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CFA Institute Research Challenge
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CFA Society Bangladesh
Team Name: Last In, First Out
Marico Bangladesh Limited
Pharmaceuticals & Chemicals Sector, Fast Moving Consumer Goods Industry
Dhaka Stock Exchange
Date: 2 December. 2019 Recommendation: BUY Ticker – DSE: MARICO Eikon: MARI.DH
Current Price: Tk. 1725.20 (Closing price of Dec 1 2019) Target Price: Tk. 2034.29 Capital Gain: 17.92%
Figure 1
Highlights
Marico Bangladesh Limited is one of the top three listed FMCG MNCs,
operating in the personal care and wellness space in Bangladesh.
We issue a BUY recommendation with a 1-year target price of BDT 2034.29,
representing a 17.92% capital gain from its November 24, 2019 closing price
of BDT 1725.20. Our recommendations are based on these key categories.
Strong Economic Growth contributes to the stable revenue generation

Bangladesh is moving towards attaining the status of middle-income country
by 2021. There has been a significant decline of population under poverty
line, which was 21.8% in 2018 compared to 59% in 1992 in our country. Due
to the increase in per capita income & disposable income, people’s personal
consumption has increased. It has created a positive impact on the FMCG
industry. As MBL has 82% market dominance in coconut oil segment &
Source: Eikon Refinitiv exponentially growing VAHO market share, the company is also
Figure 2 experiencing a constant revenue growth of 12% for the last 2 years. It is only
expected to grow this year since this year’s half yearly report indicates a
12.8% overall growth already.
Customer-oriented product expansion reduces Parachute dependency
MBL’s product diversification strategy is expected to reduce its dependency
on Parachute Coconut Hair Oil. MBL has launched a number of brands
under the VAHO segment to provide offerings to the affluent people. The
revenue contribution of VAHO has increased from 10% to 24% in the last 6
years. MBL’s edible oil Saffola’s revenue has also doubled in the last year.
Additionally, with non-hair oil expansion of products in men’s grooming &
baby care segments, MBL ensures robust revenue generation in the future.
Strong financial condition & operational efficiency
MBL has been operating at a net profit CAGR of 15.7% & revenue CAGR of
8% since it became a listed company back in 2010. MBL reported 5.80%
growth in volume sales in the last year & has a market capitalization of BDT
54,343.800 Mn. MBL’s capital structure is completely unlevered & it has
been maintaining a constant dividend payout ratio of 100% or more for the
last 5 years. It has increased operational efficiency by keeping operating
Source: Team Analysis
expense at an average of 20% for the last 6 years & achieved a 23.2% profit
Figure 3 growth in 2018-19.
News of Expansion signals expected revenue growth
Marico announced capital expenditure of BDT 294 Mn for factory expansion
to further accommodate their in-house production to cope up with the future
market demand. This indicates a substantial increase in future turnover for
MBL, which is very reasonable considering MBL’s diversification in product
offerings.
Decrease of Copra price in international market
Due to 42.9% decrease in Copra price since February 2018 in the
international market, it is expected that MBL will experience a 10% growth in
gross margin in the upcoming year. Additionally, MBL has worked jointly with
the coconut farmers in Indonesia to further ensure uninterrupted supply of
copra & minimize the risk against copra price deviation.
JAHANGIRNAGAR UNIVERSITY 1
Figure 4: Marico Price, Volume & News Chart
Figure 5: Brands of Marico Bangladesh Recent news

Announcement of capacity expansion (03 March, 2019)
On 3rd March, 2019, MBL announced that its Board of Directors has decided
to invest 294Mn BDT to expand capacity of the factories located at Mouchak
& Shirirchala from their available funds.
Interim Dividend for the 2nd Quarter, 2020 (22nd October, 2019)
The Board of director of the MBL has declared 200% interim cash dividend
for the annual year ending on March 31, 2020 on the basis of 6 months
financial for the period ending on September 30, 2019. That would make the
half yearly cash dividend 450% (accumulating previous quarter dividend of
250% on 25th July, 2019)
Business Description
Operating in Bangladesh since 1999, Marico Bangladesh Ltd is the first
subsidiary of Marico Ltd and the most profitable unit of Marico’s international
business. MBL is amongst the top 3 FMCG MNCs in Bangladesh. With a
focus on innovation, the company is engaged in manufacturing and
marketing of products in the spaces of nourishment, grooming, beauty &
wellness and food. MBL has also started exporting hair-oils to India and
Nepal and is planning to expand export to other countries as well.
Parachute: the flagship Brand
Source: MBL Annual Report Parachute, the flagship brand of MBL, has the highest market share in
coconut oil segment. Kantar WorldPanel for Bangladesh identifies
Figure 6: Revenue Breadkdown by Categories Parachute as one of the top 5 brands. The company is also market leader
in the value-added hair oil segment with brands- Parachute Advansed and
Nihar Naturals. MBL currently has 24 brands under 8 categories
(Figure-5). The VAHO portfolio contributes 36% to MBL’s business
turnover and holds the highest value market share in the VAHO
category. The Company has seen tremendous growth in the edible oil
segment in 2018-19 and scaled up new product launches to drive growth.
Business Strategies
Innovation and Portfolio Expansion: MBL operates in an increasingly

dynamic consumption environment in a growing economy. Main strategic
focus for MBL is the growth of core categories and consumer focused
innovations. One of the main strategies that MBL follows to attract
consumers and to have a secured competitive position in the market is
Source: MBL's Annual Reports
to provide right products at the right time through innovation in the
product categories and product portfolio expansion. MBL aims to address
different needs of the consumers. MBL wants to take opportunity of the
Figure 7: Comparison of GDP Growth Rate
growing economy and offer products in newer, less mature categories,
mainly to the young demographic, with higher proportion of traditional retail.
Go-to-Market: Go-to-Market (GTM) strategy and strong distribution network

has built the foundation of MBL’s success. In the operating year 2016-17,
MBL sketched a strong Go-To-Market analysis of, Sales Capability, Sales
Automation, Partner Management, Route-to-Market and Revenue
Management. Over the years, Go-to-Market strategy brought outstanding
results- increased distribution coverage, brought a large number of outlets
under the direct distribution service, enhanced range selling, built strong
customer relationship and a strong foundation for business.
Trade Marketing Initiative and Capability Development: MBL launched

some signature trade loyalty campaigns that greatly contributed to the
company’s growth. Of all the campaigns ‘Amar Dokan’ has been brilliantly
executed in the market place and has become a benchmark with 90%
Source: IMF compliance. Because of ‘Amar Dokan’, the company has been able to form
a lasting relationship with their trade partners and the campaign itself
Figure 8: GNI Per Capital vs Marico's Revenue
became a growth hub of overall MBL portfolio. To achieve excellence on
execution and develop the distributor employees on job fundamentals, MBL
also arranged for 2265 man-days training.
Sustainable In-house Manufacturing Unit: MBL has two factories in

Mouchak and Shirirchala and 3 contract-based manufacturing companies.
The capacity utilization of MBL for top two categories of products (PCNO &
VAHO) is 60% and Copra crushing is 70%. But they have created capacity
for Shirirchala Factory to ensure 100% in-house manufacturing. MBL wants
to be a positive contributor to environmental sustainability and is working
towards ensuring sustainable internal operations by reducing the
environmental impact of its business processes. For sustainable operation,
the key focus of MBL is to reduce operational costs for energy and water
consumption, utilize alternative energy sources where possible, reduce
Source: IMF & MBL's Annual Report waste and increase recycling.
Figure 9: Wage Rate Index
Industry Overview and Competitive Positioning
Macroeconomic factors
Robust Economic Growth
With just one month left of 2019, Bangladesh’s GDP is expected to grow by
8.1% in 2019 & 8.3% in 2020 (IMF, 2019)(figure-7). This GDP growth
is highest among the South Asian countries. Bangladesh is on the verge
of reaching an all-time high per capita income of USD 2846 by 2024
(Statista, 2019). This leads to an upward trend in the disposable
income (Trading Economics, 2019) & per capita income. Recently, there’s
been 9% rise in the per capita income (Figure-11). This will certainly
create a positive impact on the FMCG industry, since people’s spending
increases (Bangladesh Bureau of Statistics, 2019) with Per Capita Income
Source: IMF & MBL's Annual Report
(The Daily Star, 2019)
Figure 10: GDP vs Private Consumption Expenditure
Wage rate index (WRI) indicates higher standard of living
Wages of low & unskilled labor has seen an upward trend in the last 8 years
among all the 3 main sectors of economy: agriculture, industry, service.
(Figure-9). Considering 2010 as the base year, there has been a 161%
increase in these sectors wages in the last 8 years (Bangladesh Bureau of
Statistics (BBS), 2019). This indicates the current rise in the standard of
living not only for the high-income people but middle-to-lower income people
as well, which ultimately leads to rise in personal expenditure.
Increase in private consumption expenditure
There's been a strong upward trend in private consumption expenditure

for the last 10 years. It was reported at 194.049USD Bn in 2018 &
Figure 11: Disposable Income vs Per Capita Income increased to 210,595 USD bn in 2019 (CEIC, 2019). There is also a 10%
compound growth in private expenditure for the last 8 years (Figure-10).
Since, Changes in private consumption expenditure directly influences the
FMCG sector. This growth in private consumption expenditure will
eventually help to propel the FMCG industry towards further expansion.
Market Overview
Urbanization
Country’s urban population is increasing at a higher rate of 1.8 % in the

recent years (Figure-12) comparing to the population growth of 1.03%
in the 2019 (Trading Economics, 2019). It is expected that in 2020, the
urban population will be the 40% of whole population. FMCG industry
thrives on urban expenditure. Urbanization creates stronger distribution
Figure 12: Urban Population vs Marico's Revenue & supply chain network for FMCGs & makes the operation easier. This
will result in a prior comparative advantage for the Multinational companies
& contribute to the overall revenue growth for them.
Rural consumption
There has been an increase in consumption in the rural areas which

contributes to the FMCG sector’s growth. According to Bangladesh Bureau
of Statistics, rural consumption in our country has increased up to 269%
between 2005 to 2015 (EBL Securities LTD, 2019). Rural areas pose as an
untapped market for the MNCs, so increase in consumption in the rural will
eventually create a significant positive impact in FMCG sector.
Demographic
Other demographic factors such as increase in working age population,

Figure 13: Population Distribution by Age Groups fertility rate, infant & child mortality, maternal mortality contributes to the
overall expansion of our GDP growth. According to The (The Financial
Express, 2019), there has been a significant rise to the country’s working
age population from 49% in 1994 to 62.7% in 2018 (World Bank,
2019)There has been a noticeable rise in participation of women in labor
market, 36% in 2017 comparing to 8% in mid-80’s. ( Raihan & Bidisha,
2018). Increase in working age population as well women participation will
ultimately push the economy toward remarkable development which will
further grow the FMCG sector.
Supply Outlook
Availability of Raw Materials & skilled labor
Bangladesh makes up for a geographically suitable country due to its

favorable climate & geological condition which makes production of
agricultural raw materials easy. Even shipping of import & export materials is
Figure 14: Govt. Spending vs Unemployment
also cost efficient due to geographical location. Moreover, Increase in
Government spending in social sectors increased 10.4% in the last budget
(BBS, 2019) which has lowered the unemployment rate in the
economy (World Bank, 2019)(Figure-14) . Availability of raw materials
along with skilled labor makes up for a lucrative production
destination. That’s why Marico itself is planning to make Bangladesh as their
production hub for their overseas operations as well.
Competitive Analysis
The FMCG sector is one of the fastest growing but highly competitive sector
of Bangladesh. MBL is one of the top 3 FMCG MNC companies in the
country. MBL started with a single brand ‘Parachute’ but at present it has a
product-portfolio of 24 brands in personal care and food categories. The
company has strengthened its brand portfolio over the years and has
several major consumer brands such as- Parachute, Parachute Advansed,
Parachute Beliphool Lite, Nihar, Saffola, Hair Code etc. Parachute has been
4
Figure 15: Govt. Spending vs Marico's Revenue recognized as one of the top 10 most trusted brands in Bangladesh since
2009. MBL touches the lives of 1 out of every 2 Bangladeshis with its
flagship brand Parachute and has 82% market share in the coconut oil
segment while VAHO segment is the market lead. MBL has a strong &
deeply rooted marketing channel & distribution network to ensure its smooth
sale. Through this strong distribution network, the company reaches more
than 900,000 outlets throughout the country. Though there are some threats
of new entrance from local companies, their impact on the coconut oil and
VAHO segment is very low. MBL’s going to face intense competitions from
non-oil product expansion such as from Proctor & Gamble’s Johnson baby
lotion, Uniliver’s Axe, Vini Cosmetics Bangladesh’s Fogg, Mousumi
Industry's Cute oil. But with their brand name, best-in-class products,
unique consumer in-sighting & diversified portfolio, MBL is on its
way to achieve their goal of double revenue by 2025. (Appendix-8 & 20)
Figure 16: Porter's Five Forces Analysis
Investment Summary
We issue a buy recommendation with a 1-year target price of TK using our
DCF valuation methodology. This represents a capital gain of % from its
November 20, 2019 closing price of BDT . Here are the reasons on which
we base on our recommendations:
Positive Growth Trajectory
MBL’s current capital structure is completely unlevered & the management

intends to maintain it, which reduces the financial risk to the minimum.
For the last 3 years MBL is maintaining a revenue growth of 12 due to
VAHO segment’s recent years success. MBL already has the largest
position in the VAHO segment, while Parachute secures 82 % market
share with 1.7% CAGR. With their relentless effort to achieve
operational efficiency, their cost of business is decreasing, which contributed
to the 22% net profit growth in 2019, EPS grew from 52.15Tk to 64.23TK &
MBL is expected to generate M cash flow to the firm. (
Figure 17: McKinsey Matrix Consistent dividend payout practice
Marico Bangladesh has been giving 100%+ on their earnings since

FY2011-12. They even announced 900% dividend on their face value in
FY2013-14. They intend to maintain this payout ratio in the upcoming
years, which makes MBL a very good investment from an investor’s
point of view. because that ensures consistent gain in share values
through current yield. And this consistent dividend payout ratio along with
superior management is bound to inflate the stock’s price in the share
market. Stock market reacts very positively to those companies that is
regular in to give dividends & maintain operational excellency because it
creates shareholder's trust & reduce any risks for them.
Strong Distributional Network
MBL distribute the products through its 90000 distribution outlets comprising
sales deports located in Dhaka, Chittagong, Bogra & Jessore. With their
new Go-To-Market initiative they have ensured to expand direct distribution
& conduct 85% of their business by it. At the same time, investment behind
IT & analytics has enabled MBL to conduct real time order, movement
tracking, smooth payment through automations. MBL’s ‘Amar Dokan’ has
set a new benchmark for excellent execution in market place. MBL was
even awarded Excellence in Logistics & Transformation Management
in 28th November this year. In respond to the recent increase in
online shopping among consumers, they have also started working
with 15 large e-commerce segments to sell their products. All these
strategies & distribution network enable Marico Bangladesh to (1) ensure
future sale consistency through push marketing strategy & (2) protect
themselves against any sudden market takeover by other competitor
(Appendix-20)
Figure 18: SWOT Analysis Brand extension to diversify portfolio towards non-hair-oil products
Marico Bangladesh has targeted to deliver right products to the consumers

at right time and to address different needs of the consumers. MBL has
launched many new products to enhance their brand line in coconut oil,
VAHO, personal care, men-grooming & baby-care segments in the 2018 &
2019. Many of the products are aloe Vera, Petroleum Jelly, Hair gel, Body
Spray, Hair gel sachet pack, Baby Lotion & Hair Serum. With the target of
doubling their revenue by 2025, MBL is on the right track to their wealth
maximization. Their flagship product Parachute has reached its maturity
stage at coconut oil segment. There won’t be any significant growth for
Parachute in this segment. So, now they are launching new products in
affiliation with that brand name & diversifying their portfolio to increase their
Source: Team Analysis sales which is expected to increase the turnover at 13% in the upcoming
years (Appendix).
Figure 19: Dividend Distribution
Reduction in Copra Price in Int Market
Copra contributes to the 70-80% of Marico’s COGS & 82% of MBL’s

consumed raw materials are imported. In the recent years Copra has
reached an all-time low in the international market & is currently at 438.2
USD per ton. But it was once at 871.5 USD in earlier 2017, for which, MBL’s
COGS was affected due to it & the gross profit plummeted because of that.
Currently, MBL’s gross profit is 58%, comparing 44% at that time due to this
price reduction. Copra Price is expected to stay low at the internal market for
the upcoming years. Moreover, Marico has worked closely with the Coconut
farmers in Indonesia to ensure their steady supply of Copra in the future &
hedged against the import risk.
Source: MBL's Annual Reports
Valuation
Figure 20: Revenue Forecast Breakdown
Our calculation to determine the justified stock price of Marico Bangladesh
Limited has reached at BDT 2034.29, solely from FCFF model. As we found
no perfect peer company for Marico and all selected peer companies run
their business in different sectors that’s why we cannot assume that peer
group will perfectly reflect the market for Marico. In our FCFF valuation, we
have reflected on the essentials of a firm as well as focused on the critical
underlying issues of MBL to make the valuation more justified.
Revenues Breakdown Estimations:
1.The consistent growth of Parachute: Parachute has already hit the

maturity & had a CAGR of 1.7% over the 5 years till 2019. Since 2019’s
growth rate was 4%& 2020’s half-yearly growth rate was 8% we expect it
grow by 6% in the upcoming years.
2.Growth in VAHO segments: VAHO segment has seen a compounding

growth of 26% over the last 5 years. Especially in the recent years, this
segment grew by 39% in 2018, 40% in 2020 & 25% in the 2020 half-yearly
Figure 21: Actual vs Forecasted EPS Growth report & now holds the largest market share. This growth is driven by recent
turnover boom of Parachute Advanced Beliphool & Parachute Advansed
Extra Care. People expect more than they get from their PCNO oils & with its
nice smell & non-stickiness Bellyphool already has established a market of
its own & very soon to be different segment for MBL's revenue source. We
expect VAHO to grow by 26% according to CAGR.
3.Edible oil’s positive growth: MBL has one product in this segment which
is Saffola. Saffola’s growth is due to people getting more health-conscious &
now they can afford to spend more due to increase in disposable income.
There is a compounding growth of 75% for Saffola over 5 years. That's why,
we expect the Saffola revenue to grow by 15% in the upcoming years.
4.Other products: Due to Jhonson's inferior distribution channel & too many
Source: Team Analysis fake products, its sales has reduced, which results in high revenue
Figure 22 expectationsfor MBL's baby products. MBL is always launching new
products like Men’s hair gel, cream, hair serum, baby care products, body
spray to diversify portfolio & it will continue to do so. These products will
increase the ‘other product’s revenue by 40% (Appendix-20).
FCFF: We have selected FCFF technique to determine MBL’s intrinsic

value since this is the most preferred & accepted by the analysts all over
the world. In the previous period, Marico maintained growth in free cash
flow. According to our estimation, we expect free cash flow will increase
continuously. We forecasted 6 years of growth (2020-2025) where the
separate growth rate was assumed for the first stage. Then we assumed a
decreasing trend in growth rate as Marico then will move forward to the
maturity stage (2026-2032). After then we have calculated sustained
terminal growth rate for the rest of the life-span of the company
WACC: We have arrived at WACC of 11.56% for MBL, with our cost of
Source: Team Analysis equity utilizing the CAPM technique. Since MBL holds no long-term debt,
the cost of capital is equal to the cost of equity. The rate of 10-year
Figure 23
Treasury bond reported in October 2019 has been considered as Risk-Free
Rate of Return. Afterward, the country risk premium as added which
included all the macroeconomic variables that may impact the cost of
equity. The country risk premium rate was retrieved from Aswath
Damodaran’s open-source data in January 2019. Finally, an additional
beta .24 was taken as a specific risk for the company from Eikon and
resulted in 11.56% as the cost of equity and WACC for MBL.
Terminal Growth Rate: Our terminal growth rate assumption of 5% is

based on (a) the CAGR (2019-2024) of Bangladesh hair oil market (5.5%)
(Mordor Intelligence, 2019), (b) long term (up to 2024) inflation rate of
Bangladesh (5.5%) and (c) historical 5 years CAGR of private consumption
expenditure (10.9%).
Source: Team Analysis Relative Valuation: For supporting the FCFF valuation result, we have also
calculated relative valuation. We have determined Enterprise Value to
Figure 24 EBITDA and Price to Earnings Per Share (P/E) which were found suitable
for Marico. We had to choose 7 peer companies (Appendix) from other
sectors but from similar macro-economic environments and have nearly
similar profit potential which has been reflected in their relative ratios due to
the absence of peer company in the same sector where Marico belongs to.
We have found the different price for these twos but they have showed their
alignment with our target price (Figure-)
Financial Analysis
Strong & sustainable revenue growth pattern: MBL has taken initiatives
to support portfolio expansion through enhanced distribution coverage,
Source: Team Analysis outlet expansion and superior service to retailers. We expect MBL to
achieve 13% revenue growth in the upcoming year. MBL already had a
Figure 25: Actual vs Forecasted Revenue Growth 12.8% growth in the half yearly report. We expect this growth to be fueled by
product diversification, rapid growth of 26% in VAHO segment & consistent
growth of 6% in Parachute.
Reduced raw material cost leading to higher gross margin: Due to

recent price fall of Copra, we estimate the COGS to fall to 41% of revenue
paving the way for Gross margin to reach at 59%. Besides, with their new
hedging approach to reduce the raw material import risk, this gross margin
is expected to continue.
Efficient operational expense: Due to launching of new products & their

need of promotion, we expect marketing expense to spike up the selling &
distribution cost. Last year S&D cost was 8% of the revenue & we expect it
Source: Team Analysis to rise at 10% increasing the operational cost from 19% to 21%, whereas,
general & administrative cost expected to remain at the same rate of 11%.
7
Figure 26: Du Pont Analysis Though we expect more that, marketing cost will decrease to 8% after 3
years enabling MBL to reach operational profit margin of 40% over the years
while it was 30% last year.
Strong cash flow generation & unlevered capital structure allow

expansion: MBL’s capability to generate cash inflow from operations (avg,
CFO to sales ratio is 31% from 2019A to 2025F & last year the ratio was
30%) enables MBL to finance any capital expenditure. Additionally, they
don’t have any long-term debt. That allows MBL to take any short-term debt
to finance their capital expenditure without increasing the leverage risk. We
estimate MBL is going to finance their 294M capital expenditure with short
term loan of 500M, since they also have an outstanding loan of 200M &
already made a short-term investment of 700M in half yearly period ending
on Sept 2019. With their superior cash flow generation, they can still
Source: Team Analysis manage to pay off this debt the next year & maintain a current ratio of 1.26.
Figure 27: CapEx Ratio Higher capital gains for shareholders: Revenue jump of this year along
with decrease in COGS, makes way for MBL to experience a 43% growth in
EPS from 2019 to 2020. MBL has already announced 450% dividend
(45BDT) after 1st two quarters of 2019-20. We expect this growth in EPS to
be 17% on an average over the six years & thus, maximizing the
shareholders’ value with average ROE of 231% for 2019A-2025F. Figure-
Du Pont Analysis
Marico Bangladesh Limited has recently increased its manufacturing

capacity to support increasing demand of their products. But in upcoming
years, we are expecting an increase in utilization rate though substantial
capital expenditure has been made as well as sharp increase in Total
Assets Turnover Ratio. Though company is going to experience nearly
Figure 28: Sensitivity Analysis similar trend in net profit margin in forecasted years, high asset turnover
ratio in upcoming years with similar financial leverage are the issues
responsible for continuous growth in ROE for Marico.
Margins: In the duration of 1-year MBL has reduced power consumption by

16.3% and fuel consumption by 24.8% in their Mouchak Factory. MBL also
has a water conservation project with potential saving of 1500 KL/per year,
aimed to be completed within the fiscal year 2019-20. Due to that, we have
estimated MBL’s future gross margin to rise (Figure) due to increase in
operational efficiency & decrease in factory overhead cost. MBL has
successfully implemented its plan to reduce water, fuel and electricity costs
that are the key drivers for increased production efficiency. Net profit margin
has been also seen a substantial increase due to a noticeable increase in
the gross margin, but operating expenditure will increase proportionately to
revenue. Figure shows the trend in MBL’s margins.
Figure 29: Profitability Growth
Capital Expenditure: Major capital expenditure happened in the year 2014
and 2017, MBL has maintained 1% capital expenditure of revenue on an
average. We expect MBL will continue this trend in capital expenditure to
support revenue growth in upcoming years and in 2020 the company Board
of Directors have decided to further invest 294 million BDT from the
available funds to increase the capacity of its two factories at Mouchak &
Shirirchala
Sensitivity Analysis
We have run a What-If simulation to determine the sensitivity of the target

price with factors such as change in WACC and terminal growth rate. The
sensitivity of the target price with cost of equity and terminal growth rate is
shown in Table (). Here, terminal growth rate defines the growth of cash for
the period beyond our forecasted six years and WACC is used to discount
our cash flows. If our WACC increases by 17%, and terminal growth rate
decreases by 40%, our recommendation will change into a SELL call.
8
Figure 30: Copra Price vs Marico's Gross Margin Though our expected growth potential for Marico Bangladesh Limited
denotes that future prices will not fall below our recommended price.
Industry Risks
Market Risk
MR-1 Barriers to Entry Low (Probability: High; Impact: Medium)
Barriers to entry in the FMCG industry of Bangladesh is low. There is ease

of operation in the FMCG industry, the sector is a low capital-intensive
sector and the requirements for start-up capital are not significantly high.
Manufacturing processes are quite simple, basic technologies are easily
available and there are also many contract-based manufacturers to carry out
the manufacturing operations. So, it is easy for the new players to enter the
market. By adopting focused channel and niche market approach, many
new-age start-ups have attained reasonable scale. As a result, big brands
have to compete with other big brands as well as small brands.
Figure 31: Risk Matrix
MR-2 Fake and Counterfeit Products (Probability: High; Impact:
Medium)
Taking the advantage of lack of efficient monitoring by law enforcement

agencies, fake and counterfeit products are widely sold in Bangladesh under
the names and logos of popular national and international brands. These
fake products are of low quality, contain harmful chemicals and their use is
harmful to skin and hair. The reputation of the big brands are damaged due
to this. Moreover, because of the availability of counterfeit products in the
market, there is a high demand of imported products in Bangladesh. A large
portion of consumers think that imported products are superior in quality
than the local products. According to the State of the Global Islamic
Economy Report, Bangladesh is the sixth largest buyer of cosmetics in the
Muslim world and data from Bangladesh Cosmetics and Toiletries Importers
Association (BCTIA)’s report reveal that the market size of imported
cosmetics and toiletries is approximately Tk 4,500 crore.
MR-3 Changing Consumer Preference (Probability: Low; Impact: High)

Source: Team Analysis Consumers’ behavior is constantly changing due to the change in their
needs. Consumers are more conscious of their use of products than ever
before. This constant change in consumer preference can adversely affect
the demand. The companies need to shape and also adapt to the changing
Figure 32: List of Board of Directors preference and purchase pattern. For a sustainable profitable growth, it is
important for a company to identify and analyze the latest trend, respond
quickly to customer demand and deliver the right product at the right time.
Companies need to invest significantly to gather consumer and technical
insights for continuous innovations.
Financial Risk
FR-1 Input Risk (Probability: Low; Impact: High)
Copra is one of the key raw materials for MBL’s coconut oil and hair oil
category products and it comprises bulk of the production cost of the
company. In the past years, there has been significant volatility in Copra
prices. In 2018 there was a softening of prices in the international market,
the price of copra had fallen by 42.9% which led to favorable input prices
and the material cost decreased. A hike in copra prices can have a direct
negative effect on MBL’s production costs. Light Liquid Paraffin (LLP) is also
an essential raw material for the VAHO portfolio. As LLP is also imported,
volatility in the international petroleum market can significantly affect the
input costs.
9
Figure 33: List of Top Stockholders FR-2 Interest Rate Risk (Probability: Low; Impact: Low)
MBL is not using debt financing, so in this regard, the chances of being
affected by interest rate risk is low. But the company is maintaining a huge
amount of fixed deposits with their commercial banks and three NBFIs. The
total amount of fixed deposits for the year ended is Tk 2,064,261,503. As
these fixed deposits are not highly liquid and have maturity over three
months, volatility in interest rate can have a high impact on the financial
statements of MBL.
FR-3 Exchange Rate Risk (Impact: Medium, Probability: Medium)
According to MBL’s annual report 2018-19, the business is not protected

from exchange rate risk for Copra and petroleum. MBL had to import around
Source: Eikon Refinitiv 62% of its consumed raw materials in 2018-19 and Copra is accounted for
approximately 70.0%-80.0% of the raw materials of MBL. Moreover, MBL
Figure 34: S&P Corporate Governance Criteria must import Light Liquid Paraffin (LLP), which is a significant input for VAHO
portfolio. As the company mostly imports materials from abroad in foreign
currency, the exchange rate risk for MBL is significant.
Operational Risk
OR-1 Regulatory Risk (Impact: Medium; Probability: Low)
A change in laws and regulations made by the Government or a regulatory

body can materially impact a business’s reputation and can increase the
operating costs. In 2018, because of some changes in the regulations of
packaging by the Bangladesh Standards and Testing Institution (BSTI), MBL
experienced complications in production and packaging activities including
interference in product branding and labels. MBL emphasizes on innovation
and expansion of product portfolio. New products will be introduced in the
market and the company may again face reputational or financial risk due to
non-compliance or any sudden change in laws and regulations.
OR-2 New Product-to-Market Failure (Impact: Medium; Probability: Medium)
Innovation is one of the strategic priorities of MBL. The company has scaled up new launches and is committed towards
introducing new products to the consumers. During FY’16, MBL introduced Saffola Masala Oats and Mediker Plus in an
attempt to diversify the product portfolio. Not all the new products that are in pipeline will readily get consumer acceptance and
achieve success. It is normal for any new product to win initial trials and then to completely fail in the market. So, there exists a
significant risk of new-product-to-market failure. Again, many of the new products will be launched under the existing
successful brands of MBL (i.e. Parachute, Parachute Advanced) and if they fail to meet the expectations of the consumers it
will ultimately affect the reputation of the brand and have an adverse impact on sales.
Corporate Governance
Promotion of Best Corporate Culture
Marico Bangladesh maintaining a satisfactory standard of corporate governance & shareholder reliability for a long time. Their
board of directors comprised of three non-executive directors, their CEO & more importantly, three independent directors to
further ensure transferability. All of them are experts in their relevant industries. MBL’s appointed MD Mr. Ashish Gopal was
previously the Head of Trade Marketing, Shopper Marketing & Demand Planning of the India business. He is a very capable
leader with keen interest on grooming the young minds. Under him we believe MBL will successfully diversify its portfolio to
expand business further. Marico has a rating of CRISIL AAA for long-term & CRISIL A1+ for short term for the parent
Company & all of its subsidiary which includes MBL as well.
Proactive Compliance With the Law
Their financial statements are in compliance with the International/ Bangladesh Financial Reporting Standards (IFRS/BFRS),
the Companies Act 1994, the listing regulations of the Dhaka and Chittagong Stock exchanges, relevant Bangladesh
Secretariat Standard (BSS) by the Institute of Chartered Secretaries of Bangladesh (ICSB) and also the notification on
corporate governance of the Bangladesh Security & Exchange Commission (BSEC). Moreover, they have vigorous policy for
internal controls & company code of conduct to ensure proactive adherence to their corporate governance. They attach their
Certificate of Compliance under Corporate Governance code 2018 in their Annual Reports to maintain their transparency to
the shareholders & build trust. (Appendix)
Appendix 1: Income Statement
Amount in Million Tk. 2016A 2017A 2018A 2019A 2020F 2021F 2022F 2023F 2024F 2025F
Revenue 7066 6916 7815 8768 9908 11097 12429 13671 15039 16542
Cost of services & sales -3885 -3710 -4230 -4473 -4062 -4550 -5096 -5605 -6166 -6782
Gross Profit 3181 3206 3585 4295 5846 6547 7333 8066 8873 9760
General and Admin -735 -801 -875 -932 -1090 -1221 -1367 -1504 -1654 -1820
Expenses
Selling & Distr. expenses -639 -538 -580 -774 -991 -1110 -1243 -1094 -1203 -1323
Other operating 2 -9 6 1 5 6 6 7 8 8
expenses
Total operating expenses -1371 -1347 -1449 -1704 -2076 -2325 -2604 -2591 -2850 -3135
EBIT 1810 1858 2136 2592 3770 4222 4729 5475 6023 6625
Net Finance costs 115 69 108 158 178 200 224 246 271 298
EBT 1924 1927 2244 2750 3948 4422 4953 5722 6294 6923
Income Tax -510 -487 -601 -726 -1042 -1167 -1308 -1510 -1662 -1828
EBIT 1414 1440 1643 2023 2906 3255 3645 4211 4632 5095
Remeasurement of 0 10 0 -12
benefit plan
Related taxes 0 -3 3 3
Net Profit/(Loss) 1414 1448 1645 2015 2906 3255 3645 4211 4632 5095
Respect to Revenue in
2016A 2017A 2018A 2019A 2020F 2021F 2022F 2023F 2024F
Percentage
Revenue 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of services & sales -54.98% -53.65% -54.12% -51.01% -41.00% -41.00% -41.00% -41.00% -41.00%
Gross Profit 45.02% 46.35% 45.88% 48.99% 59.00% 59.00% 59.00% 59.00% 59.00%
General and Admin -10.41% -11.58% -11.20% -10.63% -11.00% -11.00% -11.00% -11.00% -11.00%
Expenses
Selling & Distr. expenses -9.04% -7.77% -7.42% -8.82% -10.00% -10.00% -10.00% -8.00% -8.00%
Other operating expenses 0.03% -0.13% 0.07% 0.02% 0.05% 0.05% 0.05% 0.05% 0.05%
Total operating expenses -19.41% -19.48% -18.54% -19.43% -20.95% -20.95% -20.95% -18.95% -18.95%
EBIT 25.61% 26.87% 27.33% 29.56% 38.05% 38.05% 38.05% 40.05% 40.05%
Net Finance costs 1.62% 0.99% 1.38% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80%
EBT 27.23% 27.86% 28.71% 31.36% 39.85% 39.85% 39.85% 41.85% 41.85%
Provision for income tax -7.22% -7.04% -7.69% -8.28% -10.52% -10.52% -10.52% -11.05% -11.05%
Net Profit/(Loss) 20.01% 20.93% 21.05% 22.98% 29.33% 29.33% 29.33% 30.80% 30.80%
Source: MBL Annual Report & Team Analysis
Appendix 2: Balance Sheet
Amount in Million Tk. 2016A 2017A 2018A 2019A 2020F 2021F 2022F 2023F 2024F 2025F
Property, plant and 596 594 512 469 610 533 466 427 402 388
equipment, net
Intangible assets, net 13 9 6 4 9 14 18 21 25 28
Deffered Tax 82 77 59 48 118 133 149 172 189 208
Other 84 52 40 56 38 53 56 72 111 138
Total Non-Current Assets 775 732 616 576 776 732 689 693 727 761
Inventories 1262 1349 1717 1091 1434 1624 2028 2393 2827 3273
Other fin assets 863 193 1241 2090 2338 1838 1799 1865 1874 1884
Advance, deposits & 127 1311 614 436 396 666 746 820 902 993
prepayments
Cash and cash equivalents 481 167 279 383 211 234 272 306 343 384
Total Current Assets 2733 3021 3852 4000 4379 4362 4844 5385 5947 6533
Total Assets 3507 3752 4468 4576 5155 5094 5533 6077 6673 7294
Share capital 315 315 315 315 315 315 315 315 315 315
Share premium 252 252 252 252 252 252 252 252 252 252
Retained earnings 1142 1013 926 735 913 983 1061 1174 1259 1351
Total Equity 1709 1580 1493 1302 1480 1550 1628 1741 1826 1918
Employee benefit obligation 44 44 50 65 76 73 82 90 99 109
Total Non-Current Liabilities 44 44 50 65 76 73 82 90 99 109
Loans and borrowings 300 200 500
Employee benefit obligation 7 5 7 10 9 10 11 12 13 15
Trade and other payables 1324 1741 2232 2539 2525 2828 3102 3412 3832 4258
Current tax liabilities 423 382 386 460 566 633 709 821 903 994
Total Current Liabilities 1754 2128 2925 3209 3599 3471 3822 4246 4749 5266
Total Liabilities 1799 2172 2975 3274 3675 3544 3905 4336 4848 5376
Total equity and liabilities 3507 3752 4468 4576 5155 5094 5533 6077 6673 7294
Appendix 3: Cash Flow Statement
Cash Flow Statement 2016A 2017A 2018A 2019A 2020F 2021F 2022F 2023F 2024F 2025F
Cash from sales 7111 6934 7747 8822 9908 11097 12429 13671 15039 16542
Cash from/(paid to) suppliers -4568 -4582 -5752 -5602 -6143 -6880 -7706 -8203 -9023 -9925
Interest received 109 77 131 147 178 200 224 246 271 298
Income taxes paid -500 -526 -576 -638 -959 -1074 -1203 -1390 -1529 -1681
CFO: 2151 1903 1551 2729 2984 3343 3744 4325 4758 5233
Purchase of property, plant & -92 -193 -83 -89 -294 -55 -50 -68 -75 -83
equipment
Purchase of intangible assets -9 -1 -1 -10 -11 -12 -14 -15 -17
Proceeds from disposal of property, 4 3 6 1 1 1 2 2 2 2

plant and equipment
Short-term investments -348 -450 73 -806 -248 500
CFI: -445 -642 -6 -894 -550 435 -61 -80 -88 -97
Proceeds from loans 0 0 300 200 500
Repayment of loans 0 0 -300 -200 -500
Dividend -1418 -1575 -1733 -1632 -2906 -3255 -3645 -4211 -4632 -5095
CFF: -1418 -1575 -1433 -1732 -2606 -3755 -3645 -4211 -4632 -5095
Opening Cash Balance 192 481 167 279 383 211 234 272 306 343
(+) Net changes in cash and cash 289 -314 112 104 -172 23 38 34 37 41
equivalents
Closing Cash Balance 481 167 279 383 211 234 272 306 343 384
Appendix 4: Valuation Assumptions
1. Sustained growth in Parachute and men’s grooming items and significant enhancement in demand in the VAHO category
are the key drivers in revenue growth for Marico in upcoming years.
2. According to Eikon, Copra has experienced the sharpest fall since the last 5 years and an effective hedging policy for
avoiding price movement of Copra is mostly responsible for a worthwhile decline in the cost of goods sold and resulted in high
gross margin. Production efficiency in both manufacturing plants in terms of energy usages has reduced factory overhead
significantly.
3. Introduction of new products in the product line has increased the percentage of marketing cost for the upcoming two years
and then distribution cost will increase at revenue growth. General and Administration expense for forecasted years will grow
at a percentage of revenue growth rate.
4. Marico Bangladesh Limited is expected to find a new un-penetrated market for Parachute Petroleum Jelly and imported
men’s grooming products. In the upcoming years, Marico is expected to get a significant increase in export revenue.
5. We expect Marico Bangladesh Limited will become double in terms of revenue turnover in 2025 and acquire a significant
percentage of market share in the FMCG industry.
6. As ‘Other income’ items from income statement include items like a discount on early payment, increase this item in terms
of sales revenue growth seemed to be rational.
7. Finance income covers mostly interest revenue from short term investments and fixed deposits but due to lack of proper
information, we were unable to forecast these items separately and in a proper fashion. So, we have forecasted an increase in
finance income as a percentage of sales revenue as it was found a trend in relationship with sales revenue in historical years.
8. We have taken the average or effective tax rate calculated from historical years rather than the current tax rate of 25%
8. The property, Plant, and Equipment has shown a declining trend in recent past years. A major amount of capital investment
amounting to 294 million BDT has been made in the upcoming year that was previously declared in Dhaka Stock Exchange
has made a huge increase in capital expenditure that’s why the balance of PPE gets increased in against of decreasing trend.
9. For Deferred tax estimation, we have considered Earnings before Interest and Taxes as base and have taken the historical
mean.
10. We have found a relationship with revenue for Advance, Deposits, and Prepayment that’s why we have forecasted this
current asset as a percentage of revenue turnover.
11. Current tax liabilities has related to income tax burden that’s we have found it more relevant to forecast this item as a
percentage of income tax.
12. Employee benefit obligation, both for short term and long term is related to salary expenses to employees. Over the
historical years, contribution to employee benefit obligation was the nearly similar percentage of Administrative expenses. We
have also considered the same trend for forecasted years.
13. The loan amount has been shown in the balance sheet is short term loan that will be repaid in the following years and loan
which has been taken in 2020 to meet fund needed for capital expenditure and also maintain the necessary cash balance.
14. Marico had nearly nothing as accounts receivable in recent past years that’s why we have an estimated total sales amount
will be on cash. Inventories will grow as the sales revenue growth in upcoming years.
15. We expect Marico will maintain a 100% dividend payout ratio in upcoming years.
Appendix 5: Different Revenue Segments of MBL
Revenue Segments Category Power Brands
Branded Coconut Oil

Branded Coconut Oil (BNCO) Parachute Coconut Oil
(BNCO)
Parachute Advansed Enriched Coconut hair oil
Parachute Advansed Beliphool
Nihar Shanti Badam Amla
Parachute Advansed Extra Care

Value Added Hair Oil
Value Added Hair Oil (VAHO) Parachute Advansed Ayurvedic Gold
(VAHO)
Parachute Advansed Cooling Hair Oil
Parachute Advansed Aloe Vera Hair Oil
Nihar Naturals Enriched Coconut Hair Oil
Hair and Care
Hair Code Powder

Color Hair Dye
Hair Code Cream
Saffola- Edible Oil Edible Oil & Food Saffola Active
Parachute Body Lotion Skin Care Parachute Advansed Body Lotion
Set Wet Deo
Set Wet Hair Gel

Male Grooming
X Men Deo
Parachute Advansed Men’s Cream
Bio Oil
Others Skin Care
Petroleum Jelly
Just For Baby Oil
Baby Care Just For Baby Lotion
Just For Baby Wash
Hair Serum Livon Serum
Source: MBL’s Annual Report
Appendix 6: Ownership Structure
Marico Bangladesh Limited is a subsidiary of Marico Limited, which

is based in India. As of October 31, 2019, the parent company holds
the majority of shareholding (90 percent) in Marico Bangladesh
Only 1.21% of total share of MBL is for general public to exchange

in the capital market. 2.71% is owned by Domestic Institutional
Investors and 6.08% is owned by Foreign Institutional Investors.
Appendix 7: SWOT Analysis
Strength Weakness
• Parachute: market leader in coconut hair • Import-based raw material

oil
• Failed Products
• Strong Corporate Governance
• No premium brands
• Strong distribution network
• Too many products under brand line
• Brand name & equity
• Largely depended on Parachute
• High cash flow
• Diversification of brands
• Strong financial performance
• Operational efficiency maximized
Opportunity Threat
• GDP growth in the economy • Copra supply risk
• Increase of per capita income • Exchange rate risk
• Untapped rural market for petroleum jelly • Political instability

& baby care products
• Intense competition can cause to lose market share
• Local manufacturing factories facilitates
export revenue • Tariff, government policies & regulatory risk
• Raw materials like Copra, Sunflower oil, Corn oil, Kardi

oil depended in seasonality.
Appendix 8: Porter’s Five Forces Analysis
Porter’s five forces analysis is the most comprehensive & effective model to determine the company’s current position in the
market against its competitors. We have done the porter’s five forces analysis to further evaluate the market prospect of
Marico Bangladesh in the upcoming years & get a better forecast of its new products performance against external factors like
threat to entry, buyers’ power, supplier’s power, competition, power of substitutes.
Threat of New Entrants: Moderate
Low initial investment & simpler production process results in higher number of entrepreneurs in the FMCG sector. This will
always result in more & more locals to emerge in this sector. Initially, they produce beauty soap, laundry soap, detergent
powder, coconut oil & other toiletries items which can hurt MBL’s revenue a little.
Threat of substitutes: Very High
This industry comprises of everyday products, there is a substitution of every product here. If people’s purchasing power
decreases, instead of VAHO, people will simply use local oils. Since, there are so many options, market is extremely elastic to
the price & every company is trying to market their similar product with narrow differentiation. So, the threat of substitute is
high here.
Buyer bargaining power: Very High
There is already ample brands in the market. Brands try to create some brand loyalty through marketing, bargaining power &
Customer relationship management but low switching costs, option to compare products, aggressive marketing strategies
results in value for money approach in customers & promote switching tendencies.
Supplier Bargaining Power: Moderate
In case of supplier’s power, MBL is prone to more adversaries. MBL’s most popular brand Parachute & VAHO are heavily
depended on Copra. Price deviation in Copra supplies makes high impact on MBL’s profitability. But they have recently
absorbed the risk by working with the coconut suppliers in Indonesia & Copra price in the international market has also
reduced. There is also no threat of forward integration.
Intensity of Competitive Rivalry: High
MBL specifically caters to the Personal Care segment of FMCG industry. They have numerous big names as their
competitors. There are many multinational & local companies with strong-rooted distribution channel & consumer knowledge,
which makes up for a strong competitive rivalry position for MBL But MBL’s brand name & market dominance in coconut oil &
VAHO segment reduces the risk.
Appendix 9: Peer Company Analysis
For our peer analysis, we have taken the companies below. Since, MBL is listed within Pharmaceuticals sector in DSE index,
not FMCG we have taken some companies from pharmaceuticals with similar financials & company size. We have also taken
some other FMCG companies like BATB, Reckitt Benckiser & Kohinoor as well to conduct our peer analysis.
• Renata Limited is one of the dominating and emerging pharmaceutical and animal health product companies in
Bangladesh. The key operations of Renata Limited are pharmaceuticals and animal health products. The Company
also engaged in distributing several kinds of consumer goods, consumer durables, food items, sugar confectioneries,
edible oils and beverages, raw materials, semi-finished items, producers, goods and various other products of local or
foreign origin, pharmaceutical drugs, and medicines.
• Square Pharmaceuticals Limited is the largest pharmaceutical company in Bangladesh. Therapeutic classes and
herbal and nutraceuticals products are the core offerings of this organization. At present, the company offers
approximately 70 domestic produced and imported poultry and livestock items.
• British American Tobacco Bangladesh Company Limited is one of the leading manufacturers of tobacco items.
The Company is involved in the producing and distribution of cigarettes in Bangladesh. The key items include Benson
& Hedges, John Player Gold Leaf, Pall Mall, Capstan, Star, Derby, Pilot, and Hollywood.
• Olympic Industries Limited is a Bangladesh-based company, which is engaged in manufacturing and distributing of
dry cell batteries, biscuits, and candy and confectionery items and plastic products.
• Reckitt Benckiser (Bangladesh) Limited is a Bangladesh-based company, which is a subsidiary of Reckitt
Benckiser Group plc. Reckitt Benckiser Group plc is involved in consumer health items and hygiene products such as
condoms, lubricants, disinfectant cleaners, dishwashing detergents, water softeners, garment care, and fabric
treatment.
• Beximco Pharmaceuticals Limited is one of the leading manufacturers in the pharmaceutical industry in Bangladesh
involved in the production and distribution of pharmaceuticals products, including intravenous fluids and active
pharmaceutical ingredients (APIs). The Company produces approximately 300 generic medicines as well as various
key therapeutic categories.
• Kohinoor Chemical Company (Bangladesh) Limited is a Bangladesh-based company, manufacturer and distributor
of soaps, cosmetics, and toiletries. The Company produces its beauty products under the brand, Tibet. The
Company's other items include toilet cleaners, toothpaste, dish wash, hand wash, and cleaner.
Appendix 10: Ratio Analysis
2014A 2015A 2016A 2017A 2018A 2019A 2020F 2021F 2022F 2023F 2024F 2025F
Solvency Ratios
Debt - Asset Ratio 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Equity Multiplier 2.15 1.96 2.05 2.37 2.99 3.51 3.48 3.29 3.40 3.49 3.66 3.80
Debt - Equity Ratio 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Financial Leverage 2.15 1.96 2.05 2.37 2.99 3.51 3.48 3.29 3.40 3.49 3.66 3.80
Profitability Ratios
Gross Profit Margin 0.50 0.45 0.45 0.46 0.46 0.49 0.59 0.59 0.59 0.59 0.59 0.59
Operating Margin 0.25 0.24 0.26 0.27 0.27 0.30 0.38 0.38 0.38 0.40 0.40 0.40
Net Profit Margin 0.22 0.18 0.20 0.21 0.21 0.23 0.29 0.29 0.29 0.31 0.31 0.31
ROA (%) 0.38 0.40 0.40 0.38 0.37 0.44 0.56 0.64 0.66 0.69 0.69 0.70
ROE (%) 0.81 0.79 0.83 0.91 1.10 1.55 1.96 2.10 2.24 2.42 2.54 2.66
ROCE (%) 0.80 0.77 0.81 0.89 1.06 1.48 1.87 2.00 2.13 2.30 2.41 2.51
Market Ratios
EPS 161.7
43.99 42.69 44.89 45.72 52.15 64.23 92.25 103.32 115.72 133.68 147.05
6
Book Value / Share 54.16 54.35 54.25 50.16 47.38 41.34 47.00 49.21 51.69 55.28 57.96 60.90
DPS 161.7
90.00 42.50 45.00 50.00 60.00 65.00 92.25 103.32 115.72 133.68 147.05
6
Payout Ratio 2.05 1.00 1.00 1.10 1.15 1.01 1.00 1.00 1.00 1.00 1.00 1.00
EPS Growth -0.03 0.05 0.02 0.14 0.23 0.44 0.12 0.12 0.16 0.10 0.10
DuPont Analysis
Gross Profit Margin 0.50 0.45 0.45 0.46 0.46 0.49 0.59 0.59 0.59 0.59 0.59 0.59
Operating Margin 0.25 0.24 0.26 0.27 0.27 0.30 0.38 0.38 0.38 0.40 0.40 0.40
Net Profit Margin 0.22 0.18 0.20 0.21 0.21 0.23 0.29 0.29 0.29 0.31 0.31 0.31
Total Asset T/O 1.73 2.19 2.01 1.84 1.75 1.92 1.92 2.18 2.25 2.25 2.25 2.27
ROA (%) 0.38 0.40 0.40 0.39 0.37 0.44 0.56 0.64 0.66 0.69 0.69 0.70
Financial Leverage 2.15 1.96 2.05 2.37 2.99 3.51 3.48 3.29 3.40 3.49 3.66 3.80
ROE (%) 0.81 0.79 0.83 0.92 1.10 1.55 1.96 2.10 2.24 2.42 2.54 2.66
Source: MBL’s Annual Report and Team Analysis
Appendix 11: Free Cash Flow to Firm (FCFF) Model
We forecasted 6 years of growth (2020-2025) where the separate growth rate was assumed for the first stage. Then we
assumed a decreasing trend in growth rate as Marico then will move forward to the maturity stage (2026-2032). After then we
have calculated sustained terminal growth rate for the rest of the life-span of the company.
Amount in Mn Tk. 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E
EBIT 3948 4422 4953 5722 6294 6923 7546 8150 8802 9506 10266 10985 11754
Depreciation 142 130 119 113 110 109 170 183 198 214 231 247 264
Taxes -1042 -1167 -1308 -1510 -1662 -1828 -1992 -2152 -2324 -2510 -2710 -2900 -3103
Change in NWC 10 -111 -130 -117 -59 -68 -75 -81 -89 -97 -105 -115 -125
Capex -304 -67 -62 -82 -90 -99 -197 -213 -230 -249 -269 -287 -307
Unlevered FCFF 2755 3207 3572 4125 4593 5037 5452 5887 6357 6865 7413 7930 8483
Terminal Value 135771
2755 3207 3572 4125 4593 5037 5452 5887 6357 6865 7413 7930 144254
Discount Period 1 2 3 4 5 6 7 8 9 10 11 12 13
Discount Factors 0.90 0.80 0.72 0.65 0.58 0.52 0.46 0.42 0.37 0.33 0.30 0.27 0.24
Enterprise Value 64369
(-) Debt 500
(+) Cash 211
Value of Equity 64080
WACC 11.56%
Terminal Growth Rate 5%
No. of Ordinary Share 31.5
Value Per Share 2034.29
Price on 1 December 2019
Comment Undervalued
Appendix 12: Relative Valuation
Company Market Cap

TICKER Company Name P/E(x) EV/EBITDA(x) EV/Revenue(x)
(Millions, USD)
RNTL.DH Renata Ltd 1,246.30 29.23 19.47 4.75

Square
SQPH.DH 2,139.54 18.64 13.48 5.02
Pharmaceuticals Ltd
British American
BATC.DH Tobacco Bangladesh 2,304.47 21.22 10.27 3.95
Co Ltd
OLIS.DH Olympic Industries Ltd 421.62 25.05 15.74 3.28
Beximco
BXPH.DH 385.90 15.04 10.22 2.75
Pharmaceuticals Ltd
Kohinoor Chemical Co
KHCH.DH 71.86 40.11 27.26 1.71
(Bangladesh) Ltd
Reckitt Benkiser
RKBN.DH 160.28 30.62 15.40 2.37
(Bangladesh) Ltd
Mean 25.70 15.98 3.41
Appendix 13: Experience of the Management Board
Board of Directors and Management Team of Marico Bangladesh
Years of
Name Responsibility Background
Experience
Mr. Saugata Gupta Chairman- Mr. Gupta leads Marico’s operations both in India and its 24 years
Nominee International Business. Joined Marico in January 2004 as
Director Head of Marketing and was elevated to CEO of the India
business in 2007. In April 2013, Marico restructured
International Business Group under Saugata’s leadership as
the CEO of Marico Limited. Thereafter, in March 2014, was
appointed as the Managing Director of the company.
Ms. Rokia Afzal Independent Hailed as the first woman banker of Bangladesh, Ms. Over 45
Rahman Director Rahman is a leading woman entrepreneur in the agro, years
finance, media, real estate and power industries and a
former Advisor to the Caretaker Government of Bangladesh.
She is the Vice Chair of International Chamber of Commerce
- ICC Bangladesh. She joined MBL as an independent
director in October 2014.
Mr. Masud Khan Independent An experienced professional in leading multinational 39 years
Director companies in senior management positions and has been
serving as a Director in several company boards. In the
course of his career Mr. Masud Khan joined as an
Independent director in October 2014.
MR. Ashraful Hadi Independent An advocate of the High Court Division of the Supreme Over 18
Director Court of Bangladesh and Barrister-at-Law from the U.K. He years
is a former Member of Executive Committee of Bangladesh
Supreme Court Bar Association. Mr. Ashraful Hadi was
appointed as an Independent Director for Marico
Bangladesh Limited since April 25, 2016.
Mr. Sanjay Mishra Nominee Mr. Sanjay Mishra is the Chief Operating Officer (COO) – 24 years
Director India Sales and Bangladesh Business at Marico Ltd.,
responsible for the Go-To-Market (GTM) Transformation
endeavor in line with Marico’s portfolio of the future and
reinforce the Sales function.
Mr. Vivek Karve Nominee Mr. Karve joined Marico ltd in 2000 as a Manager in Over 23
Director Corporate Finance. He is now the CFO of Marico Group. Mr. years
Karve is a Chartered Accountant (1994), a Cost Accountant
(1993) and a B. Com. from the University of Bombay (1991).
Mr. Ashish Goupal Managing Mr. Goupal took over as Managing Director of MBL in July 15 years
Director 2018. His deep understanding of business along with rich
functional experience helped him in launching several
successful innovations like Parachute Advansed Hot Oil and
winning the prestigious Lakshya Awards for Excellence in
Demand Planning, Innovation Award for Brand innovation
and Sales Process Transformation.
Source: MBL’s Annual Report
Appendix 14: Corporate Governance
Corporate Governance is a set of internal mechanisms to lead the company and control it. Marico
Bangladesh’s Corporate Governance Framework aims to deliver management effectiveness, reduction in
risk and promotion of best corporate culture. Good Corporate Governance is the underlying force for the
Company, driving sustainable and responsible business operations with transparency, accountability and
compliance.
For the evaluation of the corporate governance of Marico Bangladesh, S&P Corporate Governance
Score was used. Standard and Poor’s Corporate Governance Score is an interactive analytical process
that focuses on four main mechanisms of mitigating corporate governance risks. There are four
components of this analysis and 11 sub-categories under
these components. The rating scale is from 1 (the lowest) to
10 (the highest) for sub-score and overall score.
Interpretation of Scores:
• 7-10: Strong Global Governance Standards
• 4-6: Basic Govenance Standard in place, though

certain shortcomings are apparent
• 1-3: Fundamental Weaknesses in Governance

Structure and Practices
Criteria Score
1. Ownership Structutre and External Influence
• Transparency of ownership 9
• Concentration and Influence of Ownership and External Stakeholders 7
2. Shareholder Rights and Stakeholder Relations
• Shareholder meetings and voting procedures 9
• Ownership rights and takeover defenses 9
• Stakeholder relations 9
3. Transparency, Disclosure and Audit
• Content of public disclosure 9
• Timing of, and access to, public disclosure 10
• The audit process 9
9.33
4. Board structure and effectiveness
• Board structure and independence 10
• Role and effectiveness of the board 8
• Director and senior executive remuneration 9
Corporate Governance Score 8.83
*Standard & Poor’s Corporate Governance Scores and Evaluations (Criteria, Methodology and Definitions) January, 2004
Marico Bangladesh’s corporate governance score interprets that there exists a strong global governance
standards.
• Effective board structure and active engagement by non-executives and independent directors
• Ownership structures do not pose conflicts
• Shareholder rights are well defined and protected
• High transparency and disclosure of company information (IFRS or GAAP)
Board Highlights
Board Composition
Marico’s Board of Directors comprises of 7 (seven) directors in the following classes- 3
Independent Directors, 3 Non-Executive Nominee Directors and 1 professional being the
Managing Director. The Board selects its members and leaders via an inclusive and
thoughtful process, aligned with Company strategy. The Board has in-depth knowledge,
skills and vast experience in the context relevant to the Company. The Independent
Directors ensure protection of interests of all shareholders of the Company.
Chairman and CEO

distinguished As mentioned, the Marico Board is headed by a Chairman, while the Management Team is
led by the Managing Director /CEO who is a different individual. The Chairman is a non-
executive director and leads the Board while the Managing Director is the authoritative head
for day-to-day management in the Company.
Board Audit Committee According to the conditions of the BSEC guidelines and Corporate Governance Code 2018,
the Audit Committee comprises 3 Independent Directors and 2 Non-Executive Nominee
Directors. All members of the Audit Committee are ‘financially literate’ as per regulatory
requirement and are able to analyze and interpret financial statements to effectively
discharge their duties and responsibilities.
Financial Reporting
Marico has strong financial reporting procedures in place. Financial statements are
prepared in accordance with International/Bangladesh Financial Reporting Standards
(IFRS/BFRS), the Companies Act 1994, the Securities and Exchange Rules 1987 and other
applicable financial legislations.
Appendix 15: Distribution Channel
Appendix 16: Business Model Canvas
Key Activities
Customer
Relationships
• Product
Innovation
• Sustainability at
• Better relationship
Manufacturing
management with
Unit
customers through
• Talent
Value Proposition development of IT
Management
& Analytics and
• Go-to-Market Performance
Initiative and
• Deliver Right Monitoring
Key Partners Trade Marketing
Product at the
Initiative
Right Time Customer Segments
• Building Best in
• Raw Material
Quality Brands
Suppliers Key Resources
• Exceed
• Production • Young Demographic
Customer
Partners (Women & Men)
• Expectation
• Trade Partners Physical
•
Resources • Positive Baby (0 to 6 months)
(Factories, contributor to
Machineries, Environmental
Sustainability Channels
Office Space)
• Human Resource
(Executive and • Retail Stores
Employees) • E-Commerce
• Intellectual Partners
Resources • Wholesale
(Brands, IT &
• Industrial Sales
Analytics,
Customer
Database,
Specialty Trade
Channels)
Cost Structure Revenue Streams
• Import Cost of Raw Materials (Copra, LLP) • Sales of Manufactured Products (Local)
• Manufacturing Cost • Export of Parachute Coconut Hair Oil in India and
• Operational Cost Nepal
Appendix 17: Ansoff Matrix
Marico Bangladesh Ltd. continues to expand its

revenue sources by launching new brands/products.
MBL has been introducing new products in the
existing basket to bring diversity to its product
portfolio. The Company is actively looking to expand
the size of the non-Coconut oil portfolio.
MBL is focusing on increasing revenue of the

company by using new products in the same market.
They are aware of the market conditions and is
experimenting on how the market reacts to these
brands. Hence, Marico falls in Product Development
grid which suggests that the company is facing
relatively low level of uncertainty.
MBL
Appendix 18: Altman Z-Score

Amount in Million Tk. 2014 2015 2016 2017 2018 2019
Input Variables
Working Capital 799 964 978 893 926 791
Market Capitalization 35510 45100 41120 31690 38240 45260
Derived Variables
Working Capital / Total Asset 0.023 0.021 0.024 0.028 0.024 0.017
Retained Earnings / Total Asset 0.310 0.341 0.325 0.270 0.207 0.161
EBIT / Total Asset 0.432 0.515 0.516 0.495 0.478 0.566
Market Value of Equity / Total Liabilities 18.03 27.47 22.86 14.59 12.85 13.82
Sales / Total Asset 1.733 2.191 2.015 1.843 1.749 1.916
Outcome
Altman Z-Score 14.43 20.87 17.92 12.64 11.36 12.33
According to Z-score formula, score of greater than 2.99 means that the entity being measured is safe from bankruptcy. A
score of less than 1.81 means that a business is at considerable risk of going into bankruptcy, while scores in between should
be considered a red flag for possible problems. Formula: (1.2*A) + (1.4*B) + (3.3*C) + (0.6*D) + (1.0*E).
Considering the Z-score of Marico Bangladesh Limited for the period from 2014 to 2019, it can be concluded that MBL has
absolutely no probability of being bankrupt.
Source: Annual Report and Team analysis
Appendix 19: VRIN Model
Costly & Difficult Non-

Resources Valuable? Rare? Core Competency
to Imitate? Substitutable?
Physical
Manufacturing Plant Yes Yes Yes Yes Sustainable

Competitive Advantage
Equipment Yes Yes Yes No Temporary Competitive

Advantage
Technological
Proprietary Technology Yes Yes Yes No Temporary Competitive

(Brands, Patents etc.) Advantage
Human
Commitment and Loyalty of Yes Yes Yes Yes Sustainable

Employee Competitive Advantage
Reputation
Customer Perception of the Yes Yes Yes No Temporary Competitive

Brands Advantage
Relationship with Suppliers Yes Yes Yes Yes Sustainable

Management Capabilities
Strategic Control Yes Yes Yes Yes Sustainable

Raw Materials Management Yes No No No Competitive Parity
Sales
Brand Visibility Yes Yes Yes Yes Sustainable

Trade Marketing Initiatives Yes No No No Competitive Parity
Appendix 20: Consumer Insight
As a part of our research, we went out and interviewed some general consumers & FMCG sector proffessionals to get
to know about the behavior of MBL’s target consumer segments. Here are some of the key information -
Sample size: 46 respondents; 37% male, 63% female
Age Group: 18-45 Years
Location: Dhaka and Savar.
• 76.1% of the consumers prefer Marico’s products over other personal care brands for its reliability
• 47.8% of the respondents responded that, they buy at least one product from Marico’s catalogue per month.
• 95.6% of the respondents responded that, they always buy branded hair care products for brand recognition
• Since, men's care product market is price sensitive, they prefer Fogg for its cheap price & availability. So, there is
little chance for MBL to penetrate.
• According to the experts, due to news of harmful ingredients in Johnson's baby lotion in India, people are shifting
towards MBL's baby care products & there's a huge growth is expected from its petroleum jelly due to its aiming at
rural untapped market.
Appendix 21: Competitor Analysis
Product Offerings
Company Name Distribution Channel Key Focus
Categories
Respond quickly to customer demands by

Personal Care, Widest distribution network with
Unilever continuous innovation of products,
Household Care, seasonal operation in cost effectives
Bangladesh promotional activities, packaging and
Fabric Wash, Food areas.
distribution.
• Strong domestic distribution

Personal Care and network of more than 150 highly
Hygiene, experienced distributors to Satisfy the needs of domestic &
Square Toiletries
Baby Products, market their products. international consumers through
Ltd
Household Care, innovative quality-products & services.
Fabric Wash • Exports manufactured products
to more than 25 countries.
• Own distribution channel

• More than 208 distributors in Positioning differently as an Ayurvedic
Dabur Personal Care,
both metro and rural areas brand and creating brand loyalty through
Bangladesh Food
• Distributors to Retailers to offering natural products.
Customers
Source: Company Websites
Appendix 21: References
Bangladesh Bureau of Statistics (BBS), 2019. Consumer Price Index (CPI), Inflation Rate and Wage, Dhaka: Bangladesh
Bureau of Statistics (BBS). [Accessed 07 November 2019]
Bangladesh Bureau of Statistics, 2019. Bangladesh Consumer Spending. [Online]
Available at: https://tradingeconomics.com/bangladesh/consumer-spending
[Accessed 22 October 2019].
Bangladesh Bureau of Statistics, 2019. Bangladesh Government Spending. [Online]
Available at: https://tradingeconomics.com/bangladesh/government-spending
[Accessed 17 November 2019].
Bidisha, D. S. R. &. D. S. H., September, 2018. Economic Dialogue on Inclusive Growth in Bangladesh, Dhaka: The Asia
Foundation. [Accessed 01 November 2019]
CEIC, 2019. Bangladesh Private Consumption Expenditure. [Online]
Available at: https://www.ceicdata.com/en/indicator/bangladesh/private-consumption-expenditure
[Accessed 7 Novermber 2019].
EBL Securities LTD, 2019. FMCG Industry Review of Bangladesh, Dhaka: EBL Securities LTD. [Accessed 5 November 2019].
Eikon Refinitiv, 2019. thomsonreuters.com. [Online]
Available at: https://amers1.apps.cp.thomsonreuters.com/web/cms/?pageId=noprimarychain-cash-template-
z&st=RIC&s=COPRA-PHCAK-P1
IMF, 2019. World Economic and Financial Surveys. [Online]
Available at: https://www.imf.org/external/pubs/ft/weo/2019/02/weodata/index.aspx
Marico Annual Report, 2019. Marico Annual Report, Dhaka: Marico Bangladesh.
Mordor Intelligence, 2019. BANGLADESH HAIR OIL MARKET - GROWTH, TRENDS, FORECASTS (2019 - 2024). [Online]
Available at: https://www.mordorintelligence.com/industry-reports/bangladesh-hair-oil-market
Statista, 2019. Bangladesh: Gross domestic product (GDP) per capita in current prices from 1984 to 2024. [Online]
Available at: https://www.statista.com/statistics/438223/gross-domestic-product-gdp-per-capita-in-bangladesh/
The Daily Star, 2019. The ‘middle-class’ in Bangladesh: Winners or losers?. [Online]
Available at: https://www.thedailystar.net/opinion/economics/news/the-middle-class-bangladesh-winners-or-losers-1762765
The Financial Express, 2019. Working age population rises to 62.7 per cent. [Online]
Available at: https://thefinancialexpress.com.bd/economy/bangladesh/working-age-population-rises-to-627-per-cent-
1555498587 [Accessed 27 October 2019]
Trading Economics, 2019. Bangladesh - Urban population (% of total). [Online]
Available at: https://tradingeconomics.com/bangladesh/urban-population-percent-of-total-wb-data.html
Trading Economics, 2019. Bangladesh Disposable Personal Income. [Online]
Available at: https://tradingeconomics.com/bangladesh/disposable-personal-income
World Bank, 2019. Bangladesh - Age dependency ratio (% of working-age population). [Online]
Available at: https://tradingeconomics.com/bangladesh/age-dependency-ratio-percent-of-working-age-population-wb-data.html
World Bank, 2019. Bangladesh Unemployment Rate 1991 - 2019 | Yearly | % | World Bank. [Online]
Available at: https://www.ceicdata.com/en/indicator/bangladesh/unemployment-rate
Disclosures:
Ownership and material conflicts of interest:
The author(s), or a member of their household, of this report does not hold a financial interest in the securities of this company.
The author(s), or a member of their household, of this report does not know of the existence of any conflicts of interest that might
bias the content or publication of this report.
Receipt of compensation:
Compensation of the author(s) of this report is not based on investment banking revenue.
Position as a officer or director:
The author(s), or a member of their household, does not serve as an officer, director or advisory board member of the subject
company.
Market making:
The author(s) does not act as a market maker in the subject company’s securities.
Disclaimer:
The information set forth herein has been obtained or derived from sources generally available to the public and believed by the
author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or
completeness. The information is not intended to be used as the basis of any investment decisions by any person or entity. This
information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report
should not be considered to be a recommendation by any individual affiliated with CFA Society Bangladesh, CFA Institute or the CFA
Institute Research Challenge with regard to this company’s stock.
CFA Institute Research Challenge

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CFA Institute Research Challenge

Strong Economic Growth contributes to the stable revenue generation

Figure 5: Brands of Marico Bangladesh Recent news

Parachute: the flagship Brand

Innovation and Portfolio Expansion: MBL operates in an increasingly

Go-to-Market: Go-to-Market (GTM) strategy and strong distribution network

Trade Marketing Initiative and Capability Development: MBL launched

Sustainable In-house Manufacturing Unit: MBL has two factories in

Robust Economic Growth

Increase in private consumption expenditure

There's been a strong upward trend in private consumption expenditure

Country’s urban population is increasing at a higher rate of 1.8 % in the

There has been an increase in consumption in the rural areas which

Other demographic factors such as increase in working age population,

Availability of Raw Materials & skilled labor

Bangladesh makes up for a geographically suitable country due to its

Positive Growth Trajectory

MBL’s current capital structure is completely unlevered & the management

Figure 17: McKinsey Matrix Consistent dividend payout practice

Marico Bangladesh has been giving 100%+ on their earnings since

Strong Distributional Network

Marico Bangladesh has targeted to deliver right products to the consumers

Copra contributes to the 70-80% of Marico’s COGS & 82% of MBL’s

Revenues Breakdown Estimations:

1.The consistent growth of Parachute: Parachute has already hit the

2.Growth in VAHO segments: VAHO segment has seen a compounding

FCFF: We have selected FCFF technique to determine MBL’s intrinsic

Terminal Growth Rate: Our terminal growth rate assumption of 5% is

Reduced raw material cost leading to higher gross margin: Due to

Efficient operational expense: Due to launching of new products & their

Strong cash flow generation & unlevered capital structure allow

Marico Bangladesh Limited has recently increased its manufacturing

Margins: In the duration of 1-year MBL has reduced power consumption by

We have run a What-If simulation to determine the sensitivity of the target

MR-1 Barriers to Entry Low (Probability: High; Impact: Medium)

Barriers to entry in the FMCG industry of Bangladesh is low. There is ease

Taking the advantage of lack of efficient monitoring by law enforcement

MR-3 Changing Consumer Preference (Probability: Low; Impact: High)

FR-1 Input Risk (Probability: Low; Impact: High)

FR-3 Exchange Rate Risk (Impact: Medium, Probability: Medium)

According to MBL’s annual report 2018-19, the business is not protected

OR-1 Regulatory Risk (Impact: Medium; Probability: Low)

A change in laws and regulations made by the Government or a regulatory

OR-2 New Product-to-Market Failure (Impact: Medium; Probability: Medium)

Proactive Compliance With the Law

Source: MBL Annual Report & Team Analysis

Intangible assets, net 13 9 6 4 9 14 18 21 25 28

Deffered Tax 82 77 59 48 118 133 149 172 189 208

Other 84 52 40 56 38 53 56 72 111 138

Employee benefit obligation 44 44 50 65 76 73 82 90 99 109

Total Non-Current Liabilities 44 44 50 65 76 73 82 90 99 109

Loans and borrowings 300 200 500

Employee benefit obligation 7 5 7 10 9 10 11 12 13 15

Source: MBL Annual Report & Team Analysis

Purchase of intangible assets -9 -1 -1 -10 -11 -12 -14 -15 -17

Proceeds from disposal of property, 4 3 6 1 1 1 2 2 2 2

Short-term investments -348 -450 73 -806 -248 500

Proceeds from loans 0 0 300 200 500

Repayment of loans 0 0 -300 -200 -500

Source: MBL Annual Report & Team Analysis

Revenue Segments Category Power Brands

Branded Coconut Oil

Parachute Advansed Enriched Coconut hair oil