This action might not be possible to undo. Are you sure you want to continue?
SQUARE PHARMCETICAL Ltd.
Target Price for December 2009 BDT 4925 Today’s price BDT 2885 (14th December) Pharmaceuticals & Chemicals sector Share In Issue 8.94mln Market Cap BDT 34837.467mln
Valuation of Square Pharmaceutical Ltd Course: Portfolio Management
Prepared for Mr. Md Mohiuddin Associate Professor IBA, DU
Prepared by Ashek Ishtiak Haq (email@example.com) Minul Islam (firstname.lastname@example.org) MBA 41st D IBA, DU
This report is an academic endeavour. It is not, under any circumstances, to be used or considered as an offer to sell, or a solicitation of any offer to buy. Due care has been taken to ensure authenticity and reliability of data and information. However, analysts make no representation or warranty as to the accuracy or completeness of such information. All opinions and projections expressed in this report represent our judgment as of this date and are subject to change without prior notice.
2 | P a g e
Brief Overview Square Pharmaceuticals Limited (SPL) is leading the Pharmaceuticals sector from the very beginning. DPL grow as pharmaceutical industry matured and yet today it is one of the fastest growing sectors of the country with a growth rate close to 15%. The positives that differentiate is the market leader; it controls approximately 20% of the market share. Second, the company is about to enter the European market by next year. Third it has a large and diversified portfolio of investment and businesses that gives it very sustainable earnings. Strong brand image, a large distribution network, large product portfolio and creative marketing make us optimistic about the future potential of the company. Therefore, we recommend BUY with a December 2009 target price of BDT 4925. • • The pharmaceuticals market is an Oligopoly in nature despite the presence of more than 250 companies. The top 15 players control around 73% of the market share. Though the sector is reaching maturity as indicated by the stable sales growth for last few years. However, new opportunities of export are opening up and 3 year CAGR of revenue was 15%. • Attainment of the UK MHRA certification for its manufacturing plant and opening of many new markets within next year, as stated by company officials, convinced both the analysts of booming growth for coming years. • Our DDM model gives us a fair value of BDT 4,925 for December 2009 whereas our PE based relative valuation technique gives us BDT 3,971 for the same period. On the other hand when we value SPL by using the sum of the parts, we arrive at a value of BDT 6,332 for December 2009. Considering the assumption and market perception we back the DDM approach and our bet is that SPL stock will reach a price of 4,925 by December 2009.
2002 P/E P/B EV/EBITDA EV/Sales P/Sales DivYield (only Cash Basis) RoE
2008 2009 E
33.85X 7.85X 15.70X 13.26X 11.73X 2.6%
33.61X 6.68X 15.39X 12.51X 11.06X 2.4% 21.5%
26.50X 5.60X 12.29X 11.36X 10.04X 2.4% 23.0%
20.47X 4.62X 10.47X 10.05X 8.89X 2.7% 24.7%
22.05X 4.02X 9.81X 8.88X 7.85X 2.6% 19.5%
19.73X 3.51X 8.42X 7.31X 6.46X 1.7% 19.0%
18.60X 3.05X 8.22X 6.42X 5.68X 1.4% 17.5%
20.11X 4.25X 6.54X 5.04X 4.45X 3.0% 17.7%
16.88X 3.88X 5.46X 4.34X 3.83X 3.2% 24.0%
14.62X 3.55X 4.63X 3.74X 3.31X 3.4% 25.4%
13.96X 3.32X 4.23X 3.39X 3.00X 3.6% 24.6%
11.82X 3.01X 3.59X 2.90X 2.57X 3.8% 26.7%
3 | P a g e
Macro Analysis According to the Economist Intelligence Unit most of the developed world will be in recession in 2009. The global economy will grow by 2.6% (on a purchasing power parity, or PPP, basis), the slowest pace since 2002. The big industrialized countries will expand by a mere 0.3% in 2009, while developingworld growth will slip to 5.9%, a full percentage point lower than in 2008. World trade will increase by 3% in 2009, a third of the rate in 2006. Trade growth in emerging markets will be healthier, at 8-9%, but this is not entirely good news: emerging Asia’s openness to trade will leave it exposed to the downturn in the wealthier countries. South-east Asia will be hurt by a lacklustre euro zone and will feel some of the pain from the downturn in the United States. Weaker global demand will push commodity prices lower, including oil. As China and India slow infrastructure spending, commodities like cement, iron, and steel’s price will fall. The US and European central banks will cut interest rates as economies slide and inflation recedes. With more than half a trillion dollars of assets already written off by global banks, a return to normal credit conditions remains far away.
World Trade and GDP
World GDP Growth (real terms, at PPP), % 5.4 4.8 4.2 3.6 5.2 4.5 4.1 3.8 3 2.6 3.4 5.3 World Trade Growth ($ value), %
$ bn (manufacturer's sales)
World Eastern europe and Russia Latin America Japan Asia and Australasia Western Europe 35 43.2 67.5 145.2 249 420.9 902.4
3 2.4 1.8 1.2 0.6 0
In the health frontier, Rapid urbanisation and a growth in sedentary living are helping to drive epidemics in diabetes and cardiovascular complaints across Africa, the Middle East, Asia and Latin America. India, for example, will have more than 30m diabetes sufferers in 2009, the most of any country. That number is expected to more than double in the next 20 years. China, in a different illness, is estimated to have more than 100m hypertension sufferers, with 3m new cases expected each year.
4 | P a g e
The average life expectancy of a woman in 2009 will be 75 years for the first time in history. Men will reach a life expectancy of 70 two years later. Recession or no, global health-care spending will expand in 2009 as longer lived consumers place a premium on having the latest therapies or drugs. In the developing world, the swelling ranks of the middle class will increase demand for pharmaceuticals, while rising government-provided benefits for the elderly will ensure continued growth of the sector. Health-care spending per head will rise by 4.3% in 2009 and pharmaceutical spending by 7.2%. Total drug sales will be worth $1.2trn in 2012. The explosion in the amount of chronic disease in the developing world will push down the cost per treatment.
Bangladesh at a Glance Annual data 2007(a) Population (m) 158.7 GDP (US$ bn; market exchange rate) 67.8 GDP (US$ bn; purchasing power parity) 196 GDP per head ( US$; market exchange rate) 427 GDP per head ( US$; purchasing power parity) 1,233 Exchange rate (av) Tk: US$ 68.87(b) (a) Economist Intelligence Unit estimates. (b) Actual.
Historical averages (%) 2003-07 Population growth 1.8 Real GDP growth 6.1 Real domestic demand growth 5.6 Inflation 7.5 Current-account balance (% of GDP) 0.5 FDI inflows (% of GDP) 1.0
The political scene will remain unsettled during the early part of 2009. The general election is expected to be held in December 2008. The electoral reforms have been completed. However, the timing of the poll could be delayed by a few months at the most, as the EC attempts to complete all the preparations set out in the election roadmap. Assuming that an election is held and that all the parties take part, it is likely to be a contest between the two long-established rivals, the Awami League and the Bangladesh Nationalist Party. However, tensions could escalate if the caretaker government goes ahead with the formation of a National Security Council, which could give the army a bigger role in politics than was the case before the imposition of emergency law in early 2007. From the early perception by the international media Awami League could win the election. The biggest risk to political stability centres on the timing of the next general election. Given the huge task of holding civic elections and local government elections before setting a date for the parliamentary poll, there are concerns that all the preparations may not be completed in time for a general election to be held by end-2008. A sustained campaign of violence by any of the numerous militant groups in Bangladesh would constitute another threat to political stability. Although the leading figures in two of the country's four main banned militant groups have been executed, huge networks of full-time and part-time activists remain intact. Relations with India are expected to improve during the forecast period. High-ranking officials from Bangladesh and India have agreed to co-operate on a range of economic and security issues, and this process is expected to continue in 2008-12. Economic policy in the forecast period will focus on continued economic liberalisation, although progress will be slow. Bangladesh will seek to attract foreign direct investment, particularly in the textile industry. Efforts to diversify the tax base and to improve revenue collection will achieve some success. Demand for energy will continue to outstrip supply, but the situation should improve slightly from end-2008, as new power plants come on stream. Real GDP growth will average 6.2% a year in 2008-12, driven largely by strong private consumption and gross fixed investment expansion. The economy will remain dependent on both the agricultural sector—which provides the main stimulus to private consumption—and the textile industry, which accounts for the country's largest category of exports. Record inflows of expatriate workers' remittances will ensure that the current-account deficit as a proportion of GDP will stay below 1% during the forecast period.
5 | P a g e
Projected Figures Key indicators Real GDP growth (%) Consumer price inflation (avg; %) Budget balance (% of GDP) Current-account balance (% of GDP) Exchange rate Tk:US$ (av) Exchange rate Tk:€(av)
2007 6.4 9.1 -3.9 1.2 68.87 94.27
2008 6.2 8.5 -4.8 -0.3 68.66 106.26
2009 6.0 9.0 -5.2 -0.3 70.03 105.05
2010 6.2 6.8 -4.8 -0.6 72.21 101.63
2011 6.4 6.6 -4.8 -0.7 74.54 99.51
2012 6.4 6.0 -4.7 -0.7 77.17 101.09
Outlook for 2008-09 • The Economist Intelligence Unit expects the budget deficit in fiscal year 2008/09 (July-June) to rise to the equivalent of 5.2% of GDP, compared with the official target of 5% in the 2008/09 budget. • Real GDP is expected to grow by 6% in 2008/09, driven by strong household spending and investment. • Consumer price inflation is expected to remain high over the forecast period, averaging 8.2% in 2008 and 8.8% in 2009. • The trade deficit is expected to swell to record levels in 2008-09 as demand for industrial raw materials strengthen and international oil prices stay high. The Global Financial Crisis: The consequences of the ongoing global financial crisis for the Bangladesh economy are too early to predict with a measure of reliability; much will depend on how the crisis evolves and unravels in the near term. Three possible scenarios could unfold, though, with the implication for economies such as that of Bangladesh depending on the width and depth of the crisis. In the first scenario, the crisis leads to a slowdown in global economy but is followed by a quick upturn. The financial rescue packages start to work and the developed country economies get back to their recent growth trends. The second scenario could be a recession lasting for 1-2 years with negative to zero growth rates. This would result in sluggish demand and higher rates of unemployment in developed economies. The third scenario could be one where recession develops into depression, lasting for 3-4 years, with negative growth rates, high unemployment in developed countries, and a drastic fall in effective demand. This is likely to have dire global repercussions. Impact on and implications for Bangladesh economy will critically hinge on which particular scenario actually emerges from the current crisis. Anything bordering the third scenario will have adverse consequences for economies such as Bangladesh, while even the second scenario is likely to be detrimental to the interests of Bangladesh economy in FY09.
OPENING AND SETTLEMENT OF L/C (FY2008 VS. FY2009, JULY – AUGUST) FY 2008 FY 2009 Opening Settlement Opening Settlement Consumer Goods Rice Wheat Intermediate Goods Industrial Raw Materials Textile Fabrics Accessories Textile Fabrics Accessories BBLCs Fabrics Petroleum and Petroleum Products Capital Machinery Machinery for Misc Industries Commercial Sector Industrial Sector Other L/Cs Total 526.04 149.42 168.24 267.7 1330.02 468.31 432.45 338.66 276.87 306.8 262.66 368.05 252 620.05 3590.14 334.56 69.71 69.06 227.66 1114.18 463.49 426.23 327.29 371.82 250.81 207.43 250.29 161.59 411.88 2918.34 269.59 0.67 98.1 393.61 1784.82 554.69 513.4 394.22 489.55 267.3 353.14 427.81 289.63 717.44 4275.45 277.29 81.15 16.79 251.65 1619.39 545.63 512.31 393.58 435.32 293.63 281.76 357.24 331.1 688.34 3847.38 Growth % Opening Settlement -48.75 -99.55 -41.69 47.03 34.19 18.44 18.72 16.41 76.82 -12.88 34.45 16.24 14.93 15.71 19.09 -17.12 16.41 -75.69 10.54 45.34 17.72 20.2 20.25 17.08 17.07 35.83 42.73 104.9 67.12 31.83
6 | P a g e
There are several transmission mechanisms through which global financial crisis could impact on the Bangladesh economy. Exports, although earnings posted a very high growth in July, 2008, could slow down in the face of sluggish demand in the developed country markets which account for four-fifths of Bangladesh’s global exports. Anecdotal information from apparels exporters indicate some slowdown in order placement, although it is still not clear whether it is cyclical, seasonal or is originating from the expected sluggish consumer demand in developed countries. In general, low-priced, mass-produced items, where Bangladesh is most strong, are not affected by economic slowdown in developed market since income elasticity of such items tends to be very low. Economic slowdown could even induce some shift in demand from the middle-segment of the market to the lower-end (the so-called Wal-Mart effect). Indeed, Wal-Mart sales went up by about 3 per cent in August 2008. However, a tightening of apparels price is to be expected, with major buyers putting pressure on exporters to reduce their price offers. Additionally, WTO negotiations could be adversely affected because of the global crisis and initiatives such as the DF-QF market access for LDCs may not witness much progress. Developed countries could become more protective. Initiatives such as the New Partnership for Development Act (NPDA 2007) could become victims of the crisis. Remittance flow, three-fourth of which comes from the Middle-Eastern countries, could be affected if there is a recession in developed economy with knock-on effect on investment flow to the region. Commodity prices are coming down already; any economic slowdown could lead to further fall in prices. This should benefit commodity dependent Bangladesh and have positive impact on the inflationary situation in the economy. The challenge will be to identify an optimal strategy to pass on the benefits to the long suffering consumers. Evidently, in case of commodities such as fuel cross-subsidisation considerations (between octane, petrol, diesel and kerosene) will be required. Bangladesh’s share market is not exposed to global capital July, flows to any large extent 2005 2006 2007 2008 (only about 2.5 per cent in Bangladesh (DSE) -15% -4% 87% 0% the context of market USA (S&P 500) 3% 14% 4% -14% capitalisation of about China (Shanghai Composite) -8% 130% 97% -49% USD14.0 billion). However, Japan (NIKKEI 225) 40% 7% -11% -14% the continuing need for India (SENSEX) 42% 47% 47% -34% strengthening of the Pakistan (KSE 100) 54% 5% 40% -16% oversight function of SEC Vietnam (VN-Index) 29% 144% 23% -53% should not be undermined. Whilst the ongoing crisis sends a cautionary note with regard to risky and foreign currency denominated derivatives, opportunities to attract portfolio investment to Bangladesh’s share market should not be left unattended, and will need to be explored and exploited.
Bangladesh outperforms other equity markets
7 | P a g e
Monetary Policy..In view of the global financial crisis, in addition to the already high inflation rate, Bangladesh will need to face the challenge of following a monetary policy which can ensure adequate liquidity in the banks and generate economic activities in order to alleviate poverty and accelerate economic development. The MPS of the BB for the period July-December 2008 “aims at using the monetary policy for ensuring reasonable price stability essential to sustaining high economic growth, shielding the economy from global price and financial turbulences and downside risks, and tapping new upside opportunities” (Monetary Policy Statement, Bangladesh Bank, July 2008). As a response to the current financial crisis the BB has been pursuing an accommodative policy in view of domestic and global economic developments, and has resisted the repetitive suggestion of the International Monetary Fund (IMF) to raise interest rate and follow a contractionary monetary policy. It is expected that the BB will follow an independent monetary policy to control inflation and stimulate investment as always, keeping in view the domestic and global realities.
Interest rate on 5‐ year NSD
Inflation Rate (12 month average)
Real rate of interest on 5‐Year NSD
However, in very recent times, the BB has raised the repo rate to somewhat discourage credit expansion (from 8.50 per cent in August, 2008 to 8.60 per cent in September 2008. Reverse repo rate has been changed to 6.75 percent from 6.50 per cent).
Striking a balance between high inflation and interest rate has always been a challenge for the BB 4.00 while devising a monetary policy. The long term interest rates have 2.00 either declined or remained the 0.00 same over the years. For example, June 2004 June 2005 June 2006 June 2007 December March 2008 June 2008 interest rates on 5-year and 102007 year Bangladesh Government Treasury Bond (BGTB) have declined, while the interest rate on National Savings Directorate (NSD) certificates remained same in June 2008, compared to December 2007 (Table 3.1). This implies that the real rate of interest (RRI) has declined in the face of high inflation.
Weighted average interest rate of Government long term T-bill/bonds and inflation BGTB NSD Real Rate of Interest on 51035Inflation Rate 5-Year 10-Year 3-Year 5-Year Period year year year year (12 month avg) BGTB BGTB NSD NSD June 2004 8.00 10.00 10.50 11.00 5.83 2.17 4.17 4.67 5.17 June 2005 8.75 9.93 10.00 10.50 6.49 2.26 3.44 3.51 4.01 June 2006 10.60 12.09 10.00 12.00 7.16 3.44 4.93 2.84 4.84 June 2007 12.14 11.50 12.00 7.20 4.94 4.30 4.80 December 07 10.65 11.73 11.50 12.00 9.11 1.54 2.62 2.39 2.89 March 2008 10.60 11.72 11.50 12.00 10.00 0.60 1.72 1.50 2.00 June 2008 10.60 11.72 11.50 12.00 9.94 0.66 1.78 1.56 2.06
8 | P a g e
Growth in M2
280,000 260,000 240,000
220,000 200,000 180,000 160,000 140,000
M2.There has been an upward trend in case of Broad Money Supply (M2) during the FY08. M2 has posted a rise of 18.64 per cent as of end July 2008 compared to July 2006. This growth has been due to growth in the domestic credit by 21.61 per cent during July 2007 and July 2008. Due to increased remittance flow, Net Foreign Assets (NFA) has continued to increase in recent times. During July 2007 and July 2008, NFA increased by 13.98 per cent. Net Domestic Assets (NDA) has also experienced an increase of 19.51 per cent during July 2007 and July 2008. This constant growth in the money supply is a sign of the economic expansion the country is Inflation..The annual average rate of inflation (12-month annual average CPI, 1995-96 = 100) increased to 10.00 per cent in August, 2008 from 7.78 per cent in August, 2007. The increasing trend continued till March, 2008 when it reached 10.0 per cent. Then it started declining in September. Inflation dropped drastically on October due to adequate supply of boro and aus rice in the market following a bumper harvest. The overall inflation rate on a point-topoint basis dropped by 2.93% point to 7.26% in October as price of both food and non-food items fell. Inflation on food items fell 3.99% and on non-food items it fell 1.24%. Interest rate..In view of high spread between lending and borrowing rates, interest rate has been a contentious issue as far as business and banking community were concerned. The BB has already directed the major commercial banks to reduce the interest rate spread and reduce their lending rates. The lending rate (calculated on a quarterly basis) of scheduled banks was 12.29 per cent in June, 2008 as compared to 12.75 per cent in December, 2007. Their deposit rate (also calculated on a quarterly basis) stood higher at 6.95 per cent in June, 2008 as compared to 6.77 per cent in December 2007 (Table 3.9
tk in crore
witnessing for some years.
inflation (general) Point to point
Interest Rate Spread
14 13 12 11
10 9 8 7 6 5 4
9 | P a g e
Sep‐05 December Mar‐06 June July August September October November December January ,07 February March April May June July August September October November December January ,08 February March April May June July August
Falling Inflation: General, Food and Non‐food
inflation (food) point‐to‐point inflation (non‐food) point‐to‐point
and Figure 3.8).
Steady Exchange Rate (end of month)
68.65 68.6 68.55 68.5 68.45
the EURO owing to the global financial crisis. Balance Of Payment
Exchange Rate..The exchange rate between Bangladesh Taka (BDT) and US Dollar (USD) has remained stable for the last one year or so. This is because of the introduction of floating exchange rate in 2003 to contain fluctuations of Taka against foreign currencies, particularly the US Dollar. During August, 2007 and August, 2008, Taka appreciated slightly by 0.26 per cent. At the end of August, 2008 Taka per USD decreased to Tk.68.52 from Tk.68.70 at the end of August, 2007. Taka depreciated against Euro by 7.38 per cent in August, 2008 compared to August, 2007. However, very recently taka is appreciating against
Balance of Payments.. Bangladesh’s external sector was in tight situation in FY08, with export earnings of Trade balance USD13.94 billion and import Services payments exceeding USD19.48 Income billion in the FY08. However, Current transfers July FY09 experienced an Official transfers improvement in trade balance Private transfers in comparison to July of the last fiscal (In July FY08, trade of which : Workers' remittances 5979 7915 567 821 balance was USD507 million Current account balance 936 672 -130 269 whereas in FY09 it came down Capital account 490 576 1 1 to USD342 million). Trade Financial account 762 -431 230 -243 balance recorded a larger deficit Errors and omissions -695 -213 60 151 of USD5541 million in FY08 Overall balance 1493 604 161 178 compared to the deficit of million in FY07. Reserve assets -1493 -604 -161 -178 USD3458 However, balance on the current account recorded a surplus of USD672 million in FY08 against the surplus of USD936 million during FY07, mainly thanks to a larger current transfer of USD8743 million. There was surplus in current account in July FY09 (USD269 million) in the backdrop of negative balance in the corresponding month of the last fiscal year (USD130 million). (In million USD) July July FY2007 FY2008 FY2008 FY2009 -3458 -5541 -502 -342 -1255 -1525 -125 -175 -905 -1005 -115 -93 6554 8743 612 879 97 127 0 0 6457 8616 612 879 This surplus mainly originated from private transfers in the form of worker’s remittances which was USD7915 million in FY08 with a robust growth of 32.38 per cent against USD5979 million in FY07. The growth of workers’ remittances also continued in July FY09 (USD821 million) compared to the corresponding period of July FY08 (USD567 million). The overall balance also showed a surplus of USD604 million during FY08 against the surplus of USD1493 million during FY07 due to surplus in current account and capital account of USD672 million and USD576 million respectively (Table 5.5). Overall surplus balance was registered in the first month (July) of FY09 (USD178 million) against the surplus of USD161 million in July of FY08.
10 | P a g e
respectively from September 2008.
Capital Market.. Stock market indicators rose in the first quarter of FY2009, after which they started declining. The Dhaka Stock Exchange (DSE) general index reached 2,966.8 points at the end of September 2008, a rise of 7.5% from July. The DSE general index then dropped by 7.4% in October. Although the share of foreign portfolio investment in the country’s stock market is small and the global financial crisis is not expected to have significant effects on the domestic stock market, the downward movements in share prices were likely caused by market speculation and selling pressures from nervous retail investors. DSE market capitalization reached Tk1,068 billion, increasing by 10.1% from July 2008 to September 2008; however, it declined to Tk1013 billion in October 2008. Similar trends were observed at the Chittagong Stock Exchange (CSE), the country’s other stock exchange. The CSE selective categories index rose to 5,892.7 in September 2008 from 5,517.5 in July 2008, a rise of 6.8%; while market capitalization rose by 7.5% during the same period. However, in October, the CSE selective categories index declined by 7.3%. Both the DSE and CSE indexes continued to fall and reached 2,584.02 and 5,164.21 points respectively on 9 November 2008, representing decline of 12.9% and 12.4% With respect to IPOs, the number of companies that floated their shares in FY08 were 12, which was 2 more compared to the previous fiscal year. However, total issued shares, sponsors’ part, and public offer etc. in FY08 were not found to be very promising for potential investors. Oversubscription in the context of IPOs had made the share of public offer to decrease by about 49 per cent. In case of 9 upcoming IPOs (four from insurance and one each from leasing, housing finance, textile, iron steel and ICD) public offering as percentage of total shares was found to be low (22 per cent of total shares visa-vis 37 per cent in FY08) which is a matter of concern for small scale investors
11 | P a g e
Industry Analysis: • With a USD 600mn industry and an average annual growth rate of 12%, the Bangladeshi pharmaceutical industry is the biggest (in volume) amongst all the LDCs. • Primarily a generics industry producing about 8,000 different brands which meet 97% of the domestic demand. Local companies enjoy 86% market share. Of the 245 registered pharmaceuticals, the top ten players account for 65% market share. • According to the WTO TRIPS agreement, LDC’s are exempted from “Patent Protection” until 2016 allowing legal reverse engineering and sale of patented products. This provides a unique opportunity for Bangladesh over India and China, who are under the patent regime. • Bangladesh has made significant progress in the export market. Between 2003 and 2006 pharmaceutical exports increased to about 61 countries from 51 and quadrupled in value from USD 7.9mn to USD 36.5mn. • Since many companies have acquired international certifications like USFDA, UKMHRA and TGA, Bangladesh can penetrate into regulated and unregulated markets. Industry grew by 41.8% over last 3 years. The Pharmaceutical Sector is one of the fastest growing sectors in Bangladesh. In 2007 the Bangladesh pharmaceutical market was worth nearly USD 600mn and it is growing at a steady average rate of 11.57% over the last five years. The last three years has seen an average growth rate of 13.7% and the last year alone has given an impressive growth rate of 15.8%. The Pharmaceutical Sector is the second highest contributor to the National ExChequer and the largest White Collar Labor intensive employment sector of the country. The growth of the industry is depicted in the table below. Bangladesh pharmaceutical market (in mn USD) Quarter 1st 2nd 3rd 4th Total 2004 94.1 110.6 107.5 104.4 416.5 2005 95.8 120.4 128.2 145.6 490.0 2006 123.7 136.8 157.9 91.6 510.0 2007 142.2 156.6 154.2 137.6 590.6
The Bangladeshi Pharmaceutical Market is primarily a generic market producing both patented and off-patented products. This is popularly known as Branded Generic Market since any manufacturer can produce the same molecule (either patented or off-patented) and market it in different brand names. There are currently 450 generics registered in Bangladesh, out of which 117 are in the controlled category i.e. in the essential drug list. The remaining 333 generics are in the decontrolled category. The total number of brands that are registered in Bangladesh are currently estimated to be 5,300, while the total number of dosage forms & strengths are 8,300 and cover all the important groups. Local manufacturers hold over 86% market share whereas only 13% share is held by the MNCs. Out of the top ten players in the market, nine are local pharmaceutical companies, with SnaofiAventis as the only MNC. The top two domestic manufacturers, namely Square and Beximco Pharmaceuticals have a cumulative market share of over 27%, while the top five have a market share of 44.5% and the top ten domestic manufacturers contribute about 64% of the total pharmaceutical market of Bangladesh.
12 | P a g e
In Bangladesh there are currently a total of 245 companies out of which 200 have operations in the country. The market is totally dominated by the local companies and there are only 5 multi-nationals currently operating. The 245 companies together have 5300 brands registered in Bangladesh. The table below lists the top ten pharmaceutical companies in Bangladesh in terms of sales value and market share. Top 10 Manufacturers in Bangladesh by sales - 2007 Company Name Sales USD mn Share (%) Square 106.5 18.03 Beximco 54.3 9.19 Incepta 43.5 7.37 Acme 31.9 5.4 Eskayef 26.8 4.54 Drug Int. 23.1 3.91 Aristopharma 22.9 3.88 Sanofi aventis 22.4 3.8 A.C.I. 22.4 3.79 Renata 21.5 3.63 Source: IMS Report,4th Quarter - 2007
Top 10 Market Player by Market Share
20 18 16 14
12 10 8 6 4 2 0 0 1 2 3 4 5 6 7 8 9 10 11
Beximco Incepta Acme Eskayef Aristopharma Drug Int. ACI Sanofi aventis Renata
Square Pharmaceuticals is also the market leader in terms of the number of products manufactured. Companies like Square, Beximco and Incepta continue to mark their strong presence by being in the top 5 with Opsonin posing a strong presence at the 3rd position. Many smaller local companies like Gaco Pharmaceuticals, produce quite a large number of drugs without making much revenue enough to challenge the top 10.
Top Selling Brands in 2007 (USDmn) Brand Company Sales Share Growth NEOCEPTIN Beximco 8 1.35 34.06 SECLO Square 7.3 1.24 63.1 NEOTACK NAPA CIPROCIN LOSECTIL PANTONIX FIMOXYL LEBAC ENTACYD Square Beximco Square Eskayef IAP 6.3 6 5.7 5.7 4.3 1.07 1.01 0.97 0.96 0.74 21.26 10.17 44.8 39.88 33.97
Sanofi Aventis 4.3 0.73 19.26 Square 3.6 0.61 13.75 Square 3.3 0.56 24.92 Source: IMS Report, 4th Quarter - 2007
The graph and table below show the sales values and the market shares of the top 10 brands in the market. As expected, the top brand is a drug concerning the alimentary disease class. Consistently
13 | P a g e
enough, Square and Beximco play a vital and predominant role. Although Square is the market leader in terms of market share, “Neoceptin”, a product of Beximco is the market leader in terms of brands. The Export Story.. The history of pharmaceutical exports from Bangladesh dates back to the late 80's. At that point, only one or two major pharmaceutical companies of Bangladesh took proactive efforts to initiate export. These companies on their own initiative started exporting their bulk drugs as well as finished formulations to some of the less-regulated overseas markets like Myanmar, Vietnam and Nepal. After being successful in these less-regulated markets, in the early 90's, a few companies of Bangladesh took the initiative to explore some of the moderately regulated markets like Russia, Ukraine and Singapore. Today, Bangladesh Export Statistics (in million USD) Pharmaceutical Industry is Year Finished products Raw materials No. of countries 2001 4.5 0.2 17 exporting its quality products to 2002 5.9 0.6 32 around 65 countries of the world 2003 7.9 0.3 51 and the volume of exports has 2004 20.3 0.02 62 more than quadrupled from 2005 20.6 0.1 67 around USD 8 million to almost 2006 36.5 0.1 61 USD 36 million in the last 4 years. 2007 35.9 n/a 65 Source: Primary Interview, DDA Bangladesh has made significant progress in the export market. Between 2003 and 2006 pharmaceutical exports increased to about 61 countries from 51 and quadrupled in value from USD 7.9 million to USD 36.5 million thus resulting in an average annual growth rate of 91.8%. This growth in the export can be largely credited to the lowcost factors of production that exist in Bangladesh in the form of low labor, infrastructure and power costs. Bangladesh exports a wide range of pharmaceutical products covering all major therapeutic classes and dosage forms. Besides the regular brands, Bangladesh exports high-tech specialized products like inhalers, suppositories, nasal sprays, sustained release products, etc. Apart from overseas retail customers, Bangladesh has also been supplying to world-renowned hospitals and institutions like Raffles Hospital, Singapore, KK Women & Children Hospital, Singapore, Healthway Medical Group, Singapore, Jinnah hospital, Pakistan, Aga Khan Hospital, Pakistan, Mission for Essential Drugs (MEDs), Kenya and State Pharmaceutical Corporation (SPC), Sri Lanka. The quality and efficacy of the products being exported from Bangladesh have been well accepted by the doctors, chemists, patients and regulatory bodies of all the importing countries. The packaging and presentation of the products of Bangladesh are comparable to any international standards; in fact, they have been highly appreciated internationally. At present, Bangladesh imports over 80% of the local API requirement. Even though, a number of 21 local pharmaceutical companies are producing 41 APIs for pharmaceutical products. Bangladesh currently has the capacity of producing APIs worth of USD 29.7 million. Table 9: Major API manufacturers in Bangladesh and their products - 2007 Company List of API Products Beximco Pharmaceuticals Amlodipine, Amoxycillin, Ampicillin, Celecocib, Rofecoxib, Paracetamol, Ltd. Diclofenac, Cloxazillin, Flucloxacillin, Cetirizine Fluconazole, Ciprofloxazin, Ranitidine, Cephalexin Square Pharmaceuticals Amoxycillin, Paracetamol, Diclofenac, Cloxazillin, Flucloxacillin, Ltd. Cephalexin Drug International Ltd. Amoxycillin, Diclofenac, Cloxacillin, Flucloxacillin, Cephalexin Globe Pharmaceuticals Ltd. Amoxycillin, Diclofenac, Cloxacillin, Flucloxacillin, Cephalexin
14 | P a g e
Gonoshashtaya Amoxycillin, Paracetamol, Diclofenac, Cloxazillin, Flucloxacillin, Pharmaceuticals Ltd. Cephalexin Sunipun Pharmaceuticals Paracetamol Ltd. Opsonin Chemicals Ltd. Amoxycillin, Paracetamol, Diclofenac Source: GTZ. (2007). 'Study on the Viability of High Quality Drugs Manufacturing in Bangladesh.' Federal Ministry of Economic Cooperation and Development
A capital intensive industry requiring huge fixed costs in machinery and extensive R&D
Government policy makes it hard for the MNCs to enter the market.
Currently only 20% of the API are produced internally the rest are imported. Too small size of the most of the players makes it unattractive for investment in API production.
About 245 firms operate with only 5 MNCs. Top 10 players hold about 64% of the total market. Square and Beximco together holds 25% market
Due to restriction on direct promotion of drugs cos’ have to market through key opinion leader i.e. the doctors by inducing them to suggest a particular drug. This often results in unfair practice.
The 245 companies have 5,300 brands many firms offering similar products and services because of the absence of patent protection. Cost of switching is relatively low.
Porter’s Five Forces Analysis of the Industry
15 | P a g e
Square Pharmaceuticals Ltd. Company Overview Background Square Pharmaceuticals started as a Partnership Firm in 1958. It converted into a Private Limited Company in 1964. The company made its initial price offering in 1995. It has achieved MHRA certificate as the first pharmaceutical company of Bangladesh. Square Pharmaceuticals Limited is the largest pharmaceutical company in Bangladesh and it has been continuously in the 1st position among all national and multinational companies since 1985. At the end of 2007 as well, Square was the leading company with annual sales worth BDT 68.9bn (USD 106.5mn) and market share of 18%. Such is the dominance of Square that the closest competitor Beximco has only about half the market share. Plant & Size Square Pharmaceuticals has three GMP facilities in Bangladesh. The first factory located in Pabna started operations in 1958. The second, known as the "API Unit" began production in 1995. The third unit located 50 kilometers north of Dhaka has been in operation since 2002. This facility is geared oral capsules and tablets. The company plans to use this factory as part of its export strategy. Products Square manufactures products in the following categories: Tablets: Non-Coated (plain, chewable, dispersible, vaginal) Coated (sugar coated, film coated, enteric coated) Sustained/Extended Released (coated, non – coated). Capsules: Granulated Material filled, Pellets Filled Suppositories: Suppocire based Injections: Vials containing Dry Powder for Injections, Small Volume Liquid Parenterals Liquids: Oral Syrups (Sugar based, Non-Sugar based), Oral Suspensions, Topical Liquids Spray, Drops, Ointment, Cream and Powder: Small Volume Sterile Eye & Ear Drops Small Volume Nasal Drops & Sprays Topical Ointments & Creams Topical Antibiotic Powder Oral Dry Powders: Dry Suspensions (Antibiotic & Anti Infectives), Dry Syrups (Antibiotics) Dry Powder Inhalers: Partial Filled (Premix) Capsules for Respiratory Tract Application with a Device Metered Dose Inhalers: Pressurized Canisters for Oral use with an Actuator International Trade Square pharmaceutical is already supplying products to the following markets: Asia: Afghanistan, Bhutan, Cambodia, Macau, Malaysia, Myanmar, Nepal, Papua New Guinea, Sri Lanka, Tajikistan, Vietnam, Yemen Africa: Gambia, Ghana, Kenya, Libya, Mauritius, Niger, Somalia, Sudan, Tanzania South America: Belize, Costa Rica, Guatemala Square pharmaceuticals is also supplying to the UK further to the approval of its general plant by the MHRA. The markets under exploration are: Asia: Hong Kong, Iran, Laos, Maldives, Philippines, Qatar, Saudi Arabia, Thailand, UAE Africa: Algeria, Chad, Comoros Island, Ethiopia, Malawi, Mozambique, Nigeria, Rwanda, Sierra Leone, South Africa
16 | P a g e
Europe: Germany, Kosovo, Romania, Russia, Ukraine South America: Brazil, Colombia, El Salvador Square plans to penetrate into the developed nations with its exports in the future. API Scenario The Pharmaceutical Bulk Manufacturing Plant: • • • • Established in 1992 and commercial production started in 1995. It is the one of the largest manufacturers of pharmaceutical bulk products in Bangladesh. It is well equipped with modern machinery. It has got the feasibility of reverse engineering of bulk drug under post WTO scenario.
Square is presently the largest quality-bulk drugs manufacturer in the country. Until 1996 it was involved only for the internal consumption of Square Pharma. Since 1997 it started marketing the API to all top local pharmaceuticals like Aventis Pharma, Novartis Bangladesh Ltd., Glaxo Smith Kline, ACI Ltd., Beximco Pharmaceuticals Ltd., etc.
17 | P a g e
SWOT Analysis of Square Pharmaceutical Ltd:
Has own API plant whereas 80% of the industry’s API requirement is imported. SPL is planning to capitalize on TRIPS and about to enter in to Europe Market. Received the UK MHRA certification for its manufacturing plant and waiting to enter the European market in the next year. Square enjoys 18% of the market, making it the biggest player in the market Strong brand image, quality of products, the largest distribution network in the country and doctors’ level marketing SPL is the only pharmaceutical company in Bangladesh that has the largest investment portfolio in different businesses and subsidiaries. For example, Square Spinning Mills Ltd (SCL) contributes 14% of SPL’s revenue. SPL has the largest product portfolio comprising of more than 430 products. So far in 2007, 17 new products have already been introduced. The pharmaceuticals market is an Oligopoly in nature despite the presence of more than 250 companies. Given the country's lack of spending power, the pharmaceutical market remains tiny in comparison with the population size. Pharmaceutical spending is amongst the lowest in the world in per capita terms. Healthcare expenditure consists of only 3.4% of GDP. R&D activities of the company have to be improved if it wants to compete with global players. Square’s textiles subsidiaries seem not to be adding value; rather they are taking value away from the pharmaceutical business. The market is dominated by cheap, locally produced generic drugs used for the treatment or prevention of basic illnesses. Therefore major revenue sources come from antibiotics, vitamins, pain-killers and anti-asthma drugs.
Industries in Bangladesh including some world class manufacturing industries that are providing 97% of the total medicine requirement of the local market. The industry is worth USD 593 mn, which grew by 41.3% in the last 3 years. It has enjoyed an average growth of 12% for last 5 years. Local companies and MNCs together meet 95% of the country’s drug demand but the local manufacturers dominate the industry; they enjoy approximately 87% of market share, Low presence of the MNC, there are only 5 big MNCs operating in the market. More than 97% of sales revenue comes from the local market. Bangladesh is the 7th most populated country with a population base of 150m. With the prevalence of diseases, Bangladesh ranks 167 in the world in terms of life expectancy at birth. As per TRIPS/WTO agreements only 50 LDCs including Bangladesh will be able to export their patented drugs. Among the 50 LDCs, Bangladesh is the only country which has a strong manufacturing base for pharmaceuticals and is therefore in a unique position to exploit this opportunity. Bangladesh Govt. declare this Sector as “Thirst Sector” for 2006-2009 & EPZ declares as the “Export Product of the year 2007” Between 2003 and 2006 pharmaceutical exports increased to about 61 countries from 51 and quadrupled in value from USD 7.9 million to USD 36.5 g e 18 | P amillion thus resulting in an average annual growth rate of 91.8%.
Price Hike of Raw materials. Recently few new industries have been established with hi tech equipments and professionals Patent Law, which is valid up to 2016 for Least Developed Countries like Bangladesh. Lack of Hi tech Quality control Laboratory, establishment of API Park by the Govt, necessary action for Process Loss of API by the Govt. After 2016 the advantage enjoyed by Bangladesh will evaporate.
Company Valuation Our analysis of the square pharmaceutical limited (SPL) is based on Present value of cash flow, (PVCF) and Relative Valuation techniques. In the PVCF approach, we estimate the value of the stock through estimation of future dividend (D), and free cash flow to equity (FCFE) based on future growth rate (g) and required rate of return (k). This section discusses the underlying assumptions behind the estimations and lists the final result. Estimation of Financial Statements On basis of historical data, macro-analysis, and company information, projected balance sheet and income statement for SPL has been prepared. The complete balance sheet has been included in the appendix-2: Financial Statements-Historical & Estimated, with the assumptions and rational governing the projection. Required rate of return Risk free Rate is calculated on basis of Bangladesh Government Treasury bond rate that equals to 10.6%. As the analysts consider an investment time frame of 5 years, they believe the 5 year BGTB rate should be the base to estimate required rate of return instead of the 91days T-bill rate. BGTB rate is inflation-adjusted so no estimation of inflation has been done. Stock market return from 2003-2008 with conjunction of SPL return been used to estimate the risk premium of SPL and market return which is average of return annual return from 2003-08, is 0.38 Trade Date 01-01-03 01-01-04 01-01-05 01-01-06 03-01-07 01-01-08 DSE Index 845.85 967.15 1999.71 1669.80 1,583.09 3008.913 Price SPL 308.39 545.72 1227.68 923.46 1122.47 2483.33 0.143404 1.067636 -0.16498 -0.05193 0.900658 0.769577483 1.249651836 -0.24780073 0.215504732 1.212379841 Return DSE Return SPL
From regression between DSE return and SPL return, we find the following Covariance of Return of DSE and SPL, CovSPL,M = .27 Variance of DSE return, σM2 = 0.32 βSPL=0.84 Risk Premium for SPL is .84X(.25-.07)=0.15 Expected rate of return = 22% yearly
19 | P a g e
FCFE Approach FCFE Estimation FCFE has been calculated from the financial statement prepared using the following formula FCFE=Net Income+Depreciation Expenses-Capital Expenditure-Change in WC+New DebtRepayment of Debt
2009 2010 2011 2012 2013
FCFE 88,87,32,304 4,57,51,33,864 12,13,21,09,167 24,47,81,76,742 35,27,08,53,418
PV of FCFE Less Debt No of share Price
Dividend discount Model Dividend estimation:
৳ 77,34,50,05,495.20 ৳ 89,95,87,261.00 12072240 ৳ 6,332.33
Historical data indicates a compound annual growth rate of -7.0%, however the dividend and net operating profit after tax (NOPAT) of Square pharma has a negative correlation of 0.6. As square pharma is investing heavily on fixed assed (Fixed asset CAGR for the period is 30%), it paid lesser dividend. We depend on the total dividend paid by the pharma industry to estimate the dividend to be paid by SPL instead of historical data or NOPAT. Our assumption is justified as correlation coefficient between dividend paid by SPL & total Pharma industry is about 90%. And it has been found that the dividend paid by SPL vary around 23 to 25 percent of total dividend paid by the industry, however last year the dividend come down to 12% of industry dividend. We consider three different views-pessimistic, average and optimistic, to determine the dividend paid by SPL on basis of total dividend paid in Pharma industry. Total dividend to be paid by pharmaceuticals is correlated to GDP measured at market price. A correlation factor of 73% has been found between the two and for the last five years, the correlation coefficient stood at 85% the total dividend paid by the Pharmaceutical is about 10% of GDP. For estimated GDP growth rate, we consider the forecast of Intelligence unit of Economist group,
Dividend Growth rate estimation:
20 | P a g e
Growth rate has been estimated using historical data that included two approach-using average compound growth rate, and use of Retention rate (RR) & Return on Equity (ROE). From dividend estimation, we saw, the CAGR approach provides an unacceptable result. However, from ROE and RR, we find better estimation of growth rate. Growth Rate gDividend(Historical) Payout Ratio ROE Growth Rate, g=RRXROE 2003 27.46% 21.00% 15.60% 2004 25.98% 23.00% 17.00% 2005 26.49% 25.00% 18.20% 2006 31.96% 19.00% 13.30% 2007 22.87% 19.00% 14.60% 2008 25.89% 18.00% 13.00%
We believe, the dividend growth rate will pick up with opening up of new gDividend 2009-11 2012-14 export destination in European market. However, due to political instability and global financial turmoil, which hopefully will not affect pharmaceutical, In usual business/Scenario 15% 18% we are little pessimistic. And our final standpoint is that if everything goes Pessimistic view 13% 10% normal, the growth rate will rise while if things go wrong the growth rate will stumble and might come below 10%. For past data we estimate the growth rate will be around a constant figure for three years in a row.
Value/Output Stock Price from Dividend Discount Model Dividend payment more than industry average like before lower than industry average @ Moderate Growth Rate 4,811.43 4,925.93 7,388.89 @ Low Growth Rate 2,780.33 3,707.11 5,560.66
Analysts believe from discussion with company insiders and business performance that dividend payment will be as usual and the company will grow at moderate rate. Hence our bet is on BDT 4925BDT for SPL stock.
21 | P a g e
Relative Valuation techniques Earning Multiplier From historical data we find, P/E ratio for SPL is higher than industry average. Though our historical data differ from that of DSE reporting, we have continued with our calculation as we don’t know the assumptions and process DSE adopted to calculate P/E. From the historical data we project the P/E for SPL is likely to vary from 30 to 25. Value/Output 2009 Earnings per Share Price Earnings Ratio =30 =25 Final value of SPL stock We applied DDM, FCFE, and Earning multiplier approach to determine the value of SPL stock. The DDM is based on GDP while FCFE is based projected financial statement of the company that requires estimation of revenue and expense based on macro analysis. Earning multiplier approach based P/E ration that is pivoted on industry analysis and in depth study of the company. After a close look of the values that we obtain, we can discard some findings as those refer some unrealistic situation like paying a dividend that is more than industry average in a low growth situation. And our final valuation from three different approaches is listed below. All the approaches unlikely. Approach DDM FCFE Earning Multiplier Approach Assumptions Value 4,925 6,332 3,176 3,153 Under/Overvalue Undervalue in market by 2,050.00 Undervalue in market by 3,475.00 Undervalue in market by 301.00 Undervalue in market by 278.00 106 3176.34 3153.88 2010 126 3784.66 3642.19 2011 146 4370.63 3814.38 2012 153 4577.26 4505.72 2013 180 5406.86 Sectoral PEa 10.76 18.19 10.84 11.76 21.05 20.23
Year 2003 2004 2005 2006 2007 2008
SPL 50.42 39.76 30.71 33.08 29.59 27.91
indicate a buy decision. Though we believe from our market perception, a value of 6,332 is
Hence our final stand is that SPL stock price will be and should be BDT 4,925 by then end of 2000. And ee are recommending BUY as the analysis show the stock is undervalued by 1526 BDT on average considering latest market price of 2885 BDT (Close of Dec 4, 2008).
22 | P a g e
Appendix :Financial Statements Forecasted Revenue
2004 Square Pharma Local: Pharmaceuticals Product Growth % of Total SPL Sales Basic Chemicals Growth % of Total SPL Sales Agrovet products* Growth % of Total SPL Sales Pesicide Products Growth % of Total SPL Sales Total Local Sales Growth % of Total SPL Sales Export: Growth % of Total SPL Sales Gross Sales for SPL Growth VAT( 15% of Sale) Net Sales
5,07,30,41,083 92.54% 32,17,28,657 6% 2,73,63,822 0.50%
10,07,52,84,369 11,80,08,23,300 13,78,45,51,079 15,24,99,70,046 17,87,97,06,652 15.5% 17.1% 16.8% 10.6% 17.2% 85.72% 84.34% 79.46% 72.43% 67.55% 28,32,11,554 30,21,05,273 35,16,71,636 39,16,58,264 34,29,71,250 6.7% 16.4% 11.4% -12.4% -20.7% 2% 2% 2% 2% 1% 52,21,09,096 47,45,57,926 90,65,39,335 1,56,64,89,732 1,87,97,87,679 20% 168.1% -9.1% 91.0% 72.8% 4.44% 3.39% 5.23% 7.44% 7.10% 12,94,56,436 29,82,50,882 68,71,31,455 1,58,30,61,991 3,64,71,70,060 67.9% 130.4% 130.4% 130.4% 130.4% 1.18% 2.32% 4.37% 8.42% 15.36% 11,01,00,61,455 12,87,57,37,382 15,72,98,93,504 18,79,11,80,033 23,74,96,35,641 16.95% 22.17% 19.46% 26.39% 17.71% 93.67% 92.03% 90.68% 89.24% 89.73% 74,37,35,384 1,11,56,03,076 1,61,76,24,460 2,26,46,74,244 2,71,76,09,093 250% 50% 45% 40% 20% 6.33% 7.97% 9.32% 10.76% 10.27% 11,75,37,96,839 13,99,13,40,458 17,34,75,17,965 21,05,58,54,277 26,46,72,44,735 23% 19% 24% 21% 26% 1,76,30,69,526 2,09,87,01,069 2,60,21,27,695 3,15,83,78,142 3,97,00,86,710 9,99,07,27,313 11,89,26,39,389 14,74,53,90,270 17,89,74,76,136 22,49,71,58,024
5,42,21,33,562 98.91% 5,99,54,358 1.09% 5,48,20,87,920
23 | P a g e
Historical and Projected Balance Sheet
Square Pharmaceuticals Limited ASSETS: Current Assets: Cash & cash Equivalent Short Term Loan Merketable Securities Advance, Deposits & Pre-payment Accounts Receivable Inventories Total Current Assets Long term Investment Investment-Long Term (at cost) Investment- Associate Undertakings Preliminary Expense Total Long Term Investment Fixed Assets Property, Plant & Equipment-at cost Less: Accumulated Depriciation Net Fixed Assets Capital Work -in -Progress Total Fixed Assets Total Assets Liabilities & Shareholder's Equity Current Liabilities: Accounts Payable Liabilities for Expense Liabilities for Other Finance Short Term Bank Loan Current Portion of LTD Total Current Liabilities: Non Current Liabilities: Long Term Loan-Secured Deffered Tax Liability Minority Interest Total Non Current Liabilities Total Liabilities Shareholder's Equity: Share Capital Share Premium General Reserve Tax Holiday Reserve/Other Reserve Retained Earnings Total Shareholder's Equity Total Liabilities & Shareholder's Equity 2002 3,17,77,525 59,26,21,908 6,40,00,000 10,36,73,589 14,61,44,642 51,42,76,326 1,45,24,93,990 51,08,00,000 2003 3,01,37,159 38,63,34,814 2,02,50,000 12,44,58,455 14,05,36,470 73,98,35,432 1,44,15,52,330 1,19,72,00,000 2004 44979899.00 815577152.00 20250000.00 107177611.00 225115010.00 795856209.00 2008955881.00 1221900000.00 2005 382074333.00 1281695105.00 20250000.00 146042777.00 267527741.00 1144912356.00 3242502312.00 1660833364.00 2006 316720982.00 1897124652.00 20250000.00 166492706.00 288732137.00 1342364478.00 4031684955.00 1915833364.00 2007 139855179.00 1418893703.00 20250000.00 236455395.00 322864637.00 1544191798.00 3682510712.00 2792186364.00 2008 205295694.00 1510502334.00 20250000.00 288806440.00 360245646.00 2026736322.00 4411836436.00 3611744164.00 2009 E 400943269.67 2363814453.76 20250000.00 307491359.46 443729272.92 2335667806.62 5871896162.42 4373169647.06 2010 E 776004144.21 2711365638.64 20250000.00 373905699.62 502072378.22 2732921561.65 7116519422.34 5430783611.78 2011 E 1388659587.09 2817566186.51 20250000.00 457273069.44 555579468.96 3241203711.01 8480532023.01 6589848222.73 2012 E 1310548456.77 3196741288.49 20250000.00 529684152.14 638722065.99 3792209160.24 9488155123.63 7446072187.62 2013 E 1690936868.36 3813778838.36 20250000.00 609910490.26 739659121.58 4421828524.94 11296363843.49 8982590791.17
51,08,00,000 1,08,99,21,364 58,87,71,710 50,11,49,654 2,06,16,71,687 2,56,28,21,341 4,52,61,15,331
1,19,72,00,000 3,25,78,25,743 88,98,99,023 2,36,79,26,720 15,76,41,175 2,52,55,67,895 5,16,43,20,225
1221900000.00 3408474009.00 1171335118.00 2237138891.00 402266589.00 2639405480.00 5870261361.00
1660833364.00 3786220623.00 1468862152.00 2317358471.00 687238515.00 3004596986.00 7907932662.00
1915833364.00 4030138469.00 1756377308.00 2273761161.00 1077707832.00 3351468993.00 9298987312.00
2792186364.00 5803500191.00 2272496682.00 3531003509.00 481239419.00 4012242928.00 10486940004.00
3611744164.00 6893452889.00 2805020718.00 4088432171.00 59114649.00 4147546820.00 12171127420.00
4373169647.06 6923010213.50 2977726506.78 3945283706.72 880856454.38 4826140161.09 15071205970.58
5430783611.78 7363438440.69 3156307114.96 4207131325.73 1308443408.40 5515574734.13 18062877768.26
6589848222.73 8017660144.89 3348570847.28 4669089297.61 1602053386.48 6271142684.09 21341522929.83
7446072187.62 8818686838.13 3559025184.57 5259661653.56 1569634027.12 6829295680.69 23763522991.93
8982590791.17 9603503851.69 3789302568.19 5814201283.50 2016716050.01 7830917333.51 28109871968.18
2,99,71,605 3,39,52,588 8,96,03,249 89,04,43,212 13,75,02,727 1,18,14,73,381 7,09,28,279
3,46,45,046 2,18,59,848 18,65,53,888 91,86,93,533 8,62,14,517 1,24,79,66,832 6,52,54,933 6,52,54,933 1,31,32,21,765 30,00,00,000 1,36,72,45,000 10,58,78,200 66,06,73,130 1,41,73,02,130 3,85,10,98,460 5,16,43,20,225
52646198.00 16928468.00 229034317.00 889045030.00 55921187.00 1243575200.00 36544158.00 0.00 0.00 36544158.00 1,28,01,19,358 360000000.00 2035465000.00 105878200.00 853731206.00 1235067597.00 4590142003.00 5870261361.00
83848465.00 102395447.00 250567620.00 1370262208.00 142875686.00 1949949426.00 389193080.00 0.00 0.00 389193080.00 2,33,91,42,506 432000000.00 2035465000.00 105878200.00 919636288.00 2075810668.00 5568790156.00 7907932662.00
79390166.00 49771374.00 399018813.00 1471158187.00 261416941.00 2260755481.00 602349621.00 33867438.00 0.00 636217059.00 2,89,69,72,540 496800000.00 2035465000.00 105878200.00 947678690.00 2816192882.00 6402014772.00 9298987312.00
60601743.00 24565248.00 426444968.00 1818777878.00 225176449.00 2555566286.00 492569379.00 105546727.00 598116106.00 3,15,36,82,392 596160000.00 2035465000.00 105878200.00 1101935237.00 3493819175.00 7333257612.00 10486940004.00
100953258.00 32290235.00 400905780.00 2669693184.00 297002646.00 3500845103.00 602584615.00 182656997.00 785241612.00 4,28,60,86,715 894240000.00 2035465000.00 105878200.00 1101935237.00 4279522268.00 8417040705.00 12703127420.00
190530880.46 57232007.59 903335708.75 5114520902.90 640042751.62 6905662251.32 1696986043.46 424246510.86 2121232554.32 9026894805.64 1207224000.00 2035465000.00 105878200.00 1417557933.54 1278186031.40 6044311164.94 15071205970.58
236584690.10 63371115.19 1127557779.72 6445714016.50 809153102.71 8682380704.21 2203859419.71 550964854.93 2754824274.63 11437204978.85 1207224000.00 2035465000.00 105878200.00 1754128439.60 1522977149.81 6625672789.41 18062877768.26
287587395.60 70169925.10 1375874527.97 7919955797.56 996435881.32 10650023527.54 2765200897.02 691300224.26 3456501121.28 14106524648.82 1207224000.00 2035465000.00 105878200.00 2127655583.40 1758775497.61 7234998281.01 21341522929.83
324236087.25 75055302.95 1554305923.88 8979292393.94 1131010483.53 12063900191.56 3168560493.54 792140123.39 3960700616.93 16024600808.48 1207224000.00 2035465000.00 105878200.00 2548428515.69 1841926467.76 7738922183.45 23763522991.93
392015823.14 84090540.10 1884304959.13 10938477059.90 1379898795.31 14678787177.58 3914551842.35 978637960.59 4893189802.93 19571976980.51 1207224000.00 2035465000.00 105878200.00 3013564618.37 2175763169.30 8537894987.67 28109871968.18
7,09,28,279 1,25,24,01,660 25,00,00,000 80,00,00,000 10,58,78,200 47,09,61,594 1,64,68,73,877 3,27,37,13,671 4,52,61,15,331
24 | P a g e
Historical and Projected
Square Pharmaceuticals Limited Net Turnover Cost of Goods Sold Gross Profit Selling & Distribution Expense Administrative Expense Depreciation Expense Operating Income Other Income Profit From Associate Undertaking Minority Interest EBIT Interest Expenses EBT Allocation for WPPF Tax (Current+Deffered) Net Profit After Tax 2002 3670811162 2192414303 1478396859 342210097 98558167 66480850 971147745 55574367 2003 4065850882 2324689139 1741161743 378784260 103636659 305157073 953583751 146995504 2004 4721551742 2559622865 2161928877 513726087 129544712 289445574 1229212504 88679623 2005 5332046635 2892918529 2439128106 650601644 146846258 303954532 1337725672 357395181 2006 6089905396 3273103588 2816801808 771066429 169534071 295996773 1580204535 169353845 2007 7500811349 3976923696 3523887653 968270120 208111388 521753906 1825752239 220144368 2008 8257843739 4530270057 3727573682 1171156634 300615781 546495449 1709305818 604628504 2009 E 9990727313 5773568438 4217158875 1453932249 172705789 172705789 2417815049 33881517 2010 E 11800823300 6704682510 5096140790 1775470591 310048206 178580608 2832041385 172085686 2011 E 13784551079 7772079838 6012471241 2127852203 370738606 192263732 3321616700 231045655 2012 E 15249970046 8565916296 6684053749 2388163473 414806290 210454337 3670629649 145977348 2013 E 17879706652 10022893602 7856813051 2855299556 489230541 230277384 4282005570 276824175
1026722112 75699498 951022614 45286791 146288070 759447753
1100579255 124494965 976084290 46480204 164719297 764884789
1317892127 108673997 1209218130 57581816 181592771 970043543
1695120853 106451324 1588669529 75650930 257170446 1255848153
1749558380 139863636 1609694744 76652130 367177998 1165864616
2045896607 236845084 1809051523 86145311 419663372 1303242840
2313934322 351868423 1962065899 93431709 486771097 1381863093
2451696566 661373783 1790322783 89516139 422620613 1278186031
3004127070 862979871 2141147199 107057360 511112689 1522977150
3552662355 1072184129 2480478226 124023911 597678817 1758775498
3816606997 1227545424 2589061573 129453079 617682026 1841926468
4558829745 1496909633 3061920112 153096006 733060937 2175763169
25 | P a g e
This report is provided for academic purposes only. It is not, under any circumstances, to be used or considered as an offer to sell, or a solicitation of any offer to buy. Due care has been taken to ensure authenticity and reliability of data and information. However, analysts make no representation or warranty as to the accuracy or completeness of such information. All opinions and projections expressed in this report represent our judgment as of this date and are subject to change without prior notice.
26 | P a g e