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Corporate-Finance-2 -Group-Assignment

Thi truong chung khoan (Đại học Kinh tế Quốc dân)

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NATIONAL ECONOMICS UNIVERSITY

SCHOOL OF ADVANCED EDUCATION PROGRAM

GROUP ASSIGNMENT
COURSE NAME: CORPORATE FINANCE 2

Lecturer: PhD. Tran Tat Thanh

Class: Corporate Finance 65C

Members: Student ID:

Tran Thuy Dung 11233029

Le Quang Minh 11234690

Nguyen Phuong Thao 11230723

Hoang Thu Minh 11234688

Nguyen Đuc Thanh 11235750

Hanoi, 10/2025

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TABLE OF CONTENTS

TABLE OF CONTENTS............................................................................................... 2
LIST OF FIGURES...................................................................................................... 4
1. DHG’S REVENUE, COGS, SG&A AND NET INCOME FORECAST FOR NEXT 5 YEARS. .5
1.1. Revenue........................................................................................................ 6
1.2. COGS............................................................................................................ 7
1.3. SG&A............................................................................................................ 7
1.4. Net Income................................................................................................... 8
1.5. Comparison net income forecast with other method......................................9
2. WEIGHT AVERAGE COST OF CAPITAL (WACC).....................................................10
2.1 Cost of Equity............................................................................................... 11
2.1.1. Risk-free rate (Rf ).......................................................................................11
2.1.2. Market Return Premium (Rm − Rf)..............................................................12
2.1.3. Beta (β).......................................................................................................12
2.2 Cost of Debt................................................................................................. 13
2.3 Capital Structure.......................................................................................... 14
2.4 WACC........................................................................................................... 15
3. VALUATION OF DHG.......................................................................................... 16
3.1. Comparable Company Analysis....................................................................16
3.1.1. Selection......................................................................................................16
3.1.2. Valuation....................................................................................................16
3.2. Dividend Discount Model (DDM).................................................................18
3.2.1. Dividend per Share......................................................................................18
3.2.2. Terminal Value............................................................................................19
3.3. Compare the two methods and current prices..............................................21
4. RISK-RETURN ANALYSIS..................................................................................... 22
4.1. Historical Performance Analysis (Return vs. Total Risk)................................22
4.2. Systematic Risk Assessment (Beta)..............................................................22
4.3. SML Model Analysis and Valuation..............................................................22
4.4. Investment Recommendation......................................................................23
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5. STRATEGIC DIRECTION AND BUSINESS INITIATIVES...........................................24

5.1 Challenging macro environment...................................................................24
5.2 Increased industry competition....................................................................25
5.3 AI application............................................................................................... 26
6. ESG ASSESSMENT & AI REFLECTION...................................................................27
6.1. Environmental Aspect (E)............................................................................28
6.2. Social Aspect (S).......................................................................................... 28
6.3. Governance Aspect(G)................................................................................. 30
6.4. Student Reflection on the Use of AI..............................................................32
REFERENCES.......................................................................................................... 33

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LIST OF FIGURES

Figure 1: Revenue, Cost of Goods Sold (COGS), Selling, General & Administrative
Expenses (SG&A), and Net Income for the period 2025–2029...................................5

Figure 2: DHG Net Revenue Forecast (Billion VND)..................................................6

Figure 3: DHG Forecast COGS 2020 - 2029 (Billion VND)...........................................7

Figure 4: DHG Forecast SG&A 2020-2029 (Billion VND)............................................8

Figure 5: DHG Net income forecast 2020-2029 (billion VND)....................................9

Figure 6: Net income forecast using dividend discount model..................................9

Figure 7: Vietnam 5 Years Bond - Historical Data...................................................11

Figure 8: Monthly Trading History of DHG and VNIndex (2020–2024)....................11

Figure 9: Cost of equity......................................................................................... 13

Figure 10: Cost of debt.......................................................................................... 13

Figure 11: DHG Capital Structure...........................................................................14

Figure 12: Capital Structure Calculation.................................................................14

Figure 13: WACC................................................................................................... 15

Figure 14: 6 Companies Selection..........................................................................16

Figure 15 : DHG’s Comparables Valuation Method................................................16

Figure 16 : Valuation............................................................................................. 17

Figure 17 : Dividend Discount Mode......................................................................18

Figure 18: Dividend per Share Forecast..................................................................18

Figure 19: Terminal Value..................................................................................... 19

Figure 20: DDM Intrinsic Value.............................................................................. 19

Figure 21: Comparison Valuation analysis (Comps vs DDM)...................................21

Figure 22: Average Returns, SD and Beta of the market and five selected firms.....22

Figure 23: CAPM of DHG and other firms...............................................................23

Figure 24: Security Market Line.............................................................................23

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Figure 25 : Some AI’s applications in the Pharmaceuticals Industry........................26

1. DHG’S REVENUE, COGS, SG&A AND NET INCOME FORECAST FOR NEXT 5
YEARS
DHG Pharmaceutical Joint Stock Company (DHG) is one of the largest and
most reputable pharmaceutical manufacturers in Vietnam. Established in 1974 and
headquartered in Can Tho, the company engages in the production and distribution of
pharmaceutical products, dietary supplements, and cosmetics. DHG operates across a
wide product spectrum, including antibiotics, pain relievers, respiratory and
cardiovascular drugs, and dermatological products. It has built a solid reputation
through a focus on high-quality manufacturing, modern technology, and sustainable
growth strategies. Moreover, DHG not only dominates the domestic market but also
exports its products to over 20 countries, making it a key player in Vietnam’s
pharmaceutical industry.
To evaluate DHG’s future financial performance, an Excel-based forecast
model was developed using historical financial data from 2020 to 2024. The model
projects the company’s key financial indicators - Revenue, Cost of Goods Sold
(COGS), Selling, General & Administrative Expenses (SG&A), and Net Income for
the period 2025–2029. Historical averages and observed growth patterns were used to
derive forecast assumptions, ensuring consistency and reasonable accuracy.
Figure 1: Revenue, Cost of Goods Sold (COGS), Selling, General & Administrative Expenses
(SG&A), and Net Income for the period 2025–2029

Source: Excel file

The following sections provide a detailed breakdown and interpretation of each

major financial component. Specifically, analyzing the underlying assumptions,
calculation methods, and expected trends for Revenue, COGS, SG&A, and Net
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Income. This structured approach allows for a clearer understanding of DHG’s

projected profitability, cost efficiency, and long-term growth outlook.

1.1. Revenue
The forecast for DHG’s revenue over the next five years (2025–2029) is
derived using the historical growth trend observed between 2020 and 2024. The
theoretical formula applied is:

where “g” represents the average sales growth rate. Based on historical data, DHG’s
average sales growth is estimated at 7.01% per year.
This consistent growth assumption reflects DHG’s stable position in Vietnam’s
pharmaceutical industry and its ability to maintain market share through product
diversification and brand reputation. The 7% annual increase indicates optimism about
continuous demand recovery following the COVID-19 period and ongoing expansion
in domestic healthcare needs. The projection assumes that DHG will maintain its core
business strength, improve distribution efficiency, and gradually expand exports to
neighboring markets.
As illustrated in the forecast chart, DHG’s revenue is expected to rise from
VND 5,227 billion in 2025 to approximately VND 6,856 billion by 2029, showing a
steady upward trajectory aligned with the company’s long-term growth strategy.
Figure 2: DHG Net Revenue Forecast (Billion VND)

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Source: Created by students

1.2. COGS
The projection of COGS is directly tied to the revenue forecast using the
following formula:

DHG’s average COGS ratio is estimated at 53%, based on the company’s

performance during 2020–2024.
This ratio assumes a relatively stable cost structure over time, reflecting DHG’s
operational maturity and efficiency in sourcing raw materials. Although inflation and
fluctuations in global pharmaceutical input prices could increase production costs,
DHG’s scale advantage, localized manufacturing, and long-term supplier contracts
help mitigate these pressures.
The projection anticipates that COGS will increase proportionally with revenue,
rising from VND 2,771 billion in 2025 to VND 3,634 billion in 2029. The stability of
the 53% COGS ratio indicates that the company’s gross profit margin will remain
strong at around 47%, allowing DHG to sustain profitability while managing
production costs effectively.
Figure 3: DHG Forecast COGS 2020 - 2029 (Billion VND)

Source: Created by student

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1.3. SG&A
SG&A expenses are forecasted using a proportional approach, based on the
following formula:

The average SG&A ratio of 25.82% is adopted from the company’s recent
financial trends.
This assumption reflects a balanced approach between operational expansion
and cost efficiency. As DHG continues to invest in marketing, digital transformation,
and research & development, administrative costs are expected to rise moderately.
However, productivity improvements and technology adoption are assumed to offset
these increases, helping the company maintain a stable cost-to-revenue ratio.
From 2025 to 2029, SG&A expenses are projected to grow from VND 1,350
billion to VND 1,770 billion. This steady growth aligns with DHG’s revenue
trajectory, suggesting that expenses will expand proportionally without significantly
eroding margins. Maintaining the SG&A ratio below 26% ensures the company
preserves strong operational leverage as it scales up.
Figure 4: DHG Forecast SG&A 2020-2029 (Billion VND)

Source: Created by student

1.4. Net Income

The forecast for net income integrates the projections for revenue, COGS,
SG&A, and other non-operating items. The theoretical formula is:
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Net Income = (Revenue – COGS – SG&A + Other Income/Expense) x

(1 – Effective Tax Rate)
An average effective tax rate of 10.71% is applied, consistent with DHG’s
historical tax burden.
This projection assumes stable non-operating income and expenses over the
period, reflecting DHG’s conservative financial management and limited exposure to
currency fluctuations or interest volatility. As a result, profit growth is primarily driven
by revenue expansion and consistent cost control rather than extraordinary gains.
Between 2025 and 2029, DHG’s net income is expected to rise from VND
1,011 billion to VND 1,320 billion, representing a compound annual growth rate of
approximately 6.8%. This steady increase highlights DHG’s strong fundamentals,
operational efficiency, and disciplined cost structure. The company is projected to
maintain profitability despite moderate cost inflation, confirming its sustainable
financial outlook for the medium term.
Figure 5: DHG Net income forecast 2020-2029 (billion VND)

Source: Created by student

1.5. Comparison net income forecast with other method

Figure 6: Net income forecast using dividend discount model

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Source: Excel file

The Income Statement Forecast Model provides projected net income figures
based on detailed operational assumptions, including revenue, cost of goods sold,
operating expenses, and taxes. In contrast, the Dividend Discount Model (DDM)
derives its projections from historical financial data, focusing on dividends paid, return
on equity (ROE), dividend payout ratio, and dividend growth rate.
When comparing the two forecasts, the results from the DDM appear to be
more accurate. This is because the DDM is directly grounded in audited financial
statements and reflects the firm’s long-term profitability and dividend policy, which
are less sensitive to subjective assumptions. Meanwhile, the Income Statement
Forecast Model, though more granular, relies heavily on estimated operating variables
such as expense ratios and effective tax rates, making its projections more assumption-
dependent.
Nevertheless, the Income Statement Forecast Model is analyzed in greater depth
because it provides a comprehensive view of the company’s business operations. By
examining the sources of revenue growth, cost structure, and profit margins, this
model enables a deeper understanding of DHG’s performance drivers and potential
risks. The DDM, on the other hand, will be employed in the third question of this
research, where it serves as the foundation for the company’s valuation and dividend-
based investment analysis.

2. WEIGHT AVERAGE COST OF CAPITAL (WACC)

WACC is the discount rate used in financial models to find a company’s or
project’s value. It represents the rate used to discount unlevered free cash flows and
shows the minimum return investors expect before investing in the business.
The WACC formula is:

WACC = (E/V x Re) + [(D/V x Rd) x (1 – T)]

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Where:

E = market value of the firm’s equity

D = market value of the firm’s debt
V = total value of capital (equity plus debt)
E/V = percentage of capital that is equity
D/V = percentage of capital that is debt
Re = cost of equity (required rate of return)
Rd = cost of debt (yield to maturity on existing debt)
T = tax rate

Or WACC = Cost of equity x %Equity + Cost of debt x %Debt

2.1 Cost of Equity

The cost of equity is calculated using the Capital Asset Pricing Model (CAPM)
which equates rates of return to volatility (risk vs reward). Below is the formula for
the cost of equity:
Re = Rf + β × (Rm − Rf)

Where:

Rf = the risk-free rate (typically the 10-year U.S. Treasury bond yield)
β = equity beta (also known as the levered beta)
Rm - Rf: market return premium

2.1.1. Risk-free rate (Rf )

Figure 7: Vietnam 5 Years Bond - Historical Data

Source: World Government Bonds

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Long-term government bond yields are commonly used as the risk-free

rate, given that governments are unlikely to default on their debt (Hayes 2024).
Accordingly, the 5-year Vietnamese government bond yield of 2.19% is used as the
risk-free rate for the period 2025–2029 (Figure 7).

2.1.2. Market Return Premium (Rm − Rf)

According to the Country Default Spreads and Risk Premiums report (last
updated on January 9, 2025), the market return premium (MRP) in Vietnam is
currently 8.35%.

2.1.3. Beta (β)

Figure 8: Monthly Trading History of DHG and VNIndex (2020–2024)

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Source: CafeF

Beta will be calculated by using the Covariance & Variance function in

Excel with data collected by DHG and VN Index monthly return from 2020–2024.
Figure 9: Covariance & Variance; Beta of DHG

Source: Exel file

A beta coefficient of 0.45 indicates that DHG’s stock exhibits low

systematic risk, meaning its price movements are only about 45% as volatile as the
overall market. This suggests that the stock is less sensitive to market fluctuations,
making it more suitable for risk-averse investors. However, it also implies that the
expected return may be lower compared to higher-beta stocks.
Figure 9: Cost of equity

Source: Excel file

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By calculation, the cost of equity should be 5.97%, assuming that this

rate will remain for the next 5 years.

2.2 Cost of Debt

Figure 10: Cost of debt

Source: Excel file

The average CoD over the forecasted period is 5.797%, calculated by the formula:

With DHG, Total Debt is considered equal to Short-term Loans, as no long-

term interest-bearing debt is reported, with the data collected from the company’s
financial report (DHG Pharmaceutical JSC Balance Sheet). The data of Interest
Expenses is collected from DHG Pharmaceutical JSC Income Statement.
([Link]

2.3 Capital Structure

Figure 11: DHG Capital Structure

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(Source: DHG Annual Report 2024)

Figure 12: Capital Structure Calculation

Source: Excel file

We calculated the capital structure using the following formula:

The capital structure for the forecasted period is assumed to follow the
average from 2020–2024, based on data from DHG Pharmaceutical JSC Balance
Sheet. Accordingly, the average Weight of Equity and Weight of Debt are 78.71%
and 21.29%, respectively.

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2.4 WACC
Figure 13: WACC

Source: Excel file

DHG’s 5.93% WACC indicates moderate capital costs, a balanced

financial structure, and prudent use of debt. This suggests that the company maintains
financial stability while still leveraging financing to support operations and growth.
The WACC level reflects DHG’s ability to efficiently manage its cost of capital,
ensuring sufficient returns to investors and sustaining competitiveness in the
pharmaceutical industry.

3. VALUATION OF DHG

3.1. Comparable Company Analysis

3.1.1. Selection
Figure 14: 6 Companies Selection

Source: Excel file

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This section outlines the selection of six comparable companies (peers) for
DHG Pharma, illustrated in Figure 1: 6 Companies Selection. The chosen peers are
Traphaco JSC (TRA), Cuu Long Pharmaceutical JSC (DCL), OPC Pharmaceutical
JSC (OPC), Ha Tay Pharmaceutical JSC (DHT), Imexpharm Corporation (IMP), and
Domesco Medical Import-Export JSC (DMC). Selection criteria include similarity in
market capitalization, business models, product range, international expansion
intentions, historical development, strong governance, and robust manufacturing
capacity.

3.1.2. Valuation

Figure 15 : DHG’s Comparables Valuation Method

Figure 16 : Valuation

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Source: Excel file

There are calculation formulas using for this valuation:

DHG’s lower P/E and EV/EBITDA compared to peers suggest cautious market
expectations for profitability or potential undervaluation, while a higher P/S indicates
strong confidence in revenue growth. The estimated share price (230,324 VND)
significantly exceeds the actual market price (~103,900 VND in 2024, per Studocu
sample), reinforcing the undervaluation conclusion and highlighting investment
potential.
However, the Excel results (EV 26,032 billion VND, Share Price 230,324
VND) differ slightly from the Studocu sample (EV 25,406 billion VND, Share Price
203,667 VND), possibly due to different peers or updated data; this discrepancy
should be clarified. The analysis is robust for market-based benchmarking but could
benefit from sensitivity analysis to address outliers (e.g., DHT’s high EV/EBITDA of
70.04).

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3.2. Dividend Discount Model (DDM)

3.2.1. Dividend per Share

Figure 17 : Dividend Discount Mode

Figure 18: Dividend per Share Forecast

Source: Excel file

Indicator Formula Explanation

P/E (6 Comps (P/E ratios of six comparable Represents the average Price-to-
Average) companies) ÷ 6 Earnings ratio of comparable
companies. It serves as a benchmark for
valuing DHG based on earnings
performance.

P/S (6 Comps (P/S ratios of six comparable Measures the average Price-to-Sales
Average) companies) ÷ 6 ratio, showing how much investors are
willing to pay for each unit of sales.

Ratio (P/E of DHG) ÷ (Average P/E Indicates DHG’s relative valuation

DHG/Compar of six comparable companies) compared to its peers. A ratio above 1
able Average suggests overvaluation; below 1
(P/E) suggests undervaluation.

Enterprise (EBITDA of DHG) × Estimates DHG’s total firm value

Value (EV) (Average EV/EBITDA of six (equity + debt – cash) using the average
comparable companies) EV/EBITDA multiple of peer
companies.

Equity Value (Net income of DHG) × Calculates the value attributable to

(Average P/E of six DHG’s shareholders based on the
comparable companies) industry’s average P/E multiple.

Share Price (Equity Value) ÷ (Number of Determines DHG’s estimated fair value
outstanding shares of DHG) per share by dividing total equity value
by the number of shares outstanding.

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The use of audited financial statement data (2020–2024) enhances reliability,

and the 6.87% growth rate is reasonable for Vietnam’s pharmaceutical sector given
rising healthcare demand. However, the high payout ratio in 2024 (125.89%)
suggests unsustainability, likely funded by reserves, and the short historical data
period (5 years) may not fully capture economic volatility risks. The DPS forecast is
straightforward but assumes constant growth, which may be optimistic without
considering regulatory or competitive pressures in the industry.

3.2.2. Terminal Value

Figure 19: Terminal Value

Figure 20: DDM Intrinsic Value

Source: Excel file

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Indicator Formula Explanation

Terminal Value TV = D₆ × (1 + g) / (r − Represents the company’s value beyond the

(TV, Year 2029) g) explicit forecast period (after 2029),
assuming a perpetual growth rate g.

Present Value of PV(TV) = TV / (1 + r)⁵ Discounts the terminal value back to the
TV (T = 0) present (base year) using the required rate
of return r.

Discount Factor DFₜ = 1 / (1 + r)ᵗ Calculates the present value multiplier used
for Year t to discount future cash flows or dividends
occurring in year t.

NPV of DPS NPV(DPS) = DPS × Determines the present value of expected

(Dividend per Discount Factor dividends received in each forecast year.
Share)

Share Price Share Price = Σ(NPV of Estimates the fair share price based on the
DPS from 2024–2029) + sum of discounted dividends and
PV(TV) discounted terminal value.

Equity Value Equity Value = Share Represents the total market value of
Price × Outstanding shareholders’ equity.
Shares

Enterprise Value EV = Equity Value Measures the total value of the company’s
(EV) − Net Debt operations, including both debt and equity
holders, after adjusting for net debt.

The Terminal Value section effectively employs the Dividend Discount Model
(DDM) to assess DHG Pharma’s long-term valuation, providing a structured approach
to forecasting future cash flows. The use of a terminal growth rate to project dividends
into perpetuity offers a reasonable estimate for a mature company, though the chosen
discount rate appears notably high, potentially reflecting an elevated perception of risk
that might not fully align with the company’s stable industry position. The discounting
process to bring the terminal value to the present is well-executed, ensuring a
comprehensive valuation that incorporates annual dividend contributions. The
resulting share price integrates these elements cohesively, supporting the derived
equity and enterprise values, which suggest a robust intrinsic worth based on dividend
sustainability.

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However, the significant discrepancy between the calculated enterprise value

and the current market value hints at possible undervaluation, which could stem from
market skepticism or sector-specific headwinds. This gap underscores the need for a
deeper analysis of the discount rate’s assumptions and external market factors to
validate the model’s optimism.

3.3. Compare the two methods and current prices

Figure 21: Comparison Valuation analysis (Comps vs DDM)

Source: Excel file

The discussion section effectively contrasts DHG Pharma’s valuation
approaches, revealing distinct perspectives on the company’s worth. The peer-based
method suggests a higher intrinsic value, driven by industry benchmarks, indicating
strong growth potential and possible undervaluation relative to market expectations. In
contrast, the dividend-based approach offers a more tempered assessment, reflecting a
cautious outlook tied to historical financial performance. The market’s current
valuation appears notably conservative, potentially signaling reduced investor
confidence or external pressures.
Both analytical methods point toward an undervalued stock, hinting at
investment opportunities, though the peer-driven estimate may lean toward over-
optimism due to its reliance on industry multiples. The dividend model would benefit
from further scrutiny of its underlying assumptions to ensure robustness. The
divergence from market value suggests a need to explore broader sector dynamics that
might be influencing perceptions of DHG’s future prospects.

4. RISK-RETURN ANALYSIS

4.1. Historical Performance Analysis (Return vs. Total Risk)

At first glance, DHG's 5-year historical investment profile appears unattractive
when compared to the general market. The stock's annual average return reached only
12.06%, significantly lower than the 21.43% return of the VNIndex. Ironically, while
delivering lower returns, DHG's total risk level (measured by Annual Daily SD) was

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24.32%, higher than the market's volatility of 19.75%. This initially paints an
unfavorable picture of an asset with low returns but high volatility risk.
Figure 22: Average Returns, SD and Beta of the market and five selected firms

Source: Excel file

4.2. Systematic Risk Assessment (Beta)

However, total risk is not the only metric, as it includes diversifiable risk. A
deeper analysis of systematic risk (Beta) tells a different story. With a Beta coefficient
of only 0.352, DHG is actually a typical defensive stock. This means its returns are
less affected by the general fluctuations of the overall market. This is a crucial
characteristic, indicating that a large portion of its 24.32% volatility risk is
unsystematic risk (company-specific risk), which can be mitigated within a diversified
portfolio.

4.3. SML Model Analysis and Valuation

The key question is whether the 12.06% return is "worth" the Beta risk of
0.352. To answer this, we use the Security Market Line (SML) model. Based on the
Risk-free Rate (3.897%) and the Market Return (21.43%), the theoretical return that
the market requires to compensate for DHG's risk (Expected Return) is only 10.08%.
Meanwhile, the actual return the stock has generated historically is 12.06%. The fact
that the actual return exceeds the theoretical return shows the stock has performed
more efficiently than its risk profile would suggest. On an SML chart, DHG's point
would lie above the SML, a clear sign that the stock is Undervalued
Figure 23: CAPM of DHG and other firms

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Source: Excel file

Figure 24: Security Market Line

Source: Excel file

4.4. Investment Recommendation

Based on the analysis above, we recommend INVESTING in DHG stock.
Although its surface performance appears weak, the SML analysis—our most
sophisticated tool—indicates that DHG is undervalued on a risk-adjusted basis. The
stock has demonstrated its ability to generate returns superior to its risk profile.
Therefore, DHG is a reasonable investment choice, especially for investors seeking a
stable, defensive asset for their portfolio that also holds the potential for price
appreciation back to its true value.

5. STRATEGIC DIRECTION AND BUSINESS INITIATIVES

5.1 Challenging macro environment

- Strategic Direction

Over the next five years, DHG Pharmaceutical will likely face a volatile
macroeconomic environment marked by moderate growth, global uncertainties,
and rising input costs. Tighter price regulations and stricter environmental
standards may further strain profit margins. To sustain growth and resilience,
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DHG’s Board and management should focus on cost efficiency, business

diversification, and operational adaptability.

 Building resilience to macro-economic shocks

DHG should strengthen its resilience by diversifying and localizing raw

material sources to reduce import dependence and supply chain risks. The
company could establish a cost-hedging fund and adopt flexible cost
management to handle inflation pressures. Regular reviews of key
macroeconomic indicators and multi-scenario financial planning will help DHG
adapt quickly and maintain long-term stability.

 Focusing on upgrading production capabilities and international standards

to create a competitive advantage

DHG should upgrade its production capacity and meet international

standards to stay competitive. Shifting toward higher value-added products such
as ETC drugs, specialty medicines, and exports will help improve margins and
reduce domestic dependence. Investing in technology and automation will also
lower costs, enhance quality, and boost competitiveness.

 Diversifying markets and distribution channels to create a 'support system'

against macroeconomic fluctuations

DHG should expand beyond the domestic market by targeting regional

export opportunities to reduce risks from local economic downturns.
Strengthening diverse sales channels such as OTC, ETC, online, and e-
pharmacy will lessen dependence on a single market and leverage digital
transformation. A more flexible distribution network will also help DHG
respond effectively to changing consumer behavior, healthcare policies, and
economic conditions.

 Strengthen risk management and adapt faster to macro variables

DHG should establish an early warning system to monitor key macro

variables such as inflation, exchange rates, and raw material costs. The
company also needs to review and update its strategic direction annually to
ensure flexibility and proactive decision-making. In addition, promoting ESG
initiatives and sustainable development will help DHG build long-term trust
and reputation amid an increasingly volatile environment.

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5.2 Increased industry competition

Facing intensifying competition from both domestic and foreign players, DHG
must reposition itself to strengthen its market leadership. The company should pursue
a clear strategic focus on product differentiation, innovative distribution channels, and
value chain excellence to sustain its competitive edge.
DHG should diversify its product portfolio by transitioning from traditional
generic drugs to higher-value and technology-intensive pharmaceuticals. This includes
developing biosimilars, specialty medicines, and herbal-based products that leverage
Vietnam’s natural resources and DHG’s R&D capabilities. According to Vietnam
News (2024), domestic pharmaceutical firms that invest in innovation and high-tech
production are better positioned to compete with imported products, particularly as
global players dominate the generic drug segment.
DHG should reinforce its market position by diversifying distribution channels
beyond traditional pharmacies (OTC) into hospitals (ETC), e-commerce, and
partnerships with digital health providers. This multi-channel approach would enhance
brand visibility and reduce market share risks amid stronger competition. According to
DHG Annual Report 2024, domestic competition has intensified, particularly in
pharmacy and hospital bidding channels.
DHG should enhance operational efficiency and cost control to sustain
profitability amid margin pressures. Rising raw material prices and import dependence
heighten risks; thus, investing in local sourcing, long-term supplier contracts, and
manufacturing automation is crucial. As Diễn đàn Doanh nghiệp (VCCI, 2025) notes,
Vietnamese drugmakers face production costs 20–25% higher than peers in India and
China, making efficiency vital.
By integrating product innovation, market diversification, and operational
efficiency, DHG can reinforce its market position, protect profitability, and ensure
sustainable long-term growth amid intensifying competition in Vietnam’s
pharmaceutical industry.

5.3 AI application
AI has already contributed significantly to drug discovery and development,
especially during the COVID-19 pandemic. In the next five years, DHG
Pharmaceutical Joint Stock Company (DHG Pharma) should strategically focus on
integrating Artificial Intelligence (AI) across its value chain to enhance innovation,
operational efficiency, and competitiveness. Specifically:

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Figure 25 : Some AI’s applications in the Pharmaceuticals Industry.

- Research and Development (R&D) Transformation

Apply AI to accelerate drug discovery, repurposing, and clinical trial

optimization, reducing research costs and development time. Following examples like
BenevolentAI, DHG can strengthen its R&D capabilities and expand into high-value
druginnovation.

- Personalized Medicine:
DHG should leverage clinical and genetic data analytics to provide customized
treatments, improve patient outcomes, and transition from generic to specialized
pharmaceuticals. Personalized medicine reduces adverse drug reactions, enhances
therapeutic effectiveness.

- Smart Manufacturing and Supply Chain:

AI can optimize manufacturing operations and the entire supply chain through
predictive maintenance, real-time quality control, and automated logistics
management. Predictive analytics enable early detection of production inefficiencies,
while smart algorithms help forecast demand and manage inventory dynamically.
According to Kaizen Institute (n.d.), the integration of AI technologies in
pharmaceutical operations can enhance plant capacity by 25–40% and improve
operational efficiency by up to 50%.
- Regulatory Compliance and Safety:

Vietnam is enforcing stricter regulations to ensure drug quality and safety

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(Vietnamnews, 2025). AI-based tools for regulatory monitoring, documentation

automation, and pharmacovigilance can support DHG in complying with evolving
global standards
By adopting these AI-driven initiatives, DHG can achieve cost efficiency,
operational excellence, and sustainable growth, positioning itself as a digitally
advanced leader in Vietnam’s pharmaceutical market.
Besides these opportunities, the pharmaceutical industry also faces challenges
such as competition from imported products and dependence on imported raw
materials. However, these challenges serve as motivation to strengthen Vietnam’s
pharmaceutical sector. In response to industry trends, DHG Pharma has proactively
invested in upgrading production lines to meet high standards such as EU-GMP and
Japan-GMP, increasing R&D investment, diversifying distribution channels, and
integrating technology into operations. As a result, for 28 years, DHG Pharma has
maintained its leading position in Vietnam’s pharmaceutical industry, distinguishing
itself from competitors and fostering new opportunities and continuous growth,
reinforcing its pioneering role in driving both domestic and regional industry
development.

6. ESG ASSESSMENT & AI REFLECTION

ESG (Environmental, Social, and Governance) factors are increasingly
central to investor evaluations, particularly in the pharmaceutical sector, which directly
impacts public health and operates within stringent regulatory frameworks. For DHG
Pharmaceutical JSC, adhering to ESG best practices is not only a corporate
responsibility but also a strategic imperative to maintain competitive advantage and
attract investment. The 2024 Annual Report emphasizes the company’s commitment
to integrating ESG principles into its sustainable development roadmap, aligning
business objectives with the United Nations Sustainable Development Goals (SDGs)
and Vietnam’s national strategy toward net zero emissions by 2050 (DHG Pharma
Annual Report, 2024).
In 2024, DHG officially incorporated ESG objectives into its Sustainable
Development Roadmap 2024-2030, assigning the Board of Directors and the General
Director to align departmental KPIs with ESG indicators. ESG performance has
become a measurable part of the company’s balanced scorecard and annual
management evaluations. This approach reinforces DHG’s mission “For a Healthier
Life” while ensuring that sustainability and profitability advance in parallel. By
embedding ESG into corporate governance, DHG demonstrates a proactive stance in
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meeting global investor expectations and enhancing long-term resilience (DHG

Pharma Annual Report, 2024).

6.1. Environmental Aspect (E)

DHG Pharma demonstrates strong environmental performance through concrete
initiatives that support Vietnam’s COP26 commitments and global sustainability
trends. The rooftop solar power system (capacity 1.8 MWp) installed at the Hau Giang
manufacturing plant became operational in December 2023, generating 2,415,610
kWh in 2024, saving 1.465 million VND, and reducing 1,907 tons of CO ₂ emissions
(DHG Pharma Annual Report, 2024). The company also upgraded to GMP-compliant
LED lighting, optimized HVAC systems, and modernized production equipment to
improve energy efficiency.
In waste and water management, DHG complies with QCVN 40:2011/BTNMT,
with 2.3% of treated wastewater reused and monitoring conducted four times per year.
(DHG Pharma Annual Report, 2024). The company reported zero environmental
violations or penalties in 2024. Furthermore, DHG has initiated a “Zero Waste to
Landfill by 2030” roadmap and participates in green procurement programs, requiring
suppliers to follow environmental standards. To strengthen environmental
performance, DHG plans to conduct an energy audit in 2025 and provide employee
training on sustainable production and energy efficiency (DHG Pharma Annual
Report, 2024).

6.2. Social Aspect (S)

On the social dimension, DHG Pharma upholds its mission of “For a Healthier
Life” through comprehensive employee welfare policies and community initiatives.
The company employs 2,806 staff members (up from 2,789 in 2023), supported by
competitive salary structures, health insurance for family members, and career
development programs (DHG Báo cáo HĐQT, 2024). These policies contribute to
high employee retention and have earned DHG recognition among the Top 10 Best
Workplaces in the Pharmaceutical/Medical Device sector and the Top 100 Best
Workplaces in Vietnam (Anphabe, 2024).

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Source: DHG Pharma is in the "Top 100 VietNam Best Places to Work" for 3
consecutive years - DHG Pharma

Competitive compensation and benefits policies are maintained to motivate

employees and foster a positive work environment. DHG Pharma considers training a
strategic investment, not only to enhance professional skills but also to develop a high-
quality workforce capable of meeting the increasingly demanding market demands.
Over the past year, the company organized 86 training programs, with 23,264
participants totaling 170,965 training hours and an investment of over VND 2.1
million in training activities.
In community engagement, DHG continued its flagship program “Prescription
for Community” and up to now, the project has successfully delivered more than
1,000 programs, benefiting over one million people nationwide, with a total
investment exceeding VND 25 billion. The year 2024 marked a significant milestone
when the “Prescription for the Community” project was honored with the “Persevering
Project” award of the Human Act Prize 2024, themed “Creating Communities”. This is
a well-deserved recognition for over two decades of unwavering efforts to bring
healthcare to the underprivileged - a testament to DHG Pharma’s dedication and
persistence in building a healthy and happy community.

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Source: Toa thuốc vì cộng đồng

During economic challenges, the company ensured stable employment and

income, reinforcing its social responsibility. However, the lack of standardized social
performance indicators (e.g., gender pay gap, supplier labor standards) remains a
limitation. DHG should enhance disclosure transparency in the 2025 report to meet
comprehensive ESG evaluations (DHG Pharma Annual Report, 2024).

6.3. Governance Aspect(G)

In terms of governance, DHG Pharma maintains a solid foundation of
transparency, compliance, and accountability. The 2024 Governance Report confirms
full adherence to the disclosure requirements of the Ho Chi Minh City Stock Exchange
(HoSE) and the State Securities Commission (SSC) (DHG Pharma Governance
Report, 2024). The company operates under a three-line model of defense following
the COSO internal control framework, ensuring independent oversight through internal
audit and risk management (DHG Pharma Annual Report, 2024).
Anti-corruption and conflict-of-interest policies are strictly enforced, with
employees required to complete annual compliance training and declare related-party
transactions (DHG Pharma Annual Report, 2024). Collaboration with Taisho
Pharmaceutical Co., Ltd. (Japan) strengthens DHG’s corporate governance by
harmonizing management standards and reinforcing internal audit systems.
Despite these strengths, DHG’s Board remains dominated by non-independent
members, with only one female director as of 2025 (DHG Pharma Governance Report,
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2024). The absence of a dedicated ESG Committee may limit specialized oversight. To
address this, DHG should establish an ESG Committee and expand independent
representation, aligning with the ASEAN Corporate Governance Scorecard (2023) and
attracting ESG-focused institutional investors (Ho Chi Minh City Stock Exchange,
2025).
Overall, DHG Pharma has built a robust foundation for ESG integration,
demonstrating tangible achievements in environmental management (solar energy,
zero-waste roadmap), strong community engagement, and transparent governance
practices. These efforts have contributed to the company’s recognition among
Vietnam’s Top 50 Most Effective Listed Companies and sustained financial stability,
with revenue of 4,885 billion VND and pre-tax profit of 904 billion VND in 2024
(DHG Pharma Annual Report, 2024).

Nguồn: DHG Pharma continues to be in the Top 50 Best Listed Companies in Vietnam
2025

However, to position itself as a regional ESG leader in the ASEAN

pharmaceutical market, DHG should enhance environmental data transparency,
standardize social impact metrics, diversify board composition, and institutionalize an
ESG oversight mechanism. Aligning with global frameworks such as GRI, SASB, and
TCFD will strengthen investor confidence, mitigate long-term risks, and elevate DHG
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Pharma’s reputation as a sustainable and responsible healthcare enterprise driving

Vietnam’s journey toward inclusive and green growth.

6.4. Student Reflection on the Use of AI

In completing this ESG assessment, I utilized ChatGPT as a foundational tool
to process and structure a large volume of technical information from DHG Pharma's
2024 Annual Report. The AI's primary support was twofold: structuring and
synthesis. Initially, it provided a clear, academic framework, logically dividing the
broad topic of "ESG" into the distinct "Environmental," "Social," and "Governance"
pillars. This outline was essential for organizing my analysis. More importantly, I used
the AI as a high-speed synthesizer. For example, I was able to input dense paragraphs
from the report, and the AI effectively extracted the specific, critical data points—such
as the "1,907 tons of CO₂" reduction, the "1.8 MWp" solar capacity, and the 36%
female management ratio—and placed them under their correct thematic headings.
This saved significant time in data processing and helped to draft the initial, fact-based
sections of the assessment.
However, critically evaluating this process, the AI's limitations are as
significant as its benefits. Its core weakness is its complete dependence on the
provided source material and its inability to perform true, independent
verification. The AI proficiently reported DHG's claim of reducing 1,907 tons of CO ₂,
but it has no capacity to critically question if that figure is audited or accurate; it
simply accepts the corporate data as fact. This presents a major risk of amplifying
"greenwashing."
Furthermore, the AI excels at synthesis (arranging facts) but struggles with
genuine critical analysis. For instance, while the AI identified the board's lack of
independent members, I had to provide the crucial analytical step of connecting this
fact to a governance risk and recommending alignment with the ASEAN Corporate
Governance Scorecard. The AI provides the "what," but I, as the student, had to
provide the "so what." Ultimately, ChatGPT acted as a powerful assistant for
organizing facts, but the critical judgment and analytical depth remained my
responsibility.

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REFERENCES

1. DHG Pharmaceutical Joint Stock Company. (2024). Báo cáo thường niên
2024 [Annual Report 2024 – Toa thuốc vì cộng đồng]. DHG Pharma.
2. DHG Pharmaceutical Joint Stock Company. (2024). Báo cáo Hội đồng
quản trị [Governance Report]. DHG Pharma.
3. Anphabe. (2024). Top 5 nơi làm việc tốt nhất Việt Nam 2024 [Top 5 Best
Workplaces in Vietnam 2024]. Anphabe.
4. Diễn đàn Doanh nghiệp. (2024, October). DHG faces a headwind from
intensified competition. Retrieved from
[Link]
[Link]
5. GlobeNewswire. (2022, June 28). Vietnam Pharmaceuticals Market Report
2022–2027: Featuring Key Players – DHG Pharmaceutical Joint Stock
Company, Traphaco Joint Stock Company, Pymepharco Joint Stock Company
& Others. Retrieved from
[Link]
en/Vietnam-Pharmaceuticals-Market-Report-2022-2027-Featuring-Key-
Players-DHG-Pharmaceutical-Joint-Stock-Company-Traphaco-Joint-Stock-
[Link]
6. Vietnam News. (2024, October). Sustainable development of pharmaceutical
sector requires creative efforts. Retrieved from
[Link]
[Link]
7. ITRex. (n.d.). Why use AI in pharma and how to get it right. Retrieved from
[Link]
8. ITRex. (n.d.). AI in pharma: Top 9 use cases you should know. Retrieved from
[Link]

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