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Report on Beximco Pharmaceuticals Ltd (BPL)

SUBMITTED TO:

Dr. Tareq

Professor , NSU SBE

SUBMITTED For:

BUS 505 Section3

Submitted by:

Group 5

Name ID

Md. Ameer Ferdous 1825294660

Date of submission: 26th June, 2018


Acknowledgements

Above all, we convey our indebtedness to almighty ALLAH-TA-A-LA, the most beneficent and merciful,
for giving us the strength to accomplish this report

We would also like to take the opportunity to thank heartily and express our insightful gratitude to our
honorable Dr Tareq Professor, School of Business, and North South University. During the period of our
report preparing, we were indebted to her for his kind assistance, valuable advice, direction, guidance and
encouragement in all affairs of preparing this report.

All of the group members were very co-operative. It was a great opportunity for us to learn brand
management.
LETTTER OF TRANSMITTAL

July 22nd, 2016

Dr. Tareq

Faculty Member

NSU SBE

Dhaka

Subject: Letter of Transmittal for the submitting our report.

Dear Madam,

Here is the report on Beximco Pharmaceuticals Ltd (BPL). We have done our report on Beximco
Pharmaceuticals Ltd (BPL) as per your requirement.

It is a great pleasure to accomplish and submit strategic marketing analysis on WE phone before you for
your kind evaluation and necessary action.

Sincerely,

Md. Ameer Ferdous


Contents
BEXIMCO PHARMA LIMITED ..................................................................................................................................... 4
Analysis on Ratios – BEXIMCO Pharma Limited ........................................................................................................ 5
ORION PHARMA LIMITED ....................................................................................................................................... 22
Analysis on Ratios – ORION Pharma Limited .......................................................................................................... 23
BREAKING DOWN 'DuPont Analysis' ....................................................................................................................... 33
Decision as short term creditor .............................................................................................................................. 43
BEXIMCO PHARMA LIMITED

Beximco Pharma was founded in 1976 and started operations in 1980, manufacturing products under
the licenses of Bayer AG of Germany and Upjohn Inc. of United States. Since then, the journey
continued, and today, Beximco Pharma is one of the largest exporters of medicines in Bangladesh,
winning National Export Trophy (Gold) a record five times. It has now grown to become a
pharmaceutical company in Bangladesh, and it supplies more than 10% of country's total medicinal
needs. Today Beximco Pharma manufactures and markets its own branded generics for several diseases
including AIDS, cancer, asthma, hypertension, and diabetes for both national and international markets.
It was the first drug company from Bangladesh to sell its products in the US.

The company continues to adhere to the global standards and its manufacturing facilities have been
already certified by the regulatory authorities of USA, Europe, Australia, Canada, Latin America and
South Africa. Over the last three decades Beximco Pharma has grown from strength to strength but the
simple principle on which it was founded remains the same: producing high quality generics and
making them affordable. Ensuring access to quality medicines is the powerful aspiration that motivates
more than 3,800 employees of the company, and each of them is guided by the same moral and social
responsibilities the company values most.

Analysis on Ratios – BEXIMCO Pharma Limited

Liquidity Ratio:
Liquidity ratios are a class of financial metrics used to determine a debtor's ability to pay off current
debt obligations without raising external capital. Liquidity ratios analyze the ability of a company to pay
off both its current liabilities as they become due as well as their long-term liabilities as they become
current. In other words, these ratios show the cash levels of a company and the ability to turn other
assets into cash to pay off liabilities and other current obligations. Among the liquidity ratio the most
important tools are Current Ratio and Acid-Test or Quick Ratio.

Current Ratio:

The current ratio is a widely used measure for evaluating a company’s liquidity and short-term debt-
paying ability. The current ratio is an important measure of liquidity because short-term liabilities are
due within the next year. The ratio is computed by dividing current assets by current liabilities.
For 2017; current assets were 9,130,816,169 and current liabilities were 3,406,039,548.

Current Ratio [2017] = (9,130,816,169 / 3,406,039,548) = 2.68:1

For 2016; current assets were 8,528,007,810 and current liabilities were 2,982,567,508.

Current Ratio [2016] = (8,528,007,810 / 2,982,567,508) = 2.86:1

For 2015; current assets were 8,392,093,095 and current liabilities were 4,862,007,984

Current Ratio [2015] = (8,392,093,095 / 4,862,007,984) = 1.73:1

The most significant change in BEXIMCO’s current ratio was between 2015 to 2016 in which the
current ratio increased from 1.73 to 2.86 due to a reduction in total current liabilities and more
specifically a very high reduction in short term borrowings (secured). Then the current ration decreased
was decreased in 2017.

Analyzing the data, we see that BEXIMCO has maintained a current ratio over 2 or almost 2. In general,
investors look for a company with a current ratio of 2:1, meaning current assets twice as large as current
liabilities. Based on three years current ratio we can say that, BEXIMCO would not face problems
meeting short-term financial obligations. So, the company is quite liquid.

Acid-Test or Quick Ratio:

The quick ratio or acid test ratio is a liquidity ratio that measures the ability of a company to pay its
current liabilities when they come due with only quick assets. Quick assets are current assets that can be
converted to cash within 90 days or in the short-term. Cash, cash equivalents, short-term investments or
marketable securities, and current accounts receivable are considered quick assets.

Quick Ratio [2017] = (275,028,025 + 886,576,906 + 2,167,339,867)/ 3,406,039,548 = 0.98

Quick Ratio [2016] = (221,121,229 + 1,439,037,813 + 1,680,606,796)/ 2,982,567,508 = 1.12

Quick Ratio [2015] = (147,476,111 + 1,539,430,008 + 1,546,921,772)/ 4,862,007,984 = 0.67

The acid test ratio measures the liquidity of a company by showing its ability to pay off its current
liabilities with quick assets. A company with a quick ratio of 1 indicates that quick assets equal current
assets. This also shows that the company could pay off its current liabilities without selling any long-
term assets. Obviously, as the ratio increases so does the liquidity of the company.

Analyzing the data of BEXIMCO Pharma, we see that the company’s quick ratio was significantly
increased between 2015 and 2016 due to increase in cash or cash equivalent and decrease in liabilities.
The company’s liquidity position was best in 2016. In 2017, the ratio was 0.98 which was also good
because that means that company could pay off almost all of its current liabilities with quick assets.

Graph-1: Illustration of liquidity ratios of BEXIMCO Pharma

Liquidity Ratio 2017 2016 2015

Current Ratio 2.68 2.86 1.73

Acid Test/Quick 0.98 1.12 0.67


Ratio

Summary of Liquidity Ratio: Both of the liquidity ratios suggest that, BEXIMCO pharma’s financial
position is quiet liquid. From the average of those ratios we can say the company has maintained a good
liquidity position over the last three years.
Profitability Ratio:
Profitability ratios compare income statement accounts and categories to show a company’s ability to
generate profits from its operations. Profitability ratios focus on a company’s return on investment in
inventory and other assets. These ratios basically show how well companies can achieve profits from
their operations. This ratio shows how profitably a company can operate their business function. The
main theme of a business is to earn profit and do their businesses better than their competitors. The
main tools for profitability ratio are Return on Equity, Return on assets, Net profit margin and Gross
profit margin.

Return on Equity (ROE):

Return on equity (ROE) is the amount of net income returned as a percentage of shareholders' equity.
The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to generate
profits from its shareholders investments in the company. In other words, the return on equity ratio
shows how much profit each dollar of common stockholders’ equity generates.

Return on Equity [2017] = [2,229,274,631/ {(24,072,425,900 + 23,059,412,409)/2}] = 9.5%

Return on Equity [2016] = [993,107,338/ {(23,059,412,409 + 22,478,627,583)/2}] = 4.4%

Return on Equity [2015] = [1,953,933,378/ {(22,478,627,583 + 20,920,185,325)/2}] = 9.0%

As we can see, BEXIMCO’s return on equity was 9.0 percent in 2015 which means BEXIMCO
shareholders saw a 9 percent return on their investment. The company’s return on equity reduced to 4.4
percent in 2016 because of reduced net income. Then, in 2017 the company’s equity increased and
reached to 9.5 percent. Return on equity (ROE) of 15-20 percent is considered good. So, overall
BEXIMCO’s return on equity was low.

Return on Assets (ROA):

The return on assets ratio, often called the return on total assets, is a profitability ratio that measures the
net income produced by total assets during a period by comparing net income to the average total assets.
In other words, the return on assets ratio or ROA measures how efficiently a company can manage its
assets to produce profits during a period.
Return on Assets [2017] = [2,229,274,631/ {(34,084,132,870 + 31,148,907,975)/2}] = 6.8%

Return on Assets [2016] = [993,107,338/ {(31,148,907,975 + 30,835,550,584)/2}] = 3.2%

Return on Assets [2015] = [1,953,933,378/ {(30,835,550,584 + 29,000,525,961)/2}] = 6.5%

Analyzing the data, we see that BEXIMCO’s return on asset was 6.5 percent in 2015 which means that
BEXIMCO had earned 6.5 percent profit in relation to its overall resources. The company’s return on
asset reduced to 3.2 percent in 2016 because of reduced net income. Then, in 2017 the company’s
equity increased and reached to 6.8 percent. Return on asset over 5 percent is considered good. So,
overall BEXIMCO maintained a good return on assets.

Profit Margin Ratio:

The profit margin ratio, also called the return on sales ratio or gross profit ratio, is a profitability ratio
that measures the amount of net income earned with each dollar of sales generated by comparing the net
income and net sales of a company. In other words, the profit margin ratio shows what percentage of
sales are left over after all expenses are paid by the business.

Profit Margin [2017] = (2,229,274,631 / 15,508,776,972) = 14.4%

Profit Margin [2016] = (993,107,338 / 7,068,995,719) = 14.0%

Profit Margin [2015] = (1,953,933,378 / 12,965,506,873) = 15.1%

As we can see, BEXIMCO’s profit margin was 15% in 2015, meaning the company only converted 15
percent of its sales into profits. But, the profit decreased in 2016 to 14% as net income and net sales
both decreased, but net income decreased to a higher degree. Then, the company’s profit margin slightly
increased in 2017 as net income and net sales both increased.

Gross Margin Ratio:


Gross margin ratio is a profitability ratio that compares the gross margin of a business to the net sales.
This ratio measures how profitable a company sells its inventory or merchandise. In other words, the
gross profit ratio is essentially the percentage markup on merchandise from its cost. This is the pure
profit from the sale of inventory that can go to paying operating expenses.

The gross margin of a business is calculated by subtracting cost of goods sold from net sales. Net sales
equals gross sales minus any returns or refunds.

Gross Margin [2017] = (7,184,881,623 / 15,508,776,972) = 46.3%

Gross Margin [2016] = (3,233,846,065 / 7,068,995,719) = 45.7%

Gross Margin [2015] = (6,000,339,169 / 12,965,506,873) = 46.3%

As we can see, BEXIMCO’s gross margin was 46.3% in 2015, meaning after the company paid its
inventory costs, and still it had 46.3 percent of its sales revenue to cover operating costs. The
company’s gross margin ratio decreased a little in 2016 as an effect of decreased gross profit. Then, the
company’s gross margin increased to 46.3 percent again in 2017.
Graph-2: Illustration of profitability ratios of BEXIMCO Pharma

Profitability 2017 (%) 2016 (%) 2015 (%)

Return on Assets 6.8 3.2 6.5

Return on Equity 9.5 4.4 9.0

Gross margin 46.3 45.7 46.3

Profit Margin 14.4 14.0 15.1

Summary of Profitability Ratios: Analyzing the profitability we see that, BEXIMCO pharma is a
profitable company. Its ROA is over 5 percent which is ideal and also it has maintained good profit
margin and gross margin ratios. From the average of those ratios we can say the company has generated
good profit over the last three years.
Efficiency Ratio:
Efficiency ratios also called activity ratios measure how well companies utilize their assets to generate
income. Efficiency ratios often look at the time it takes companies to collect cash from customer or the
time it takes companies to convert inventory into cash—in other words, make sales. These ratios are
used by management to help improve the company as well as outside investors and creditors looking at
the operations of profitability of the company. The main tools of efficiency ratio are Asset Turnover,

Asset Turnover Ratio:

The asset turnover ratio is an efficiency ratio that measures a company’s ability to generate sales from
its assets by comparing net sales with average total assets. In other words, this ratio shows how
efficiently a company can use its assets to generate sales.

Asset Turnover [2017] = [15,508,776,972/ {(31,148,907,975 + 34,084,132,870)/2}] = 0.48

Asset Turnover [2016] = [7,068,995,719/ {(30,835,550,584 + 31,148,907,975)/2}] = 0.23

Asset Turnover [2015] = [12,965,506,873/ {(29,000,525,961 + 30,835,550,584)/2}] = 0.43

BEXIMCO Pharma’s asset turnover ratio was 0.43 in 2015 which means that the company generated
sales of 43 cents for each dollar it had invested in assets. Then, in 2016 the company’s asset turnover
ratio decreased to 0.23 as a result of decreased net sales. In the following year, the company’s asset
turnover ratio increased to 0.48 because of increased net sales.

Inventory Turnover Ratio:

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is managed by
comparing cost of goods sold with average inventory for a period. This measures how many times
average inventory is “turned” or sold during a period. In other words, it measures how many times a
company sold its total average inventory dollar amount during the year. A company with $1,000 of
average inventory and sales of $10,000 effectively sold its 10 times over.
Inventory Turnover [2017] = [8,323,895,349/ {(2,770,331,675 + 3,468,089,061)/2}] = 2.67

Inventory Turnover [2016] = [3,835,149,654/ {(2,817,185,843 + 2,770,331,675)/2}] = 1.37

Inventory Turnover [2015] = [6,965,167,704/ {(2,493,657,338 + 2,817,185,843)/2}] = 2.62

BEXIMCO Pharma’s inventory turnover ratio was 2.62 in 2015 which means that the company sold its
entire inventory or completed one run in almost 4.5 months [(1/2.62)*12]. It also implies that the
company could sell to sell its entire inventory 2.62 times in 2015. Then, in 2016 the company’s
inventory turnover ratio decreased to 1.37 as a result of decreased cost of goods sold. In the following
year, the company’s asset turnover ratio increased to 2.67 because of increased cost of goods sold.

Days in inventory [2017] = (365/2.67) days = 137 days

Days in inventory [2016] = (365/1.37) days = 266 days

Days in inventory [2015] = (365/2.62) days = 139 days

Analyzing the data, we see that BEXIMCO Pharma’s average selling time is high. But considering the
pharma market it might be considered good.

Accounts Receivable Turnover Ratio:

Accounts receivable turnover is an efficiency ratio or activity ratio that measures how many times a
business can turn its accounts receivable into cash during a period. In other words, the accounts
receivable turnover ratio measures how many times a business can collect its average accounts
receivable during the year.

Accounts Receivable Turnover [2017] = [2,167,339,867/ {(1,680,606,796 + 2,167,339,867)/2}]

= 1.13

Accounts Receivable Turnover [2016] = [1,680,606,796/ {(1,546,921,772 + 1,680,606,796)/2}]


= 1.04

Accounts Receivable Turnover [2015] = 1,546,921,772/ ((1,397,498,648 + 1,546,921,772)/2)

= 1.0

Analyzing the data we see that, BEXIMCO’s accounts receivable turnover was 1.0 in 2015 which
implies that, the company collects its receivables about 1.0 times a year or once in every 365 days. The
company’s accounts receivable turnover increased to 1.04 in 2016. Then, it increased to 1.13 in 2017
because of increased net credit sales.

Average Collection Period [2017] = (365/1.13) days = 323 days

Average Collection Period [2016] = (365/1.04) days = 351 days

Average Collection Period [2015] = (365/1.0) days = 365 days

So, we see that average collection period of BEXIMCO Pharma is quite high.

Working Capital Ratio:

The working capital ratio, also called the current ratio, is a liquidity ratio that measures a firm’s ability
to pay off its current liabilities with current assets. The working capital ratio is important to creditors
because it shows the liquidity of the company.

Working Capital Ratio [2017] = (9,130,816,169 / 3,406,039,548) = 2.68

Working Capital Ratio [2016] = (8,528,007,810 / 2,982,567,508) = 2.86

Working Capital Ratio [2015] = (8,392,093,095 / 4,862,007,984) = 1.73

BEXIMCO’s working capital ratio was 1.73 in 2015 which is good for a company because a working
capital ratio in between 1.2 and 2.0 is considered fine. In 2016, the company’s working capital ratio
increased to 2.86 because of decreased liabilities. Then, in 2017, the company’s working capital ratio
decreased a bit and reached to 2.68. We know that, a working capital ratio of less than 1.0 indicates
negative working capital, with potential liquidity problems, while a ratio above 2.0 might indicate that a
company is not using its excess assets effectively to generate maximum possible revenue. So, in case of
BEXIMCO we may say that, it might have not used its excess assets effectively to generate maximum
possible revenue.

Graph-3: Illustration of efficiency ratios of BEXIMCO Pharma

Efficiency 2017 2016 2015

Asset turnover 0.48 0.23 0.43

Inventory turnover 2.67 1.37 2.62

Accounts receivable turnover 1.13 1.04 1.00

Working capital 2.68 2.86 1.73

Summary of Efficiency Ratios: Analyzing the efficiency ratios we see that, BEXIMCO pharma is an
efficient organization. The company has maintained good inventory turnover, accounts receivable
turnover and working capital ratios. Considering pharma industries, its asset turnover ratio is also okay.
From the average of those ratios we can say the company has been quite efficient over the last three
years.

Solvency Ratios/Gearing:
Solvency ratios, also called leverage ratios or gearing, measure a company’s ability to sustain
operations indefinitely by comparing debt levels with equity, assets, and earnings. In other words,
solvency ratios identify going concern issues and a firm’s ability to pay its bills in the long term. Many
people confuse solvency ratios with liquidity ratios. Although they both measure the ability of a
company to pay off its obligations, solvency ratios focus more on the long-term sustainability of a
company instead of the current liability payments.

Debt to Equity Ratio:

The debt to equity ratio is a financial, liquidity ratio that compares a company’s total debt to total
equity. The debt to equity ratio shows the percentage of company financing that comes from creditors
and investors. A higher debt to equity ratio indicates that more creditor financing (bank loans) is used
than investor financing (shareholders).

Here, total equity is total shareholders’ equity.

Debt to Equity Ratio [2017] = (9,011,706,970 / 24,072,425,900) = 0.37

Debt to Equity Ratio [2016] = (8,089,495,566 / 23,059,412,409) = 0.35

Debt to Equity Ratio [2015] = (8,356,923,001 / 22,474,627,583) = 0.37

Analyzing the data, we see that BEXIMCO maintained a lower debt-to-equity ratio which is good. In
2015, company’s debt-to-equity ratio was 0.37 which means that for every dollar of BEXIMCO owned
by the shareholders, BEXIMCO owes $0.37 to creditors. In 2016, company’s debt-to-equity ratio
decreased to 0.35 and then it increased again to 0.37 in 2017.
Equity Ratio:

The equity ratio is an investment leverage or solvency ratio that measures the amount of assets that are
financed by owners’ investments by comparing the total equity in the company to the total assets.

Equity Ratio [2017] = (24,072,425,900 / 34,084,132,870) = 0.71

Equity Ratio [2016] = (23,059,412,409 / 31,148,907,975) = 0.74

Equity Ratio [2015] = (22,474,627,583 / 30,835,550,584) = 0.73

As we can see, BEXIMCO’s equity ratio was 0.73 in 2015 which implies that, 73 percent of the
company’s assets are owned by shareholders and not creditors. In other word, every $1 employed in the
business, the contribution of shareholders is about 73 cents. The creditors’ contribution, therefore,
would be 27 cents. The company’s equity ratio was increased a little in 2016 and reached to 0.74 and it
went down slightly in 2017 to 0.71. Overall, the company maintained a good equity ratio.

Debt Ratio:

Debt ratio is a solvency ratio that measures a firm’s total liabilities as a percentage of its total assets. In
a sense, the debt ratio shows a company’s ability to pay off its liabilities with its assets. In other words,
this shows how many assets the company must sell in order to pay off all of its liabilities.

Debt Ratio [2017] = (9,011,706,970 / 34,084,132,870) = 0.26

Debt Ratio [2016] = (8,089,495,566 / 31,148,907,975) = 0.26

Debt Ratio [2015] = (8,356,923,001 / 30,835,550,584) = 0.27


Analyzing the data, we can see BEXIMCO’s debt ratio was 0.27 or 27% which is a good debt ratio. The
company had also maintained a good debt ratio in 2016 and 2017 as well which implies the company
was using less leverage and had stronger equity position. We know, if the debt ratio is less than 0.5,
most of the company's assets are financed through equity. If the ratio is greater than 0.5, most of the
company's assets are financed through debt. So, in case of BEXIMCO, we can say that most of the
company's assets were financed through equity.

Graph-4: Illustration of gearing ratios of BEXIMCO Pharma

Solvency/ Gearing 2017 2016 2015

Debt to equity ratio 0.37 0.35 0.37

Debt ratio 0.26 0.26 0.27

Equity ratio 0.71 0.74 0.73


Summary of Solvency/Gearing Ratios: Analyzing the solvency ratios we see that, BEXIMCO pharma
has been financed through equity and most of its assets are owned by shareholders, not the creditors.
The company has maintained good solvency/gearing ratios. From the average of those ratios we can say
the company has been quite solvent over the last three years.

Market Performance Ratio:


This ratio measure the company’s performance related to shareholder’s expectation of their company’s
position in the stock market. One of the most effective ratio for this EPS which actually reflects the
overall return from the single share.

Earnings per Share (EPS):

Earnings per share (EPS), also called net income per share, is a market prospect ratio that measures the
amount of net income earned per share of stock outstanding. In other words, this is the amount of
money each share of stock would receive if all of the profits were distributed to the outstanding shares
at the end of the year.

Earnings per Share [2017] = (2,229,274,631- 193,154,407)/ 405,556,445= 5.02

Earnings per Share [2016] = (984,311,614- 251,891,143)/ 129,005,574= 5.67

Earnings per Share [2015] = (1,965,676,188- 503,028,121)/2,576,249,041= 5.06

Analyzing the data, we see that BEXIMCO’s earnings per share was 5.06 in 2015 meaning if company
distributed every dollar of income to its shareholders, each share would receive 5.06 dollars. The
company’s EPS increased in 2016 and reached to 5.67 and then in 2017 it decreased to 5.02.

Dividend Payout Ratio: The dividend payout ratio is the ratio of the total amount of dividends paid out
to shareholders relative to the net income of the company. It is the percentage of earnings paid to
shareholders in dividends. The amount that is not paid to shareholders is retained by the company to pay
off debt or to reinvest in core operations.

Dividend Payout Ratio = Yearly Dividend per Share / Earnings per Share (EPS)

(Yearly Dividend per Share = Dividend Paid/No. of Shares)

Dividend Payout Ratio [2017] = 0.47/5.02= 0.0937 = 9.37%

Dividend Payout Ratio [2016] = 1.95/5.67 = 0.3439 = 34.39%

Dividend Payout Ratio [2015] = 0.195/.57= 0.3421 = 34.21%

Analyzing the data, we see that BEXIMCO’s dividend payout ratio was 34.21 percent in 2015 which
means BEXIMCO was paying out 34.21 percent of its net income to its shareholders. The ratio

Increased a little in 2016 and drastically reduced to 9.37 percent in 2017 because of reduced dividend
per share.

Price Earnings P/E Ratio (PER): The price earnings ratio, often called the P/E ratio or price to
earnings ratio, is a market prospect ratio that calculates the market value of a stock relative to its
earnings by comparing the market price per share by the earnings per share. In other words, the price
earnings ratio shows what the market is willing to pay for a stock based on its current earnings.

Price Earnings Ratio [2017] = 109.85/5.02= 21.88

Price Earnings Ratio [2016] = 80.95/5.6774= 14.26

Price Earnings Ratio [2015] = 79.7/5.06= 15.75

Analyzing the data, we see that BEXIMCO’s dividend payout ratio was 15.75 percent in 2015 which
means investors were willing to pay 15.75 dollars for every dollar of earnings. The ratio decreased a
little in 2016 to 14.26 and increased to 21.88 in 2017.
Graph-5: Illustration of market performance ratios of BEXIMCO Pharma

Market Performance 2017 2016 2015


Ratio

Earnings Per Share 5.02 5.67 5.06


(EPS)

Dividend Payout 9.37% 34.39% 34.21%


Ratio

Price Earnings Ratio 21.88 14.26 15.75


(PER)

Summary of Market Performance Ratios: Analyzing the market performance ratios we see that,
BEXIMCO pharma’s market performance was good. The company has maintained good market
performance ratios. From the average of those ratios we can say the company has been performing well
in the market for the last three years.
ORION PHARMA LIMITED

Orion Pharma is a pharmaceuticals company in Bangladesh. It is part of the Orion group. It was
founded in 1965. Before January 2011 Orion Pharmacy was called Orion laboratories. In 2013 Orion
Pharma went public by floating its shares in the Dhaka Stock Exchange. It had submitted its IPO
prospectus in 2011 to regulators. From 2016 Orion started to offer 20 medical scholarship as part of its
corporate social responsibility. In February 2017 it borrowed 34 million dollar from the German BHF-
Bank to finance expansion.

Orion Pharma Ltd. is one of the premier pharmaceutical companies of Bangladesh which has been
contributing to improving the human health care of the country by providing quality branded-generic
pharmaceuticals. We, at Orion Pharma Ltd., always believe in 'Quality never ends' and refuse to settle
for anything until it exceeds the existing standard. For this, Orion Pharma Ltd. has been superseding the
market growth consistently by wide margin in last few years. The company has been awarded with the
ISO-9001: 2000 Certificate in January 2003 for serving its valued customers with products of excellent
quality. Having four decades of vast experience imbibed with technical and professional expertise, now
Orion Pharma Ltd.
Analysis on Ratios – ORION Pharma Limited

Liquidity Ratio:

Current Ratio:

Current Ratio [2017] = 6,054,117,090/2,727,997,327= 2.22

Current Ratio [2016] = 1,972,256,257/578,010,973= 3.41

Current Ratio [2015] = 3,828,497,439/1,122,021,300= 3.41

Acid-Test or Quick Ratio:

Acid Test Ratio [2017] = (71,264,335+7,145,845+5,133,000,349) / 2,727,997,327 = 1.91

Acid Test Ratio [2016] = (11,313,552+2,297,618+1,623,461,272) / 578,010,973 = 2.83

Acid Test Ratio [2015] = (21,961,601+4,460,083+3,151,424,821) / 1,122,021,300 = 2.83

Graph-6: Illustration of liquidity ratios of ORION Pharma


Liquidity Ratio 2017 2016 2015

Current Ratio 2.22 3.41 3.41

Acid Test/Quick 1.91 2.83 2.83


Ratio

Summary of Liquidity Ratio: We see that, ORION pharma has maintained a very high current asset
ratio which suggests that they’re highly liquid and signals a strong financial position but it also raises
concern that they might not be using their excess assets to generate more revenue. The quick ratio is
well above 1, so the company can pay its current liabilities with its quick assets and will still own a
larger portion of it.

Both of the liquidity ratios suggest that, ORION pharma’s financial position is quiet liquid. From the
average of those ratios we can say the company has maintained a good liquidity position over the last
three years.

Profitability Ratio:

Return on Asset (ROA):

Return on Asset [2017] = 1,965,676,188/12,315,001,207= 15.96%

Return on Asset [2016] = 437,016,478/5,247,619,013= 8.32%

Return on Asset [2015] = 2,736,227,277/13,138,679,896= 20.83%

Return on Equity (ROE):

Return on Equity [2017] = 215,615,446/18,184,995,820= 1.18%

Return on Equity [2016] = 137,016,478/4,406,018,905= 3.1%

Return on Equity [2015] = 273,627,277/11,003,071,249= 2.49%


Profit Margin:

Profit Margin [2017] = 1,965,676,188/13,423,116,737= 14.64%

Profit Margin [2016] = 137,016,478/818,285,331= 16.74%

Profit Margin [2015] = 273,627,277/1,634,120,707= 16.75%

Gross Margin:

Gross Margin [2017] = 6,159,201,551/13,423,116,737= 45.8%

Gross Margin [2016] = 454,720,910/818,285,331= 55.5%

Gross Margin [2015] = 908,080,381/1,634,120,707= 55.6%

Graph-7: Illustration of profitability ratios of ORION Pharma

Profitability 2017 (%) 2016 (%) 2015 (%)

Return on Assets 15.96 8.32 20.83


Return on Equity 1.18 3.1 2.49

Gross margin 14.64 16.74 16.75

Profit Margin 45.8 55.5 55.6

Summary of Profitability Ratios: We can see that, ORION pharma’s had seen very low return on
equity which means the company’s shareholder saw a very little return on their investment. The return
on asset (ROA) ratio was quiet high over the years. The company’s gross margin was low but its profit
margin was quiet good as it was able to convert almost 50 percent of its sales into profits. The company
maintained an average of 15 percent gross margin ratio which means it would have 15 percent sales
revenue remaining for its operational cost after inventory costs were covered.

Analyzing the overall profitability ratios we can say that, ORION pharma is a profitable company. From
the average of those ratios we can say the company has generated good profit over the last three years.

Efficiency Ratios:

Asset Turnover Ratio:

Asset Turnover Ratio [2017] = 1,996,306,215/13,507,853,356= 0.1477

Asset Turnover Ratio [2016] = 7,260,403,254/5,247,619,013= 0.134

Asset Turnover Ratio [2015] = 1,634,120,707/13,138,679,897= 0.124

Accounts Receivable Turnover Ratio:

Accounts Receivable Turnover [2017] = 5,133,000,349/4,158,924,687 = 1.2342

Accounts Receivable Turnover [2016] = 2,273,567,140/ {(3,184,849,024+4,493,486,523)/2}

= 2,273,567,140/2,273,567,140 = 1.00

Accounts Receivable Turnover [2015] = 3,184,849,024/ {(3,184,849,024+4,493,486,523)/2}

= 3,184,849,024/3,839,167,773.5 = 0.8296

Inventory Turnover Ratio:


Inventory Turnover [2017] = 885,154,503/2,372,640,735 = 3.7306

Inventory Turnover [2016] = 363,564,420/227,479,104= 1.5982

Inventory Turnover [2015] = 7,260,403,254/249,212,795= 2.9133

[For 2015]

Days inventory/ Inventory Conversion Period = 365/ Inventory Turnover

365/2.9133=125.2875

Average Collection Period = 365 / Accounts Receivables Turnover

365/0.8296= 439.97

[For 2016]

Days inventory/ Inventory Conversion Period = 365/ Inventory Turnover

365/1.5982=228.38

Average Collection Period = 365 / Accounts Receivables Turnover

365/1= 365

[For 2017]

Days inventory/ Inventory Conversion Period = 365/ Inventory Turnover

=365/3.7306=97.83

Average Collection Period = 365 / Accounts Receivables Turnover

=365/1.2342=295.73
Graph-8: Illustration of efficiency ratios of ORION Pharma

Efficiency 2017 2016 2015

Asset turnover 0.1477 0.134 0.124

Inventory turnover 3.73 1.60 2.91

Accounts receivable turnover 1.23 1.00 0.83

Summary of Efficiency Ratios: From the above data, we see that ORION pharma maintained an
average asset turnover ratio of 0.135, which means that the company generated sales of 13.5 cents for
each dollar it had invested in assets. The company had an average inventory turnover ratio of 2.75
which is quite good. It suggests that, the company would sold its complete inventory in less than 4.5
months. The company had an average accounts receivable turnover of 1.01 which indicates that the
company collected its receivable 1.01 times a year or once in nearly 365 days.
Analyzing the efficiency ratios we see that, ORION pharma is an efficient organization. The company
has maintained good inventory turnover, accounts receivable turnover ratios. Considering pharma
industries, its asset turnover ratio is also okay. From the average of those ratios we can say the company
has been quite efficient over the last three years.

Solvency or Gearing Ratios:

Debt to Equity Ratio:

Debt to Equity [2017] = 3769331252/12766848872= 0.295

Debt to Equity [2016] = 841600108/4406018905= 0.191

Debt to Equity [2015] = 1680680456/8798846131= 0.193

Equity Ratio:

Equity Ratio [2017] = 12766848872/16536180123= 0.772

Equity Ratio [2016] = 4406018905/5247619013= 0.84

Equity Ratio [2015] = 8798846131/10479526593= 0.834

Debt Ratio:

Debt Ratio [2017] = 3769331252/16536180123= 0.227

Debt Ratio [2016] = 841600108/5247619013= 0.160

Debt Ratio [2015] = 1680680456/10479526593= 0.163


Graph-9: Illustration of gearing ratios of ORION Pharma

Solvency/ Gearing 2017 2016 2015

Debt to Equity ratio 0.295 0.191 0.193

Debt ratio 0.227 0.160 0.163

Equity Ratio 0.772 0.84 0.834

Summary of Solvency/Gearing Ratios: From above data we see that, ORION pharma’s debt ratio is
quite low but its equity ratio is very high which indicates a substantial financial status of the company.

Analyzing the solvency ratios we see that, ORION pharma has been financed through equity and most
of its assets are owned by shareholders, not the creditors. The company has maintained good
solvency/gearing ratios. From the average of those ratios we can say the company has been quite
solvent over the last three years.
Market Performance Ratios:

Earnings per Share (EPS):

Earnings per Share [2017] = 75,718,631/23,400,000= 3.2

Earnings per Share [2016] = (137,016,478- 1,274,205,922)/ 3,340,000

= 2.87

Earnings per Share [2015] = (2,736,227,277- 2,544,596,856)/ 6,670,000

= 2.87

Dividend Payout Ratio:

Dividend Payout Ratio [2017] = 0.0168/0.32 =.0525

Dividend Payout Ratio [2016] = 127,420,592/4,406,018,905= 0.0289

0.0289/2.87=0.01

Dividend Payout Ratio [2015] = 254,459,685/8,798,846,137= 0.0287

0.0287/2.87=0.01

Price Earnings P/E Ratio (PER):

Price Earnings Ratio [2017] = 51.1/3.2

= 15.97

Price Earnings Ratio [2016] = 33.9/2.87

= 11.81

Price Earnings Ratio [2015] = 33/2.87

= 11.49
Graph-10: Illustration of market performance ratios of ORION Pharma

Market Performance 2017 2016 2015


Ratio

Earnings Per Share 3.2 2.87 2.87


(EPS)

Dividend Payout 0.0525 0.0101 0.0102


Ratio

Price Earnings Ratio 15.97 11.81 11.49


(PER)

Summary of Market Performance Ratios: From above data, we see that ORION pharma’s EPS ratio
was lower than BEXIMCO in three consecutive years. The company paid only 5.25 percent of its net
income to the shareholders in 2017 and only 1.01 percent in 2015 and 2016. But the company’s price
earnings ratio was quite good as it had an average P/E ratio of 13.20 in three years which means the
investors were willing to pay 13.20 dollars for every dollar of earnings.

According to the market performance ratios we can say ORION pharma’s market performance was
overall average over the last three years.
DuPont analysis is a essential routine measurement outline popularized by the DuPont
Corporation and is also stated to as the "DuPont identity." DuPont analysis is a convenient
technique used to decompose the diverse drivers of the return on equity (ROE). Breakdown of
ROE allows stockholders to focus their inquiry on the individual company performance
indicators otherwise quick assessment.

BREAKING DOWN 'DuPont Analysis'


According to DuPont analysis, there are three major financial metrics drive return on equity
(ROE): operating efficiency, asset use efficiency and financial leverage. Operating efficiency
is represented by net profit margin or net income divided by average shareholders' equity. Asset
use efficiency is measured by total asset turnover or the asset turnover ratio. Finally, financial
leverage is analyzed through observation of changes in the equity multiplier.

For breaking down DuPont Analysis, we have collected data for 2015, 2016, 2017. These are
given below

2017 2016 2015

Gross Revenues $15,508,776,972 $7,068,995,719 $12,965,506,873

Variable Expense $8,323,895,349 $3,835,149,654 $6,965,167,704

Fixed Expense $522,396,449 $240,980,804 $448,357,117

Interest Expense $557,003,162 $326,938,528 $382,845,547

Other Income $144,852,831 $100,980,597 $311,678,326

Total Assets $34,084,132,870 $31,148,907,975 $30,835,550,584

Total Liabilities $8,111,706,970 $8,089,495,566 $8,356,923,001

Using basic calculations, DuPont analysis breaks down the relationship between return on
equity (ROE) and return on assets (ROA) in mathematical form
DuPont Analysis 2015
Operating Profit Margin
Gross Revenue (-) Fixed Expense (-) Variable Expense (=) Net Operating Income
$12,965,506,873 $448,357,117 $6,965,167,704 $5,551,982,052

Net Operating Income (+) Other Income (-) Interest Expense (=) Net Income
$5,551,982,052 $311,678,326 $382,845,547 $5,480,814,831

Net Income (+) Interest Expense (÷) Gross Revenue (=) Operating Profit Margin Earns
$5,480,814,831 $382,845,547 $12,965,506,873 $0.452
Asset Turnover Ratio
Gross Revenue (÷) Total Assets (=) Turnover Ratio Turns
$12,965,506,873 $30,835,550,584 0.420
Return on Assets (ROA)
Earns (x) Turns
Oper. Profit Margin (x) Turnover Ratio (=) Return on Assets
0.452 0.420 19.016%
Return on Equity (ROE)
Total Liabilities (÷) Total Equity (=) Debt/Equity Ratio Leverage Ratio
$8,356,923,001 $22,478,627,583 0.37

Interest Expense (÷) Total Liabilities (=) Average Interest Rate AIR
$382,845,547 $8,356,923,001 4.58%

Return on Assets (+) Return on Assets (-) Average Interest Rate (x) Debt/Equity Ratio (=) Return on Equity
19.02% 19.02% 4.58% 0.37 24.382%
DuPont Analysis 2016
Operating Profit Margin
Gross Revenue (-) Fixed Expense (-) Variable Expense (=) Net Operating Income
$7,068,995,719 $240,980,804 $3,835,149,654 $2,992,865,261

Net Operating Income (+) Other Income (-) Interest Expense (=) Net Income
$2,992,865,261 $100,980,597 $326,938,528 $2,766,907,330

Net Income (+) Interest Expense (÷) Gross Revenue (=) Operating Profit Margin Earns
$2,766,907,330 $326,938,528 $7,068,995,719 $0.438
Asset Turnover Ratio
Gross Revenue (÷) Total Assets (=) Turnover Ratio Turns
$7,068,995,719 $31,148,907,975 0.227
Return on Assets (ROA)
Earns (x) Turns
Oper. Profit Margin (x) Turnover Ratio (=) Return on Assets
0.438 0.227 9.932%
Return on Equity (ROE)
Total Liabilities (÷) Total Equity (=) Debt/Equity Ratio Leverage Ratio
$8,089,495,566 $23,059,412,409 0.35

Interest Expense (÷) Total Liabilities (=) Average Interest Rate AIR
$326,938,528 $8,089,495,566 4.04%

Return on Assets (+) Return on Assets (-) Average Interest Rate (x) Debt/Equity Ratio (=) Return on Equity
9.93% 9.93% 4.04% 0.35 11.999%
DuPont Analysis 2017
Operating Profit Margin
Gross Revenue (-) Fixed Expense (-) Variable Expense (=) Net Operating Income
$15,508,776,972 $522,396,449 $8,323,895,349 $6,662,485,174

Net Operating Income (+) Other Income (-) Interest Expense (=) Net Income
$6,662,485,174 $144,852,831 $557,003,162 $6,250,334,843

Net Income (+) Interest Expense (÷) Gross Revenue (=) Operating Profit Margin Earns
$6,250,334,843 $557,003,162 $15,508,776,972 $0.439
Asset Turnover Ratio
Gross Revenue (÷) Total Assets (=) Turnover Ratio Turns
$15,508,776,972 $34,084,132,870 0.455
Return on Assets (ROA)
Earns (x) Turns
Oper. Profit Margin (x) Turnover Ratio (=) Return on Assets
0.439 0.455 19.972%
Return on Equity (ROE)
Total Liabilities (÷) Total Equity (=) Debt/Equity Ratio Leverage Ratio
$8,111,706,970 $25,972,425,900 0.31

Interest Expense (÷) Total Liabilities (=) Average Interest Rate AIR
$557,003,162 $8,111,706,970 6.87%

Return on Assets (+) Return on Assets (-) Average Interest Rate (x) Debt/Equity Ratio (=) Return on Equity
19.97% 19.97% 6.87% 0.31 24.065%
Dupont Analysis explanation and interpretation

Operating Profit Margin


Operating Profit Margin 2015 2016 2017

Beximco 0.452 0.438 0.439

Operating Profit Margin


0.46
0.45
0.44
0.43
2015 2016 2017

In 2015, Beximco has operating margin .452 on 2015, .438 on 2016 and .439 on 2017. From this analysis,
we can say that their profit margin is pretty much higher than industry average. So they are operating very
good in terms of profit.

Asset turnover ratio

Asset Turnover ratio is used for identifying the efficiency with which both of the companies how
deploying its assets in generating revenue. The higher the asset turnover ratio, the better the company
is performing. The company is generating more revenue per BDT of assets.

Asset turnover ratio 2015 2016 2017

Beximco 0.420 0.227 0.455

Asset Turnover ratio


0.6
0.4
0.2
0
2015 2016 2017
In 2015,,Beximco has 12,965,506,873 gross revenue and 30,835,550,584 total assets. This company ratio
is only 0.420. Following 2016 and 2017, they have ratio of .227 and .498. From this information, we can
say that every taka in assets, Beximco only generates 42, 27 and 49 paisa. In other words, Bexmico is not
very efficient with its use of assets.

Return on Assets (ROA)


ROA is a profitability ratio that measures the net income produced by total assets during a period by
comparing net income to the average total assets. In other words, the return on assets ratio or ROA
measures how efficiently a company can manage its assets to produce profits during a period.

Return on Assets 2015 2016 2017

Beximco 19.016% 9.932% 19.972%

Return on Assets (ROA)


30
20
10
0
2015 2016 2017

In 2015, Beximco has Operating profit margin ratio is 0.452 and Asset turnover ratio is .42. By
multiplying this two, we can get Return on Assets (ROA). We have got 19.016% on 2015. Following on
9.932% on 2016 and 21.854% on 2017 In other words, every taka that Beximco has invested in assets
during the year produced 19.016% of net income. From this we can say that this can be a healthy return
rate no matter what the investment is.

Debt-to-Equity Ratio (Leverage)


The debt to equity ratio is a financial, liquidity ratio that compares a company’s total debt to total equity.
The debt to equity ratio shows the percentage of company financing that comes from creditors and
investors.
Debt-to-Equity Ratio 2015 2016 2017

Beximco 0.37 0.35 0.31

Debt-to-Equity Ratio
0.4
0.35
0.3
0.25
2015 2016 2017

Beximco has .37 on 2015, .35 on 2016 and .35 on 2017 debt-to-equity ratio. We know that debt financing
is much more expensive than equity so we can say that Beximco is occuring a huge expense to run their
business. So Beximco should finance their operations using the investors’ money which will lower their
risk as well as expense.

Return on Equity (ROE)


Return on equity (ROE) is a measure of profitability that calculates how many dollars of profit a
company generates with each dollar of shareholders' equity. ROE is sometimes called "return on net
worth.

Return on Equity 2015 2016 2017

Beximco 24.382% 11.999% 24.065%

Return on Equity
30.00%
20.00%
10.00%
0.00%
2015 2016 2017
Beximco has 24.382% on 2015, 11.99% on 2016 an 27.131% on 2017 Return on Equity. Every investor
is concerned about how much money he or she is investing and how much money he or she is getting in
return. But Beximco return on equity is lower than standard average.

Beximco has following information for Equity Multiplier 2017

Current Assets 9130816169

Non-current Assets 24953316701

Total Shareholders’ 25,972,425,900


Equity

First, we will find out the total assets.

Current Assets 9130816169

Non-current Assets 24953316701

Total Assets 34084132870

Now, We will find the equity multiplier.

Total Assets 34084132870

Total Shareholders’ 25,972,425,900


Equity

Equity Multiplier 1.31


Beximco has following information for Equity Multiplier 2016

Current Assets 8528007810

Non-current Assets 22620900165

Total Shareholders’ 23,059,412,409


Equity

First, we will find out the total assets.

Current Assets 8528007810

Non-current Assets 22620900165

Total Assets 31148907975

Now, We will find the equity multiplier.

Total Assets 31148907975

Total Shareholders’ 23,059,412,409


Equity

Equity Multiplier 1.35


Beximco has following information for Equity Multiplier 2015

Current Assets 8392093095

Non-current Assets 22,443,547,489

Total Shareholders’ Equity 22,478,627,583

First, we will find out the total assets.

Current Assets 8392093095

Non-current Assets 22443547489

Total Assets 30835640584

Now, We will find the equity multiplier.

Total Assets 30835640584

Total Shareholders’ Equity 22,478,627,583

Equity Multiplier 1.37

Interpretation

The equity multiplier is a financial leverage ratio that processes the quantity of a firm’s properties that
are funded by its investors by equating total assets with total shareholder’s equity. In other words, the
equity multiplier shows the ratio of assets that are financed or owed by the shareholders.

Year 2015 2016 2017

Equity Multiplier 1.37 1.35 1.31


Equity Multiplier
1.4
1.35
1.3
1.25
2015 2016 2017

Equity Multiplier

Beximco has a ratio of 1.37, 1.35, 1.31. This means that Beximco debt levels are moderate. Their
average 1.32 which is moderate in terms of industry. It means that 32% of his assets are financed by
debt. Conversely, investors finance 78 percent of his assets.

Decision as short term creditor

As a creditor we want to be in safe side for regaining our invested money from the company. When it comes to
short term credit we need to ensure that the borrowing company has good amount of liquid asset in hand for the
repayment purpose without any hassle. For the decision regarding short term creditor for either BEXIMCO or
ORION we go for liquidity ratio.

Current ratios
4
3.41 3.41
3.5

3 2.86
2.68
2.5 2.21
2 1.73 BEXIMCO

1.5 ORION

0.5

0
2015 2016 2017
The current ratio chart shows that ORION had good amount of liquid assets than BEXIMCO but in the
current year 2018 BEXIMCO has current assets more than ORION but both is greater than 1.5.

Quick Ratio
3 2.83 2.83

2.5
1.91
2

1.5 BEXIMCO
1.12
0.98 ORION
1
0.67
0.5

0
2015 2016 2017

According to this ratio we can find that ORION is maintaining quickly convertible quick assets than
BEXIMCO.

According to the liquidity analysis we can say that it makes more sense for us to become short term
creditor for ORION.