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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.
JAHANGIRNAGAR UNIVERSITY 1
Figure 4: Marico Price, Volume & News Chart
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.
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
JAHANGIRNAGAR UNIVERSITY 2
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.
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.
JAHANGIRNAGAR UNIVERSITY 3
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
Rural consumption
Demographic
Supply Outlook
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:
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
Source: Team Analysis
future sale consistency through push marketing strategy & (2) protect
themselves against any sudden market takeover by other competitor
(Appendix-20)
JAHANGIRNAGAR UNIVERSITY 5
Figure 18: SWOT Analysis Brand extension to diversify portfolio towards non-hair-oil products
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
JAHANGIRNAGAR UNIVERSITY 6
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).
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.
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.
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.
Du Pont Analysis
Sensitivity Analysis
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
Financial Risk
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.
Operational Risk
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.
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)
JAHANGIRNAGAR UNIVERSITY 10
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%
JAHANGIRNAGAR UNIVERSITY 11
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
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
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
JAHANGIRNAGAR UNIVERSITY 12
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
CFI: -445 -642 -6 -894 -550 435 -61 -80 -88 -97
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
JAHANGIRNAGAR UNIVERSITY 13
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.
JAHANGIRNAGAR UNIVERSITY 14
Appendix 5: Different Revenue Segments of MBL
Bio Oil
Others Skin Care
Petroleum Jelly
JAHANGIRNAGAR UNIVERSITY 15
Appendix 6: Ownership Structure
Strength Weakness
• Diversification of brands
Opportunity Threat
JAHANGIRNAGAR UNIVERSITY 16
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.
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.
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.
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.
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.
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.
JAHANGIRNAGAR UNIVERSITY 17
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.
JAHANGIRNAGAR UNIVERSITY 18
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
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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
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
WACC 11.56%
Comment Undervalued
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Appendix 12: Relative Valuation
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
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Appendix 13: Experience of the Management Board
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
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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:
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Criteria Score
• Transparency of ownership 9
• Stakeholder relations 9
9.33
*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)
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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.
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.
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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)
• 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
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Appendix 17: Ansoff Matrix
MBL
Input Variables
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
Market Value of Equity / Total Liabilities 18.03 27.47 22.86 14.59 12.85 13.82
Outcome
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
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Appendix 19: VRIN Model
Physical
Technological
Human
Reputation
Management Capabilities
Sales
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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 -
• 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.
Product Offerings
Company Name Distribution Channel Key Focus
Categories
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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
[Accessed 21 November 2019].
IMF, 2019. World Economic and Financial Surveys. [Online]
Available at: https://www.imf.org/external/pubs/ft/weo/2019/02/weodata/index.aspx
[Accessed 03 November 2019].
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
[Accessed 01 November 2019].
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/
[Accessed 22 November 2019].
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
[Accessed 22 October 2019].
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
[Accessed 5 November 2019].
Trading Economics, 2019. Bangladesh Disposable Personal Income. [Online]
Available at: https://tradingeconomics.com/bangladesh/disposable-personal-income
[Accessed 26 October 2019].
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
[Accessed 8 November 2019].
World Bank, 2019. Bangladesh Unemployment Rate 1991 - 2019 | Yearly | % | World Bank. [Online]
Available at: https://www.ceicdata.com/en/indicator/bangladesh/unemployment-rate
[Accessed 16 November 2019].
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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.
JAHANGIRNAGAR UNIVERSITY 31