Business Analysis and Valuation - The case of Duoc Hau Giang Pharmaceutical company
Abstract
This thesis conducts an in-depth analysis of the Duoc Hau Giang Pharma
in order to determine the fair value of DHG’s share price and to conclude whether it is
over or undervalued. DHG is one of the largest pharmaceutical manufacturers that
focus on generic drugs and dietary supplements segments. DHG is headquartered in
Vietnam and its business operations are divided into three segments: pharmaceutical
manufacturing, trading business and tourism activities, where the pharmaceutical
manufacturing segment provides by far the largest source of revenue.
DHG is analyzed by conducting a strategic and financial analysis, where
several models are applied and financial drivers thoroughly analyzed from a historical
perspective. The findings from these analyses act as a foundation for forecasting the
future performance of DHG. The share value is estimated by utilizing the discounted
cash flow (DCF) valuation model on the forecasted figures. A multiple valuation
model (P/E) is also conducted in order to triangulate the value derived from the DCF
valuation with a relative valuation based on market multiples.
Empirically, the thesis relies on secondary data such as, annual reports,
academic books and articles, research papers, news articles from approved websites
and data from the Stockbiz, Cophieu68, Reuters, Bloomberg.
The fundamental valuation (DCF approach) based on the forecasts for
DHG proposes a share price of VND 154,679 which suggests that the market share
price ofDHG is undervalued as of January 1st2014.