University of Dhaka

B.B.A. 16th Batch

Department of Finance

Fundamental Analysis On Olympic Industries Limited

 Submitted to…..
Hussain Muhammad Enamul Huda
Lecturer,
Department of finance,
University of Dhaka.

Course Name-Investment and Securities Analysis

Course code-307

Submitted By….
.
Name Roll Section
Yasir Bin Yusuf 16-036 B
Aynul Bashar Amit 16-094 B
Md.Sakib Bin Abdul Hannan 16-096 B
Arafatul Karim 16-098 B
Ariful Islam 16-146 B
Risal Ahmed Mohaimen 16-150 B

Letter of Transmittal
January 24, 2013

Hussain Mohammad Enamul Huda

Lecturer
Department of Finance
University of Dhaka

Subject: Submission of a report on “Fundamental Analysis On Olympic

Industries.”
Dear Sir,
We are presenting a report on ““Fundamental analysis on olympic
industries.” for course-307. In this report, We have forecasted and determined
pro-forma income statement,balance sheet,free cash flow. In making the study,
We had to take help from the various sources of internet,manual,and excel sheet
provided as course material. We are grateful for extending generous help.
Mainly We have taken most of my gleanings from excel files and manuals.
We are pleased to be granted this vital opportunity and grateful for your
versatile assistance. We hope that my work will please you. We will be
available in the presentation for further explanations.

Sincerely,
______________

Yasir Bin Yusuf

Table of Contents
Serial no. Contents Page no.

01 Executive Summary 05

02 About Olympic Industries Limited 06

03 Prospect Analysis 08

04 Ratio Analysis 21

05 Valuation Analysis 25

06 Evaluation about The Share 26

 Executive summary

Fundamental analysis of a business involves analyzing its financial statements and

health, its management and competitive advantages, and its competitors and markets.
Fundamental analysis is performed on historical and present data, but with the goal of
making financial forecasts .Fundamental analysis constitutes of conducting company
stock valuation and predict its probable price evolution, making a projection on its
business performance, evaluating its management and make internal business decisions,
calculating its credit risk. It focuses exclusively on the company's business in order to
determine whether or not the stock should be bought or sold.The other major argument
against fundamental analysis is more practical than theoretical. These critics charge that
fundamental analysis is too unscientific a process, and that it's difficult to get a clear
picture of a company's value when there are so many qualitative factors such as a
company's management and its competitive landscape.

However for practical practice we worked on Olympic industries Limited for its
fundamental analysis. We analyzed the competitive situation of the company and its price
pressure in the market environment. The way the financial position of the company is
influenced by other internal and external factors is analyzed through fundamental
analysis. We calculated the ratio that assisted to compare it financial position against
some other variables. Ratio analysis described the strength, profitability return of the
company .By fundamental analysis we calculated the intrinsic value of the Olympic
industries limited which is calculated based on the financial data given 2006-2010.
Moreover we forecasted the particulars of financial statements from 2011-2013. The
derived intrinsic value is then compared to the market to take buy and sell decision.
 About Olympic Industries Limited

Olympic Industries Limited is one of the longest running and most reputed
manufacturing-based companies in Bangladesh, with a heritage of over 50 years and
group profile including interests in Pharmaceuticals, Power, and Information Technology,
among other FMCG. Starting with steel production dating back to 1950

Olympic Industries Limited is a public listed company and is trading on the Dhaka Stock
Exchange and Chittagong Stock Exchange.

Olympic Industries Limited began in June 1979 as Bengal Carbide Limited, starting
battery production in April 1982. The success of the battery unit, as well as the trust of its
customers in its goods led to the massive diversification of its product line. Today,
Olympic's production line includes three types of dry cell batteries (UM1, UM3 & UM4),
a wide range of biscuits, two types of handy ballpoint pens (Refill & Direct Filling) and
even confectionery items.

The driving force behind all of Olympic Industries Limited's products is quality. Olympic
is very aware that when the customers buy its products, they expect to find goods of a
high caliber – a trait that compels them to buy Olympic's goods again. In turn, the
company do its level best to maintain and continuously improve the range of products to
cater to the customer's tastes and expectations. Olympic Industries Limited is a public
limited company, trading on both the Dhaka Stock Exchange and Chittagong Stock
exchange.

Over the last 30 years, it has grown to be the one largest manufacturers, distributors and
marketers of fast moving consumer goods in Bangladesh. Its mission has always been to
provide goods and services that can compete with international standards, but more
importantly, Olympic aims to improve the quality of life for all of its customers &
stakeholders.

Production Facilities

In 1982 Olympic Industries Limited was the first Industry to introduce the best modern
technology for producing the consumer goods. In 1996 Olympic launched Olympic
Energy Biscuit which is still the pioneer in biscuit category. The automated machine for
biscuit was first introduced by Olympic Industries Limited. On the other hand, Olympic
Industries Limited first introduced the Pin Point Ball Pen in this country as Olympic Fine
Ball Pen. Theses were only possible because of the best technology, league with
multinationals, best team for operations, best team for maintenance and strong quality
control system in every step by which Olympic Industries Limited is still leading the
market and continuing the modifications in each and every step for coping up with the
global quality and even for providing the best quality products in world wild market.

 No. of factories:
1. Biscuit Factory
2. Battery Factory
3. Ball Pen Factory
4. Confectionery Factory
 Area : 2,09,089 Square Feet

Sales and Distribution network

Olympic Industries Limited has perhaps the most extensive sales and distribution
network in Bangladesh, with a field force of just under 1,000 people representing each
and every region of the country, boasting Olympic’s products’ in even the most far-
reaching, remote corners of the nation. The Sales Force uses over 300 distributors
nationwide and sells products to a total of over 4,00,000 outlets across the country.

Moreover, Olympic’s products are prominently displayed on the store signs of over
1,00,000 stores nationwide.

In addition, the Sales Force is equipped with the latest mobile devices and technology to
ensure their operations are as seamless and automated as possible.
Brand values of Olympic Industries
 Prospect analysis

Olympic has steadily diversified over the years into various consumer goods including
biscuits, confectioneries, batteries, and ball pens, with over 40 brands and 53 SKU’s. The
company has gotten to where it is today by staying true to its core beliefs, in providing
high quality, innovative products which its consumers can rely on.

Olympic Industries Limited is currently the market leader in the biscuit market and
second in position in the battery market in Bangladesh. It has been able to stride forward
due to its continuous vision for growth, its modern manufacturing facilities, and its
extensive sales and distribution network, and it has always yielded this influence to give
back to the community.

Ratio analysis

=1,389,386,956/1,076,067,327

=1.29

= (1389386956 - 416314463)/ 1,076,067,327

=.90

= 465219732/6003342018

=7.75%
= 6003342018/2591236306

= 2.32

= 7.75 * 2.32

= 17.98

= 465219732/1168606460

= .40

= 465219732/78361312

= 5.94

= 90/5.94

= 15.1
 Industry analysis

Strengths
 Brand building capabilities

 Diversified product range

 The depth of distribution

 Low and mid price range of the products

 Industry catering to masses.

Weaknesses
 Dependence on retailers and grocery store

 Lack of technology up gradation

Opportunities
 Bangladesh Biscuit Manufacturers Association (BBMA) estimates annual growth
of around 20% in next couple of years.

 Growing demand of Sugar free cream crackers & diet biscuits.

 A package of fiscal incentives provided by government

Threats
 Fluctuations in the prices of raw materials, transportation costs &distribution

 Entry of ITC (having very good distribution channels) in to biscuitindustry)

 Emerging local bakery products

RIVALRY WITHIN THEINDUSTRY IS VERY HIGH

  Major players dominate the market.

 High competition among the players

 Unorganized sector cannot compete with major players in the case of Advertising

HIGH ENTRY BARRIERS

 Capital intensive manufacturing, advertising and distribution

 Heavy competition from major players.

BARGAINING POWER OF SPPLIERS:

 In the case of major players bargaining power of suppliers is very low as they
dictate the prices.

 The ingredients are basic commodities such as wheat , sugar etc

HIGH BARGAINING POWER OF CUSTOMER

 Availability of many biscuits from low, moderate prices

 Availability of biscuits from non organized sector

 Loyalty of the buyers to biscuits that have brand identity makes them more
powerful in the case of new entries.

THREAT OF SUBSTITUTES
 Substitute threat is more in the case of biscuits

 Growing packaged industry and bread industry

 Traditional Indian homemade snacks

Critical success factors

 Bangladesh is lower and middle class segment

 Distribution (in rural markets) and advertising (in urban markets Innovation)

 New variants added into existing brands including stylish packaging.

 The focus on urban markets

 lower Price

WACC Calculation
Risk-free rate 0.0725

Market return 0.2987387

Beta 1.43229608

Cost of equity 0.39654081

Cost of debt 0.18458717

After tax cost of debt 0.13130231

Total market value of equity 6961387820

Book value of debt 202052045

Weight of equity 0.97179399

Weight of debt 0.02820601

WACC 0.38905949

Change in Working Capital

Particulars 2010 2011 2012 2013

Inventory 245123706 428386293.4 536134704. 670984170.6

9
Sundry Debtors 13543286 34276952.23 42898346.5 53688207.86
4
Advance, Deposits and 190097008 386096783.6 483208469. 604745843
prepayment 3
Non-cash current asset 448764000 848760029.1 1062241521 1329418221

Creditors for Goods 185965306 204882401.6 256414753. 320908606.2

7
Creditor for services 4250216 14217322.77 17793286.7 22268682.9
2
Accrued expenses 31293770 48145725.86 60255416.4 75410956.03
8
Advances Against sales 190097008 386096783.6 483208469. 604745843
3
Non- STD Current liabilities 411606300 653342233.8 817671926. 1023334088
3

Working capital 37157700 195417795.4 244569594. 306084133.4

5
Change in WC 158260095.4 49151799.1 61514538.89
 Free Cash Flow

Particulars 2011 2012 2013 2014

EBIT 5448263104 1975066294 2470697332
EBIT (1-tax rate) 3875510390 1404922962 1757479952
Depreciation 61001149.23 70151321.61 80674019.85
Capital expenditure -68489986.95 -78763484.99 -90578007.74
Change in NWC 158260095.4 49151799.1 61514538.89
Free cashflow 3709761457 1347159000 1686061425 1719782654

Present value discount 0.719911572 0.51827267 0.373110492

factor
Present value of free 2670700200 698195691.8 629087207.9
cashflow
Terminal value 1738659946

Enterprise value 5736643046

Cash 348567808
Interest-bearing debt 202052045
Equity value 5883158809
Value per share 2533.859821
 Assumption

 Perpetual growth rate is 2%.

 Loan will be repaid after three years maturity period with interest
 Risk free rate 7.25%
 Because of expansion of PPE, there will be no investment in other securities
 Finance cost is considered as interest expense
 Growth rate of PPE is normalized at 15%
 Deferred tax rate is calculated as proportion to the current tax
 Growth rate of Capital in work in process is normalized at 4%
 Evaluation about the Share
We have calculated the intrinsic value of Olympic Industries LTD’s Share based on the
data from 2006-10 .And the value we have ended up with is 2533.85 TK which is lower
than the market value 2,998.25 TK as per 30 November 2010.So the market value of Olympic
Industries Ltd is overestimated. So the investor should go for short position.