 2015F 2016F 2017F 2018F 2019F
Days sales outstanding 71 46 39 39 35 35 35 35
Days inventories outstanding 126 100 103 105 105 105 105 105
Days payable outstanding 71 46 39 39 35 35 35 35
Capex (VND in billion) 51 57 45 94 195 82 88 93

Capex plan - TRA is investing in a new drug factory located in Hung Yen
province. The total investment cost for this project was approved by shareholders at
VND420 billion (USD20 million), out of which VND60 billion (USD3 million) had
already been disbursed in 2013 and 2014 to acquire land use rights and to perform
preliminary construction works. The construction is expected to be completed in 2017
and the new factory is intended to replace TRA’s old factory in Hoang Liet, Ha Noi.

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 Valuation

DCF models – TRA is valued at VND90,200 per share

 The risk-free rate is the 5-year local currency Government bond yield, which is
currently equivalent to 5.4 percent.
 The Vietnamese market premium is determined to be 8.76 percent.
 Cost of equity is estimated to be 13.5 percent by using the capital asset pricing
model with beta at 0.93.
 Weighted average cost of capital (WACC) is calculated to be 13.4 percent.
 TRA’s terminal growth rate is assessed to be 3.0 percent.
VND in million 2015F 2016F 2017F 2018F 2019F
Free Cash Flow 70,448 54,913 197,262 248,414 274,081
PV Factor 0.91 0.80 0.71 0.62 0.55
PV of FCF 64,110 44,070 139,612 155,048 150,862

Terminal values 2,716,081

PV Terminal values 1,495,010
Value of Firm 2,048,712
Plus: Cash 292,169
Less: Debt 34,438
Less: MI 82,162
Value of Equity 2,224,281

Sensitivity analysis:

WACC
90,200 12.4% 12.9% 13.4% 13.9% 14.4%
1.0% 86,700 82,900 79,400 76,100 73,100
growth rate
Terminal

2.0% 92,800 88,300 84,300 80,600 77,200

3.0% 100,100 94,900 90,200 85,900 81,900
4.0% 109,200 102,900 97,300 92,200 87,600
5.0% 120,800 112,900 106,000 99,900 94,500

Changes in Gross Margin - Manufacturing

90,200 -1.0% -0.5% 0.0% 0.5% 1.0%
SG&A, % revenue

-1.0% 69,500 82,600 95,700 108,800 121,900

-0.5% 66,700 79,800 92,900 106,000 119,100
Changes in

0.0% 63,900 77,000 90,200 103,300 116,400

0.5% 61,200 74,300 87,400 100,500 113,600
1.0% 58,400 71,500 84,600 97,700 110,800

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 Peer comparison
Market Sale growth Net margin Debt to
Exchange ROA (%) ROE (%) P/E P/B
Capital (% y-o-y) (%) equity (%)
USDmn 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 Current 2015E Current

DHG Pharmaceutical JSC Ho Chi Minh 357 15.7 15.4 17.4 13.6 6.4 7.7 21.6 16.3 32.1 25.0 14.4 11.0 3.4
Domesco Medical Import Export JSC Ho Chi Minh 49 13.4 3.9 7.5 8.9 17.2 0.0 11.5 13.7 17.9 19.6 8.0 7.2 1.5
Imexpharm JSC Ho Chi Minh 64 2.8 6.6 7.2 9.5 0.0 0.0 6.9 9.0 8.4 11.2 16.0 12.7 1.7
Pharmedic Pharmaceutical Medicinal JSC Hanoi 19 17.9 1.7 15.6 17.1 0.0 0.0 29.5 28.1 38.9 36.6 6.7 8.3 2.3
OPC Pharmaceutical JSC Ho Chi Minh 33 11.9 8.6 10.0 10.7 19.7 7.6 10.9 12.3 16.0 17.5 9.9 10.5 1.8
Average 104 12.3 7.2 11.5 12.0 8.7 3.1 16.1 15.9 22.7 22.0 11.0 9.9 2.1
Median 49 13.4 6.6 10.0 10.7 6.4 0.0 11.5 13.7 17.9 19.6 9.9 10.5 1.8

Traphaco JSC Ho Chi Minh 84 20.1 -1.9 8.9 8.8 16.7 4.4 16.7 14.7 26.3 19.8 12.4 10.0 2.4
Source: VPBS, Bloomberg’s data as of April 2, 2015

We note that TRA’s forward P/E of 10.0x is quite close to the peer’s median level of
10.5x. This proximity is reasonable given TRA’s fundamental stats are on the same
level with the peer group’s averages.
As such, for market-approach valuation, we are opting to value TRA at VND76,500 per
share, which is 10.5x its 2015 earning.

Target price for TRA’s stock – VND83,500 per share

By combining the valuation methods with a 50 percent weighting to DCF and a 50

percent weighting to market multiples, we arrive at an intrinsic value of VND83,500
per share. The aforementioned proportion was chosen to balance out short-term risks
in stock prices against TRA’s long-term potential.

Valuation methods Weights VND/share

DCF 50% 90,200
P/E at 10.5x 50% 76,500
Target price 83,500

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 Technical analysis

The technical chart showed a rising phase of TRA from the bottom (VND72,000 in
January 2015) to the highest peak of VND82,000 on March 4, 2015. Subsequently,
TRA’s stock price has been declining and broke the resistance levels at MA50 and
MA200 lines.

TRA’s stock price is moving sideway around the support level of 72,000, its trading
volume has been very low recently and has not yet generated any trend signals.

Thus, a HOLD strategy for short term should be applied at the time of this report.

At April 2, 2015 TRA (VND/share)

Horizon analytic 3 to 6 months
3 months highest price 82,000
3 months lowest price 71,000
MA50 days 74,800
MA100 days 75,800
Mid-term resistance level 75,800
Mid-term support level 72,000
Recommendation HOLD

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 Appendix 1 – VPBS projection

INCOME STATEMENT (VNDbn) 2012A 2013A 2014A 2015F 2016F 2017F 2018F 2019F
Net revenues 1,401 1,682 1,651 1,871 2,165 2,339 2,503 2,650
% y-o-y 31.8% 20.1% -1.9% 13.4% 15.7% 8.0% 7.0% 5.9%
Cost of goods sold 822 961 936 1,044 1,169 1,247 1,323 1,393
Gross profits 579 721 714 827 996 1,091 1,180 1,257
SG&A expenses 377 478 460 526 633 688 728 768
EBIT 202 243 254 301 364 404 452 489
Depreciation & amortization 20 22 26 29 38 41 43 45
EBITDA 222 265 280 330 402 444 495 534
Financial income 2 6 5 6 7 8 8 9
Financial expenses 35 22 45 49 55 59 63 67
Net other incomes / (expenses) 5 3 (4) – – – – –
Income from associates 0 1 1 1 1 1 1 1
Pretax profits 174 231 211 259 317 353 398 432
Tax expense 46 60 48 57 63 71 80 86
Effective tax rate 26.3% 25.9% 22.6% 22.0% 20.0% 20.0% 20.0% 20.0%
Profits after tax 128 171 163 202 253 282 318 345
Minority interest 12 22 18 22 28 31 35 38
Net income 116 149 146 180 225 251 283 307
% growth 31.2% 28.4% -2.4% 23.4% 25.3% 11.5% 12.6% 8.5%
EPS (VND) 9,432 6,255 5,910 7,284 9,128 10,177 11,463 12,441

BALANCE SHEET (VNDbn) 2012A 2013A 2014A 2015F 2016F 2017F 2018F 2019F
Cash & near cash items 104 257 292 253 234 345 507 682
Short term investments 1 0 2 2 2 2 2 2
Accounts receivables 273 211 178 200 208 224 240 254
Inventories 285 264 265 300 336 359 381 401
Other current assets 55 44 66 74 85 91 97 102
Current assets 718 776 803 830 865 1,021 1,226 1,441

Net fixed assets 219 265 283 348 504 546 590 637
Long-term investments 2 6 7 7 7 7 7 7
Other long-term assets 30 40 39 39 39 39 39 39
Long-term assets 250 312 329 393 550 591 636 683

Total assets 968 1,088 1,132 1,223 1,414 1,612 1,862 2,124

Accounts payable 151 117 126 114 112 103 109 114
Short-term borrowings 229 114 34 0 0 0 0 0
Other short-term liabilities 75 104 100 110 124 135 147 157
Current liabilities 455 335 261 224 236 238 256 272

Long-term borrowings 1 0 0 0 0 0 0 0
Other long-term liabilities 1 0 0 0 0 0 0 0
Long-term liabilities 1 0 0 0 0 0 0 0

Total liabilities 456 335 261 224 236 238 256 272

Share capital & APIC 215 401 401 401 401 401 401 401
Retained earnings 85 111 130 198 307 423 564 707
Other equities 151 172 258 296 338 387 443 508
Equity 451 684 789 894 1,046 1,211 1,407 1,616
Minority interest 61 69 82 104 132 163 198 236

Total liabilities and equity 968 1,088 1,132 1,223 1,414 1,612 1,862 2,124

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 CASH FLOW STATEMENT (VNDbn) 2012A 2013A 2014A 2015F 2016F 2017F 2018F 2019F

Cash from operation activities 109 228 185 163 250 279 336 367
Cash from investing activities (46) (56) (42) (94) (195) (82) (88) (93)
Cash from financing activities (2) (20) (107) (109) (74) (86) (86) (99)

Net changes in cash 61 152 36 (39) (19) 111 162 175

Beginning cash balance 43 104 257 292 253 234 345 507

Ending cash balance 104 257 292 253 234 345 507 682

Free Cash Flow to Firm 83 186 143 70 55 197 248 274

RATIO ANALYSIS 2012A 2013A 2014A 2015F 2016F 2017F 2018F 2019F

Valuation ratios
Price to earnings (P/E) 12.1x 12.4x 10.0x 8.0x 7.2x 6.4x 5.9x
Price / earnings to growth (PEG) 0.4x n/a 0.4x 0.3x 0.6x 0.5x 0.7x
EV to EBIT 6.7x 6.4x 5.4x 4.5x 4.0x 3.6x 3.3x
EV to EBITDA 6.1x 5.8x 4.9x 4.0x 3.7x 3.3x 3.0x
Price to sales (P/S) 1.1x 1.1x 1.0x 0.8x 0.8x 0.7x 0.7x
Price to book (P/B) 2.8x 2.4x 2.1x 1.8x 1.5x 1.3x 1.1x
Cash dividend per share 1,000 1,000 3,000 3,000 3,500 3,500 4,000

Profitability ratios
Gross margin 41.3% 42.9% 43.3% 44.2% 46.0% 46.7% 47.1% 47.4%
EBITDA margin 15.9% 15.8% 17.0% 17.6% 18.6% 19.0% 19.8% 20.2%
Operating margin 14.4% 14.5% 15.4% 16.1% 16.8% 17.3% 18.1% 18.5%
Net profit margin 8.3% 8.9% 8.8% 9.6% 10.4% 10.7% 11.3% 11.6%
Return on avg. assets 14.2% 16.7% 14.7% 17.2% 19.2% 18.7% 18.3% 17.3%
Return on avg. equity 27.3% 26.3% 19.8% 21.4% 23.2% 22.3% 21.6% 20.3%

Leverage ratios
Interest coverage ratio (EBIT/I) 5.8x 11.8x 65.0x 249.6x n/a n/a n/a n/a
EBITDA / (I + capex) 2.6x 3.4x 5.7x 3.5x 2.1x 5.4x 5.7x 5.8x
Total debt / equity 50.9% 16.7% 4.4% 0.0% 0.0% 0.0% 0.0% 0.0%
Total liabilities / equity 101.1% 48.9% 33.1% 25.1% 22.6% 19.7% 18.2% 16.8%

Liquidity ratios
Asset turnover 1.4x 1.5x 1.5x 1.5x 1.5x 1.5x 1.3x 1.2x
Accounts receivable turnover (days) 71.1 45.8 39.4 39.0 35.0 35.0 35.0 35.0
Accounts payable turnover (days) 67.0 44.4 49.2 40.0 35.0 30.0 30.0 30.0
Inventory turnover (days) 126.4 100.2 103.2 105.0 105.0 105.0 105.0 105.0
Current ratio 1.6x 2.3x 3.1x 3.7x 3.7x 4.3x 4.8x 5.3x
Quick ratio 1.0x 1.5x 2.1x 2.4x 2.2x 2.8x 3.3x 3.8x

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 Appendix 2 – Past price peformance

VND
87,000
Apr’15: VND83,500
84,000

81,000

78,000

75,000

72,000

Sep’14: VND75,500
69,000

66,000

In our initiate report on September 9, 2014, we issued a HOLD recommendation for

TRA stock with a target price of VND75,500 per share. On that date, the stock was
trading at VND72,500 per share. TRA stock then achieved our price target on
September 30, 2014. Our new target price of VND83,500 per share is 14 percent
above the market price (VND73,000) as of April 2, 2015.

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GUIDE TO RATINGS DEFINITION
VPBank Securities (VPBS) uses the following ratings system:
Buy: Expected return, including dividends, over the next 12 months is greater than 15%.
Hold: Expected return, including dividends, over the next 12 months is from -10% to +15%.
Sell: Expected return, including dividends, over the next 12 months is below -10%.

CONTACT INFORMATION

For further information regarding this report, please contact the following members of the VPBS
research department:

Barry David Weisblatt

Head of Research
barryw@vpbs.com.vn

Luu Bich Hong Nguyen Huu Toan

Director - Fundamental Analysis Research Analyst
honglb@vpbs.com.vn toannh@vpbs.com.vn

For any questions regarding your account, please contact the following:

Marc Djandji, CFA

Head of Institutional Sales and Brokerage
& Foreign Individuals
marcdjandji@vpbs.com.vn
+848 3823 8608 Ext: 158

Ly Dac Dung
Head of Retail Sales and Brokerage
dungld@vpbs.com.vn
+844 3974 3655 Ext: 335

Vo Van Phuong Domalux

Director of Retail Sales and Brokerage Director of Retail Sales and Brokerage
Nguyen Chi Thanh 1 - Ho Chi Minh City Nguyen Chi Thanh 2 - Ho Chi Minh City
phuongvv@vpbs.com.vn domalux@vpbs.com.vn
+848 6296 4210 Ext: 130 +848 6296 4210 Ext: 128

Tran Duc Vinh Nguyen Danh Vinh

Director of Retail Sales and Brokerage Associate Director of Retail Sales and Brokerage
Lang Ha - Ha Noi Le Lai - Ho Chi Minh City
vinhtd@vpbs.com.vn vinhnd@vpbs.com.vn
+844 3835 6688 Ext: 369 +848 3823 8608 Ext: 146

www.VPBS.com.vn Page | 13

Hanoi Head Office
362 Hue Street,
Hai Ba Trung District, Hanoi
T - +84 (0) 4 3974 3655
F - +84 (0) 4 3974 3656
Ho Chi Minh City Branch
76 Le Lai Street,
District 1, Ho Chi Minh City
T - +84 (0) 8 3823 8608
F - +84 (0) 8 3823 8609
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Hai Chau District, Danang
T - +84 (0) 511 356 5419
F - +84 (0) 511 356 5418
www.VPBS.com.vn
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