Revenue and Net Profit Growth of Vietnam-Italy Steel Corporation in Recent Years

To maintain production and business activities and invest in factory construction, the company often has to borrow capital from credit institutions, leading to a relatively large debt ratio (debt to equity ratio in 2009 was about 65%), so the company has to bear great risks when interest rates fluctuate in an increasing direction.

The company has taken advantage of Daniey-Italy's modern technology and equipment to focus on producing high-grade products that other steel factories cannot produce such as: D40 steel, CIII steel, SD390, SD490, Gr60, Gr40 steel... according to the standards of Vietnam, Japan, the US, the UK, thereby continuing to strengthen the brand value, linking the name of VIS with the names of key national projects.

Chart 2.1. Revenue structure of Vietnam-Italy Steel Corporation in 2009

Source: VIS stock analysis report – MNSC

In addition, the successful research and application of rolling technology from 150mm x 150mm billets has increased the competitiveness of Viet-Italian Steel products. This improvement helps to purchase billets more proactively, on the other hand, it reduces the metal consumption rate in short and long steel from 3% to 1.95%, leading to a decrease in the consumption rate of electricity, oil and materials, significantly reducing production costs.

Cost management is a difficult problem for the entire steel industry, and for Viet Steel.

- It is also a big challenge that the entire Board of Directors of Viet Steel Corporation

- Determination to overcome. The entire system of internal contract regulations has been carefully reviewed and calculated to come up with contract numbers that both ensure safety coefficients for equipment, stimulate employees to work enthusiastically, and bring efficiency to the Company.

Chart 2.2. Revenue growth and net profit of Vietnam-Italy Steel Corporation in recent years

Source: VIS stock analysis report - MNSC

Therefore, a series of contract regulations were re-defined such as: contract for raw material consumption costs for production units and contract for sales units, contract for salary funds for indirect labor departments and contract for business management costs based on sales. The Company has applied measures to prevent waste and loss thoroughly and strictly. To reduce costs and lower product prices, the Company has refined its staff. Arranged personnel according to job requirements and positions. The Company has arranged production into reasonable shifts to avoid consuming electricity during peak hours. Thereby, significantly saving production costs and improving competitiveness. In 2009, VIS benefited from the Government's 4% interest rate support package, so interest expenses decreased compared to the same period last year. VIS is increasing

increase charter capital to reduce the impact of financial leverage. Recently, VIS issued bonus shares at a ratio of 2:1 and offered 15 million shares to existing shareholders.

II. Fundamental analysis

1. Macro environment analysis

Table 2.1. Macroenvironmental analysis - PESTEL

Political environment

Economic environment
- Vietnam's political environment is	- Vietnam is a country with an economy.
considered stable compared to other countries	emerging, a market full of potential
in the region and in the world, creating	capacity, stable GDP growth rate
conditions for open fisheries	According to the latest statistics of the Ministry
wide and stable development.	Quarterly GDP Planning and Investment
- Joining the WTO brings many benefits.	1/2010 increased 5.83% over the same period
development opportunities for the construction industry,	2009.Industrial sector and
products in the construction materials industry	Construction has improved a lot compared to
build deeper penetration into the market	compared to the same period last year. From the closing level
international school	very low contribution of the same period last year,
	increased only 1.5%, the first quarter of this year
	This area has increased by 5.65% (difference
	4.15 points %).
Social environment	Engineering-technology
- Along with stable economic development	- Engineering and technology in Vietnam
Vietnamese society also has many	increasingly developing to catch up with
clear change, people's life	developed countries in the world.
population is increasingly improved, demand	Construction materials industry and especially
on construction, home shopping increasingly	The steel industry is increasingly
much.	Enhance the application of advances

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on science, technology, research and transfer of new production technology for higher productivity.
Business environment	Legal environment
- Current problems for the steel industry	- Because the steel industry is one of the
Vietnam is the price of raw materials	important industry should be given government
are increasing. Along with the price	The government implemented many support policies.
raw materials on the market	such as: stimulus and spending policies
While the world is growing strongly, domestically,	infrastructure investment increases
coal price, electricity price, gasoline and costs	demand for steel; protectionist policies
Shipping has also increased across the board.	domestic enterprises by
Since the beginning of the month, the price has increased.	increase import tax on steel
Selling output is inevitable.	import; interest rate support policy
out. This leads to competition.	4%...
between domestic steel enterprises will
more fierce.In addition, steel in
Water still has to compete with steel.
cheap imports, especially from
ASEAN countries are imported free of charge.
tax.

Besides, Vietnamese people always trust branded and reputable products. Therefore, Chinese steel in the past year, although at times much cheaper than domestic steel, is still not trusted by people.

Conclusion: Thus, although there are still many difficulties, in general the steel industry has a good macro foundation, the macro environment is quite favorable for stable and long-term development.

2. Industry Competitive Environment Analysis – Porter's Five Forces

Construction material industry stocks in general and steel industry in particular are always stocks that attract the attention of many people. To evaluate the development and business efficiency of the industry, the author will analyze the competitive pressures in the steel industry through Michael Porter's 5 competitive pressures model.

2.1. Competitive pressure from suppliers

For the steel industry today, being proactive in finding raw materials is always a big problem. According to the Vietnam Steel Association (VSA), in 2009, the amount of domestically produced billets was 2.6 million tons and the amount of billets that needed to be imported was about 2.2 million tons. With the amount of domestically produced billets accounting for more than 60% of billets for steel rolling, it can be said that the steel industry has gradually become more proactive in production.

However, the steel industry still has to face the import of scrap because the domestic scrap supply is not enough. But in reality, many businesses are not "interested" in importing scrap steel. According to Mr. Nguyen Tien Nghi, Vice President of VSA, if billets are made from domestic ore, the profit will be higher than refining billets from scrap steel, so many investors have decided to focus on producing billets from domestic ore.

For Vietnam-Italy Steel Corporation: Raw materials for the steel rolling mill are steel billets, billet materials account for 90% of the production cost structure. However, domestic steel billets only meet 20% of the country's demand. Therefore, VIS has to import mainly from China and Russia (accounting for 90% of the necessary raw materials). Fluctuations in import prices affect VIS's revenue and profit.

2.2. Competitive pressure from customers

Currently, economic development has led to an increase in demand for construction materials in general and steel in particular. However, domestic steel enterprises are facing the influx of cheap imported foreign steel into the market. According to statistics from the Vietnam Steel Association, as of September 15, the amount of steel imported into Vietnam, including raw materials, was about 8.6 million tons, with a turnover of 4.42 billion USD. It is worth noting that the influx of rolled steel originating from ASEAN countries into the domestic market since the beginning of the year has led to a decrease in the domestic market share of rolled steel consumption by 5-7%.

However, the amount of imported steel is mainly consumed in remote areas, not appearing much in big cities because people in cities require steel products to have labels and brands. This leads to Vietnamese enterprises having to increase investment, innovate technology, production lines to ensure product quality, maintain the reputation and brand of the enterprise, thereby meeting the increasingly high demands of domestic and foreign markets.

2.3. Competitive pressure from potential competitors

According to the AFTA agreement signed by Vietnam and ASEAN countries, steel products exported to other countries will enjoy a 0% import tax if the product is produced in 2 steps, from billet production to steel production, with a content of over 40%. Therefore, rolled steel originating from ASEAN is cheaper than domestic steel by 300 - 500 thousand VND/ton.

Currently, cheap imported steel is mainly consumed in the southern provinces due to the proximity of supply sources from Thailand and Malaysia. Very little of this steel is transported to the north due to the high cost of transportation.

Obviously, the barriers to market entry are decreasing, making it a rather attractive industry for new businesses. In addition to being a steel product of Vietnam,

Not only do they have to compete with Chinese steel, they also have to compete with potential rivals from ASEAN countries. In the near future, many experts believe that there will be no shortage of steel supply and domestic enterprises will have to face fierce competition with foreign steel right at home.

2.4. Competitive pressure from substitute products

Currently, the alternative product to steel in construction is composite material with the advantages of being light and durable in the environment. Composite produced by the new advanced pultrusion technology can be used to replace iron, steel and wood in truss structures such as: rafters, handrails, used for decoration, making house columns, etc. However, these products are not popular yet, and do not really meet the needs of price, durability, convenience, etc. Therefore, the threat from alternative products is very small.

2.5. Internal competitive pressure in the industry

In addition to fierce competition with imported steel, Vietnamese enterprises will also have to compete fiercely with each other. Because the investment decentralization policy assigned to localities has led to a series of steel projects "explosion", and there will be a number of new steel projects officially put into production, making the imbalance between supply and demand in the market even further, leading to competition between domestic enterprises, especially for construction steel products, cold rolled coils, welded steel pipes, metal-coated steel, color-coated paint, etc.

Conclusion : Vietnam's steel industry has favorable conditions for development due to the increasing demand for construction. However, steel enterprises will face fierce competition in the domestic market as well as the export market, so enterprises need to make efforts to improve product quality and improve technology to increase their competitiveness.

3. Business Analysis

3.1. SWOT analysis

Table 2.2.Business analysis - SWOT

Strengths

Weaknesses

- Steel rolling line technology is considered number 1 in Italy and in the world.

- Vietnamese-Italian products account for a large market share (10% of consumption in the North)

- The company has a team of skilled, enthusiastic, dynamic and skilled technical staff.

creative

- Fluctuations in steel billet import prices greatly affect VIS's revenue and profit.

- VIS has a fairly high debt ratio, so it has to bear very large annual interest expenses and faces many interest rate risks.

Opportunity

Challenge

- Adjusting the tax rate to increase on imported steel has limited the amount of steel imported from China, affecting the market share of foreign steel in Vietnam, creating opportunities for domestic steel enterprises.

- Loose monetary policy, 4% interest rate support package, banks expanding lending activities to businesses in the real estate and construction materials sectors... This helps construction companies and real estate projects increase steel demand.

- Interest rate risk: Economic competition

- Exchange rate risk: due to having to import a large amount of steel billets, exchange rate fluctuations affect business operations.

- Raw material price risk: Continuous fluctuations in raw material prices, typically recent increases in input prices, affect business performance.

- Risk of oversupply: After the factory of Hoa Sen Group and Tata Steel joint venture comes into operation, the supply will be twice the consumption.

of the domestic market..