Equity Valuation Report on Square

Pharmaceuticals Limited (Update)

(This document has been prepared by the Research team of EBL Securities Limited) for information only of its clients.
No part of this report should be copied or used in any other report or publication or anything of that sort without
any reference given or permission taken from the authorized publisher of this report)
 Pharma, the multi billion
industry of the country, has Expected to grow at
CAGR of 15% over the
annual turnover over BDT
next 5 years
205 bn now
Square is the market leader since 1985

Quality , Innovation &

Square Pharma Corporate governance
Holds 16.95% leads to be the number
market share one in Pharma
Industry.

Square was in High Growth Trajectory which may slow down due to stiff competition

Consistent
26.24% Mix of
12.20% 8.20% 10.45% Cash and
Stock
Dividend
Historical Expected Historical Expected
5 Years Revenue CAGR 5 Years NPAT CAGR
Square Pharmaceuticals Kenya Limited, a wholly owned subsidiary in Kenya, is likely to bring the next
growth story
Commencemnet of
Project Initiation Operation Investment
June 7, 2017 2020 USD 7-8 mn

Capacity
2bn Tablets & 60 mn Bottles of EPZ in Athi River
Liquid

10 year corporate income tax Mixture of Debt & Equity will

holiday lead to tax shield
Square Pharmaceuticals Limited
DSE: SQURPHARMA BLOOMBERG: SQUARE:BD Analyst:
Current Price: BDT 248.3 Mohammad Rehan Kabir
Valuation date: 23rd May, 2019 research@eblsecurities.com

Company Fundamentals
Government has declared 10% cash incentives for export
Sector Pharmaceuticals & Chemicals
of pharmaceutical products. Approximately 4% of
Market Cap (BDT mn) 195,910
company revenue is generated from exporting pharma
Equity Market Weight 5.7%
products. Current export coverage to 42 countries and
Paid-up Capital (BDT mn) 7,890.1 submitted several ANDAs to USFDA for approval.
No. of Share Outstanding (in mn) 789.0
Free-float Shares (Inst.+For.+ Public) 65.6% The company is setting up a subsidiary manufacturing
plant in Nairobi, Kenya. Square Pharma has invested BDT
1-Year Avg. Daily Turnover (BDT mn) 94.5
216.26 mn as share money deposit in this subsidiary as on
1-Year Avg. Daily Volume 349,067
June, 2018. Ground development and construction works
Current P/E 15.62
for this formulation plant is underway which is expected
Current P/NAV 3.03
to be completed by 2020.
52-week price range (BDT) 245.5-299.0
The company is allocated three plots in API Park in
2019-20 2020-21 Munshigonj. It is expected that the production cost will
2017-18 2018-19
Exp. Exp. significantly decrease with the commercial operation of
Financial Information (BDT mn) API Park.
Net Sales 39,654 42,988 46,282 49,776
Square Pharmaceuticals Limited has 26 blockbuster drugs
Gross Profit 19,564 21,463 23,141 24,938
among the top 100 medicines sold in Bangladesh
EBITDA 15,846 17,831 19,524 21,115
according to IMS Q3 2018.
Operating Profit 12,781 14,065 15,480 16,565
Profit After Tax 10,491 11,553 12,746 13,639 Square Pharma maintains large cash and cash
Total Assets 61,273 70,140 80,003 90,713 equivalents. Current balance of cash and cash equivalent
Total Debt 0 0 767 1,052 is almost equal to the replacement cost of their PPE. After
Total Equity 57,841 64,659 74,760 84,847 Renata (Solo), Square Pharma has highest Operating
Retained Earnings 46,159 52,242 61,832 71,328 Profit margin, Net profit margin in the Pharma Industry
Cash 16,980 25,323 29,570 34,316 of Bangladesh. It’s latest ROA and ROE also exceeds its
Dividend (C/B)% 36%/7% 40%/5% 50%/5% 60%/2.5% close competitors.
Margin (50%/5 (60%/2.5 Square Pharma is an unlevered firm thus less vulnerable
Gross Profit 49.3% 49.9% 50.0%
%) 50.1%
%) to interest rate movements. To avail tax benefits,
EBITDA 40.0% 41.5% 42.2% 42.4% company will use debt financing for its Kenya Subsidiary
Operating Profit 32.2% 32.7% 33.4% 33.3% but due to tax shield this won’t have any noteworthy
Pretax Profit 34.9% 36.0% 36.2% 36.0% impact on its net profit.
Net Profit 26.5% 26.9% 27.5% 27.4% Pharma Industry is oligopolistic in nature where Square
Growth Pharmaceuticals Limited is the market leader with 16.95%
Sales 8.5% 8.4% 7.7% 7.5% of market share. But recently other players are also
Gross Profit 7.1% 9.7% 7.8% 7.8% entering into the industry and rivalry becomes intensified
Operating Profit 3.9% 10.0% 10.1% 7.0% resulted in market share lose by Square Pharma. Retaining
Net Profit 7.9% 10.1% 10.3% 7.0% current share may become a challenge for Square Pharma
Profitability in days ahead.
ROA 17.1% 16.5% 17.0% 16.0%
ROE 18.1% 17.9% 18.3% 17.1%
We initiated a valuation based on Discounted Cash Flow
Payout Ratio 25.3% 27.3% 32.5% 38.3% method and Relative Valuation method while assuming next 5-
PEG ratio 2.59 1.97 1.75 2.41 Years’ CAGR of revenue will be 8.20% (which is 12.20% now).
Leverage
Debt Ratio 0.0% 0.0% 1.0% 1.2% Price-Volume Movement of SQURPHARMA 2,000,000
Debt-Equity 0.0% 0.0% 1.0% 1.2% 350 VOLUME CLOSEP*

Altman Z-Score 40.7 28.1 30.6 28.9 330 1,500,000

Valuation 310
1,000,000
EPS (BDT) 13.3 14.6 16.2 17.3 290
NAVPS (BDT) 78.4 81.9 94.8 107.5 270
500,000
P/E 20.6 20.0 18.1 16.9 250
P/NAV (x) 3.7 3.6 3.1 2.7
230 0
EV/EBITDA 12.6 11.5 10.9 10.5
EV/Sales 5.0 4.8 4.6 4.4

Pharmaceuticals
industry of Bangladesh
Bangladesh Pharmaceutical Industry: the story of an emergent generic drugs hub
in Asia
According to Bangladesh Association of Pharmaceutical Industries (BAPI) and Directorate
General of Drug Administration (DGDA), approximately 257 licensed pharmaceutical
manufacturers are operating in
Bangladesh and about 150 are Market Size of Pharmaceuticals Product of
Bangladesh and Growth (Amount In US Dollar Million )
functional. These manufacturing $2,5 00 40. 0%

Local Sales Growth

has experienced a CAGR companies meet around 97% of local 35. 0%

33.5%
of 15.6% in last 5 years, demand. Specialized products like $2,0 00

30. 0%

expected to become an vaccines, anti-cancer products and $1,5 00

25. 0%

industry of $5.11b by hormone drugs are imported to 22.6%

20. 0%

2023 with an expected meet the remaining 3% of the 16.3%

$1,0 00

15.0% 14.0%
15. 0%

growth of 15% demand. 80% of the drugs produced

10.1% 10. 0%

in Bangladesh are generic drugs, rest $50 0

6.2% 5.0 %

20% are patented drugs. According $797 $977

$-
$1,136 $1,206 $1,375 $1,835 $2,020
0.0 %

to Director General of Drug 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Administration (DGDA), the
Source: Bangladesh Association of Pharmaceutical Industry & EBLSL Research
industry has 29,351 registered of
allopathic medicine, 2,400 registered Homeopathic drugs, 6,207 registered Unani Drugs, 524
registered Herbal drugs and 3,998 registered Ayurvedic drugs.
Domestic market value of Pharmaceutical products in Bangladesh has shown an increasing trend
over the past few years and the market size is BDT 205.12 billion now1. However, this number
does not reflect total market size because IQVIA report does not include homeopathic, unani,
ayurvedic or herbal medicine information. According to industry experts, market size of
pharmaceuticals may reach about $5.11 bn (or BDT 434.35 bn considering $1 = BDT 85) by 20232.
According to Bangladesh Bureau of Statistics, the industry has contributed 1.83% to the GDP in
2017-18 at constant prices.
Burgeoning Exports of Pharmaceuticals Product from Bangladesh- Currently Being Exported
to 145 Countries around the World
According to Bangladesh Export Revenue of Pharmaceuticals Product and
Association of Pharmaceutical Growth (Amount In US Dollar Million)

Exports of Industries (BAPI), approximately $12 0.00 30. 00%

Pharmaceuticals 1,200 pharmaceutical products $10 0.00 25. 00%

24.0%
products crossed $100 received registration for export $80 .00 20. 00%

mn benchmark in 2017- over the last two years and are 16.0%
18 with a 5-year CAGR being exported to more than 145
$60 .00
15.7%
13.0%
15. 00%

of 11.6%. Target for 8.9%

countries including USA, UK, $40 .00 10. 00%

2018-19 is $112.19 on 8.1% 8.6%

Australia and Africa. According to 4.9%
which 89% have been $20 .00 5.0 0%

achieved within 9
Export Promotion Bureau (EPB), $44.30 $48.25 $59.82 $69.24 $72.64 $82.11 $89.17 $103.46
$- 0.0 0%

months of this fiscal in the fiscal year 2017-18, 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
year Bangladesh has exported
Source: Bangladesh Export Promotion Bureau & EBLSL Research
pharmaceuticals product worth
USD 103.46 million as against USD 89.17 million in 2016-17. Over the last 7 years, export revenue
CAGR was nearly 10%. However, export sales only contributes 5.12% of pharmaceuticals market
in 2017-18. Hence, the contribution of export sales in pharmaceuticals industry is low.
Pharmaceuticals Company of Bangladesh can only sell different medicine to other country when
they get approval of the particular medicine from the drug authority of that particular country.
Approval from other country signifies that the local medicine has international standard which
helps them to build a strong position in local market.

1
https://thefinancialexpress.com.bd/trade/a-handful-of-companies-dominate-pharma-mkt-1549424895
2 https://www.thedailystar.net/business/local-pharma-market-set-hit-511b-2023-1614133
2

Population growth,
increase in income level
of people, increase in
medical facilities and
health awareness are
the key growth drivers
for Pharmaceuticals
industry in Bangladesh
3 https://www.dhakatribune.com/business/2018/09/06/gdp-growth-rate-expected-to-reach-8-25-this-year
3
Opportunities & Problems in Global Generic Drug Market for Bangladesh
Opportunities in Global Generic Drugs Market for Bangladesh
Pharmaceuticals industry of Bangladesh has tremendous opportunity to grow in the future.
Bangladesh offers significant manufacturing cost advantages due to the lower cost of labor.
Major generic hubs India and China are losing cost advantages. Cost of labor in Bangladesh is 3
to 4 time lower than that of China and India. Medicine price in Bangladesh is currently among
the lowest in the world. As a result, Bangladesh has opportunity to export pharmaceuticals
product more than India and China. At the same time, major producer of pharmaceuticals raw
materials in India and China won’t be able to produce the patented raw material due to the
restrictions from World Health Organization (WTO). Thus, Bangladesh can export to foreign
countries easily.
Key drivers for growth of Pharmaceuticals company in Bangladesh
Economic Growth of the country- one of the fastest growing economy in the world: In the year
2017-18, Bangladesh has achieved GDP growth rate of 7.86%. It is expected that the GDP growth
may reach to 8.25% this year 3. GDP growth rate outperformed the target growth rate of 7.4%
and the country experienced 7%+ GDP growth rate since 2015-16. Considering the positive
outcomes for ongoing US-China trade war, London-based Economic Intelligence Unit (EIU) has
predicted that Bangladesh will experience a real GDP growth rate of 7.7% and above starting
from 2018-19 to 2022-23 riding on increased private consumption and investment. Bangladesh
has entered the socio-economic classification of Lower Middle Income Group. It is targeted that
Bangladesh will become higher Middle Income Group and Higher Income Group by 2021 and
2041 respectively. Better living standard will also followed by higher health care expenditures
from both individual and government.
Population growth rate- steady growth with growing life expectancy: Bangladesh is one of the
densely populated countries in the world. Current population growth is 1.03%, with a birth rate
of 18.8 Births/1000 Population and death rate of 5.4 Deaths/1,000 Population. This additional
population with increased life expectancy will contribute to the growth of Pharmaceuticals
sector of Bangladesh in days ahead.
Growing income level of people and increasing MAC population may foster its real graduation
to mid income status: Average income level of Bangladesh has increased. With the growing GDP
growth, per capita income is likely to rise (currently stands at $1,909 and a target was set to
reach it to $2,750 by 2023-24 by current govt.). Increasing MAC (middle and affluent class,
median age of our population is 26.7 years now) gives indication of rising consumption demand
in Bangladesh which will help the economy of Bangladesh to shift its gear to accelerate further.
Thus, people have more money to allocate for medical expenditure.
Increase in modern healthcare facilities to ensure quality healthcare services: Medical and
Pharmaceutical facilities in Bangladesh are adopting modern technology. This will largely
contribute to the growth of Pharmaceuticals industry of Bangladesh.
Health awareness of mass people: People of Bangladesh is becoming aware of health day by
day. Increase awareness of health and high life expectancy will lead to the growth of
pharmaceutical sector of Bangladesh.
Major problems in export include lack of backward linkage, lack of modern testing
laboratory and non-existence of bioequivalence test facility
Lack of Backward Linkage: Pharmaceutical sector in Bangladesh has advanced mostly in the
production of finished drugs. At present, we are greatly dependent on other countries for
importing raw materials for the production of finished products. Currently, more than 90% of
raw materials are imported. The govt. has taken an initiative to establish an API park by June
2020 and the work is going on. However, the country needs more API parks to strengthen its
 backward linkage. Recently NBR has granted VAT waiver for API importers upon fulfillment of
some conditions till 20254.
Lack of Modern Drug Testing Laboratory and Insufficient R&D: The drug testing laboratory is
the central quality monitoring facilities of drug authority of Bangladesh. It is not modern and
well equipped. So, our drug control authority faces problems in monitoring the quality of drugs
manufactured by different companies. Foreign buyers and regulatory authorities also raise
question about the status of our drug testing laboratory. Besides, investment in R&D isn’t
adequate and major players have less than 1% of sales amount been invested in R&D. Disease
profile of people is varying, thus to ensure our self-sufficiency and meeting global standard for
exporting purpose we should invest more on R&D.
Lack of Bioequivalence Test Facility: Bioequivalence test of a product is must to be registered
in many regulated and moderately regulated countries. In our country, there is no
bioequivalence study center at present. In order to register a product, a pharmaceutical
company has to carry this test in foreign country by spending a huge testing charge. The cost of
Bioequivalence for oral dosage is between USD 100,000 to 300,000 and more in some other
countries5. For this reason, many local manufacturers don’t show interest in registering their
products in other countries to export.
High Registration Fees of Importing Countries: Regulatory authorities of importing countries
charge high registration fees. It creates obstacles to the small manufacturers to register their
drugs for export as the higher registration fees might result in lower profitability for them.
Therefor only big companies are taking the opportunities and market is limited for those
companies only.
Market Position of Different Market Share of Top 10 Companies
Companies- an industry
Top 20 Companies Annual Sales*(Cr) Market Share
which is oligopolistic in
dominate the
nature and few key players 1 Square Pharma 3476.25 16.95%
pharmaceuticals
dominate the whole 2 Incepta Pharma 2272.99 11.08%
market; holds about
industry
87.01% of pharma 3 Beximco Pharma 1694.26 8.26%
Pharmaceutical companies
market share (top 10
in Bangladesh usually 4 Renata 1066.43 5.20%
holds 68.12% of the
market share.
provide branded-generic 5 Healthcare Pharma 1061.07 5.17%
product as a result of which 6 Opsonin 1042.53 5.08%
established brands become 7 A.C.I. 898.79 4.38%
able to charge premium for 8 Eskayef 895.71 4.37%
its products. According to 9 Aristo Pharma 842.48 4.11%
IQVIA 2018 data, top 10
10 Acme 721.66 3.52%
companies hold 68.12% of Source: IQVIA 2018 (Extracted from New Age)6
Pharma market share. *Annual Sales represent company sales of Pharmaceutical products only.
Companies that secured position ranging from 11th to 20th on the basis of their relative market
shares hold 18.97% market share. Summing up, top 20 companies hold 87.01% market share,
leaving 12.99% market share to other existing companies (Source: IQVIA 2018 Q1). Thus the
industry is oligopolistic in nature.
The Pharmaceuticals market is concentrated among few local companies only and entry barrier
is higher due to large capital investment and legislative bindings. Square Pharmaceutical is the
market leader having 16.95% market share followed by Incepta, Beximco and Renata. The above
table shows the current market share held by leading pharmaceutical companies as per IQVIA
2018 data.

4 http://thefinancialexpress.com.bd/editorial/vat-waiver-for-api-producers-1557591040
5
Pinheiro Edos S, Bruning k, Macedo MF, Siani AC (2014) Production of antiretroviral drugs in middle and low income countries. Antivir Ther 19 (Supple
3): 49-55.
6 http://www.newagebd.net/article/63935/top-10-pharma-cos-keep-holding-nearly-68pc-of-market-data

4
 Recently, 19 companies planned to invest BDT 6.55 bn to setup their facilities7. These will
intensify competition among the major players. These companies have completed setting up
their facilities and they will start operations within the next 1.5 years.

Sl. No. Investors BDT (mn) Sl. No. Investors BDT (mn)
1. JR Pharmaceuticals 106.0 6. Promixco 47.5
2. Bimco Animal Health 92.6 7. Vision Drugs 47.0
3. AFC Agro Biotech 75.0 8. Lilian Pharmaceuticals 40.4
4. Senetive 50.0 9. Peartop Pharma 34.5
5. Inver Pharmaceuticals 49.0 10. Doctors Industries 10.5

Pharmaceutical Industry in Bangladesh is still in ‘developing’ phase which may contribute to

An API Park is going to
be established in
Munshigonj to reduce
the dependency of
imported raw materials
After the third revision of
‘API industrial park’
project, with an
additional costs hike of
BDT 800 mn, the project
is expected to be
completed by June 2020.
As a least developed
country, Bangladesh is
enjoying TRIPS waiver up
to 2032
further growth of pharmaceutical industry in Bangladesh
API Park: Pharmaceuticals industry of Bangladesh is dependent on imported raw material for
manufacturing drugs. According to International Trade Administration, about 80% of raw
material is imported. Main suppliers of raw material are India, China. Bangladesh Small and
Cottage Industries Corporation (BSCIC) has begun the work of setting up Active Pharmaceuticals
Ingredients (API) Park on 200 acres of land at Baushia, Gazaria, Munshigonj in 2008. The park is
being built under the public-private initiative with the Bangladesh Association of Pharmaceutical
Industries (BAPI). After revising third time, the estimated cost of the project was BDT 3,810.0
million. There will be about 42 number of plots to be set up. The cost of each acre of land is
estimated as BDT 31 million. The Companies will get 10 years’ time to pay for the plot. There are
29 plots in “A” category (3.55 acre each), 4 plots in “B” category (3.00 acre each), and 9 plots in
“S” category (2.5 to 5.0 acre). 32 member companies of BAPI has applied for 57 plots. All
infrastructural facilities including Common Effluent Treatment Plant (CETP) and Waste Dumping
Yard will be available in this project. The cost of the Common Effluent Treatment Plant (CETP) is
estimated as BDT 800 million, to be established by the companies. With the completion of API
Park, Bangladesh will be able to decrease the cost of locally manufactured drugs and it will add
to the cost advantage for exports. API can also be exported to other countries. Currently, Global
API market stands at USD 162 billion (as on December, 2017 and is expected to reach USD 257.46
bn by 2026). It is to be noted that major raw material supplying countries such as India and China
are not legally able to produce the patented raw materials due to the WTO restriction. At the
same time, The Government of Bangladesh has declared Pharmaceuticals sector as thrust
sectors (in 2018, Pharmaceutical Products were named as Product of the Year 2018). This gives
immense opportunity for Bangladesh to export API to these countries.
It has been announced that Square Pharmaceuticals Limited and Beximco Pharmaceuticals
Limited has been approved three plot in the API Park.
Trade Related Aspect of Intellectual Property Rights (TRIPS): Being a least-developed country,
Bangladesh has been exempted from the obligations to implement patents and data protection
for pharmaceutical products till 2032 by the World Trade Organization. As a result, Bangladesh
is allowed to produce any patented medicines without taking prior permission from innovator.
Also, Bangladesh has the opportunity to export to any country if the medicine is not under
patent.

7 https://www.thedailystar.net/business/news/19-firms-invest-tk-650cr-pharma-1721332
5
 Competitive Structure of the Pharmaceuticals Industry in Bangladesh i.e. shape of
the industry
Threat of new entrants of the industry: Low
A company that wishes to enter into pharmaceuticals industry requires huge capital expenditure
and regulatory permission from the drug authority, these create significant barriers to enter into
the industry. Furthermore, customer’s loyalty towards established brands, access to distribution
channel, relationship-based marketing (through marketing representative) create further
barriers. All these cause threat of new entrants in the industry significantly low.
Threat of substitute product: High
The retail consumer of pharmaceutical products often switch from one brand to another. There
Threat of New are many substitute brands of single generic medicine. If consumer does not find one brand,
Entrants
he/she switches to another brand very quickly. Besides, sometimes people have a tendency to
Bargaining
Intensity of
purchase medicines from a specific dispensary only. Unavailability of any brand to that specific
Power of
Suppliers
Competition dispensary sometimes cause customers to switch to another brand. Thus, the threat of
substitute product in pharma industry is very high.
Bargaining
Power of
Threat of The bargaining power of buyers: Low
Substitution
Buyers The government strictly maintains the retail price of the medicine. Furthermore, the buyers are
not concentrated and possess low bargaining power while fixing price of the pharma products.
The bargaining power of the supplier: High
Currently, Bangladesh imports 98% of raw materials of pharmaceuticals industry; mainly from
China and India. Bangladesh can also import API from European suppliers also. But, it will incur
more cost if Bangladesh imports raw material from European supplier. Concentration of the
supplier and high switching cost create high bargaining power from the supplier.
Rivalry among the exiting competitors: High
The pharmaceuticals market is highly concentrated. Top 20 players dominate the lion share
portion of the market. Every company has the same medicine in different brands. The companies
are competing with each other fiercely in order to grab the market share.
Square Pharmaceuticals Limited- A Flagship Company of giant Square Group that
holds leadership position in the industry for more than last 3 decades
Square Pharmaceuticals Limited is the manufacturer, marketer and distributor of
Square Pharma is the
pharmaceuticals drugs, medicine, basic chemicals, animal health product, agro vet and pesticide
flagship company of products. The Company’s product portfolio consist of 669 pharmaceuticals product, 74 agrovet
Square group and market product, 32 pesticide, 14 pellet product and 8 basic chemicals. The products of Square
leader in Bangladesh Pharmaceuticals Limited are available in different forms like tablet, capsule, injection, infusion,
pharmaceutical industry dry powder, ENT preparation, Opthal preparation, suppository, insulin, pellet etc. Square
since 1987; first company Pharmaceuticals Limited is renowned for its world class pharmaceuticals product. Square
ever from Bangladesh to Pharmaceuticals Limited became market leader in 1987 among all the national and multinational
get UK MHKA approval in
companies. Since then Square Pharmaceuticals Limited stayed as the market leader for the last
2007; was the product
31 years. Square Pharmaceuticals Limited was the first company ever from Bangladesh to get
manufacturer of Johnson
& Johnson
UK MHRA (United Kingdom Medicines and Healthcare products Regulatory Agency) approval in
2007. The company secured permission to manufacture product on behalf of Johnson &
Johnson, Belgium in 1972 with their prescribed formula. After securing a contact with Johnson
& Johnson, Square Pharma produced only Johnson and Johnson brand product. However, the
contact become void in 1982 when the government changed their policy in this respect.
Currently, the company has an agreement with M/S NAAFCO Pharma Limited and M/S Sharif
Pharmaceuticals Limited for contract manufacturing of some of the products of Square.
Founder: Late Samson H Chowdhury
Establishment: In 1958 as a Partnership Enterprise with the name “Square Pharmaceuticals
Works”
Incorporation: In November 10, 1964 as a Private Limited Company
Commencement of Manufacturing Operations: In 1959
6
 Conversion into Public Limited Company: In 1991
Listing: Dhaka Stock Exchange & Chittagong Stock Exchange: December, 1995
Credit Rating: Long Term: AAA, Short Term: ST-1, Outlook: Stable (By CRISL)
Key personnel:
Chairman Mr. Samuel S Chowdhury
Vice-chairman Mrs. Ratna Patra
Managing Director Mr. Tapan Chowdhury
Director Mr. Anjan Chowdhury
Director Mr. Kaji Iqbal Harun
Independent Director Mr. Sayed Afzal Hasan Uddin
Independent Director Mrs. Nihad Kabir
Company secretary Mr. Khandaker Habibuzzaman
Approved merger: Square Formulations Limited, a subsidiary of Square Pharmaceuticals Limited
and Square Herbal & Nutraceuticals, a concern of Square Group merged with Square
Pharmaceuticals Limited. Earlier Square Formulations Limited was 99.5% owned subsidiary of
Square Pharmaceuticals Ltd. So, after this merger there will be no significant change in group
financials.
Subsidiary Company- Entities which are directly controlled by Square Pharmaceuticals Limited
and have significant impact on consolidated earning disclosed by Square Pharmaceuticals Ltd.

Subsidiary Name Ownership Paid-up Revenue Status

(%) Capital (Latest)
Square Formulations BDT Merged with Parent
99.50% BDT 100 mn
Ltd. 11,313 mn Company
Square Trial production is
Share Money
Pharmaceuticals estimated to be
100% Deposit BDT -
Kenya EPZ Ltd. commenced by 05-02-
216.26 mn
19

Square Formulations Limited: Square Formulations Limited was incorporated in 21st November,
2011. The company started its commercial operation in 1 st April, 2014. Square Formulations
Limited is involved in producing formulation products. Square Pharmaceuticals Limited has
Square Pharmaceuticals announced to merge Square Formulations Limited with its parent company on 22 nd October
Kenya EPZ Ltd. is 100% 2017. Authorized Capital: BDT 500 million, Paid up capital: BDT 100 million. Currently, Square
owned subsidiary of Pharmaceuticals Limited holds 99.5% share of Square Formulations Limited.
Square Pharmaceuticals Square Pharmaceuticals Kenya EPZ Limited: Square Pharmaceuticals Kenya EPZ Ltd. (SPL Kenya)
Ltd. Ground development
incorporated as a pharmaceuticals manufacturing company under the Companies Act 2015 of
and construction works for
Kenya as a private company limited by shares on 7th June 2017. Nominal share capital of this
this formulation plant is
subsidiary is KSH 80,000,000 divided into 800,000 shares of KSH 100 each. Square
underway which is
expected to be completed Pharmaceuticals Limited subscribed 8,000,000 shares of KSH 100 each (1KSH = BDT 0.83) out of
by early 2020. Trial total issued 8,000,000 shares i.e. it’s a 100% owned subsidiary of Square Pharmaceuticals
production is estimated to Limited. Square Pharmaceuticals Kenya EPZ Limited is a 100% owned subsidiary of Square
be commenced by 5th Pharmaceuticals limited. As on 30th June 2018, Square Pharma has invested BDT 216.26 mn as
February, 2020. share money deposit in this subsidiary.
Recently Bangladesh Bank issued a guideline clarifying that no local entity will be allowed to take
foreign currency aboard to set up subsidiary company. However, business will be allowed to use
foreign currency from their Export Retention Quota (ERQ) account. With existing ERQ limit of
60% and considering 5% of total sales as Export, Square Pharma has approximate $15 mn in their
ERQ account whereas they will require $8 mn to subscribe aforesaid subscription in the
subsidiary. As a result, the decision won’t affect Square Pharmaceutical while opening-up
aforesaid subsidiary because of their adequate balance in ERQ account.

7
 Associate Companies- Minority investments of Square Pharmaceuticals Limited:

Associate Ownership Paid-up Revenue/NPAT Business Line

Name (%) Capital (Latest)
Company operates spinning
Square
BDT 1,879 BDT 9,412 and twisting mills on which
Textiles 46.36%
mn mn/n/a they manufacture and
Ltd.
market yarn
Square Share Money SHL is a 400-bed tertiary
BDT 3,831 mn
Hospitals 49.94% Deposit BDT care hospital
/318 mn
Ltd. 1,540 mn
Square SFL produces different sorts
n/a/BDT 1,690
Fashions 48.46% BDT 25.2 mn of Men’s, Women’s and Kids
mn
Ltd. wear

1. Square Textiles Limited:

Square Pharmaceuticals Square group entered into Revenue, NPAT and NPAT margin of Square Textiles Limited (Amount in BDT mn)
Revenue NPAT NPAT Margin
Limited hold 46.36% share the textile business with 10, 000 12. 00%

of Square Textiles Limited the establishment of 9.98%

9,0 00

9.68%
and over the years this Square Textiles Limited in
8,0 00

9.03%
10. 00%

company shows stagnant 7,0 00

1997. The company

8.0 0%

6,0 00
9,412
performance 5.33%
involves in the business of 5,0 00 6.0 0%

8,110 4,0 00
8,188 8,250 7,759 4.88%
manufacturing cotton ring 3,0 00
4.0 0%

spun yarn for hosiery. 2,0 00

810 793 745 2.0 0%

1,0 00
414 459
Square Textiles supplies its 0 0.0 0%

product to the export 2014 *2015-16 2014-15

18 month data has 2015-16
been annualized2016-17 2017-18

oriented readymade garments industry. The company started with a single unit in 1997 with
an establishment cost of BDT 1,600 million. Square Textiles Limited subsequently
established its second unit and third unit with an establishment cost of BDT 1,080 and BDT
960 in the year 1998 and 2000 respectively. Unit 1 of Square Textiles Limited has 36,288
spindles with daily production capacity of 20,000 kilograms. Unit 2 has 23,184 spindles with
daily production capacity of 12,000 kilograms and 768 rotors with daily production capacity
of 8,000 kilograms while unit 3 has 3,192 open end heads with daily production capacity of
20,000 kilograms. With its sophisticated vertically integrated technology, Square Textiles is
producing 90,000 kilograms of yarns every day.
Recently, company has increased its production capacity by investing BDT 916.0 mn and this
will increase the capacity to 3,000 tons per annum. This expansion project will contribute BDT 706.5
mn per annum and expected profit contribution may be around 10% of yearly turnover. Projected
completion of aforesaid expansion project will be within March, 2019.
Authorized Capital: BDT 3,000 million, Paid Up capital: BDT 1,878.59 million
Square Pharmaceuticals Limited hold 46.36% share of Square Textiles Limited. Square
Textiles Limited has two subsidiary companies. They are
a) Square Yarns Limited: Square Yarns Limited was established in 2006 with an
establishment cost of BDT 1,600 million. Square Yarns Limited has 31,248 spindles with
daily production capacity of 18,500 kilograms. Square Textiles Limited holds 99.48%
shares of Square Yarns Limited.
b) Square Texcom Limited: Square Texcom Limited belongs to the textile industry. Square
Textiles Limited holds 95% shares of Square Texcom Limited.

8
 2. Square Hospitals Limited:
4,5 00 14. 00%

13.52%
Revenue, NPAT and NPAT margin of Square Hospitals Limited (Amount in BDT
4,0 00 13. 00%

Square Hospitals Limited is a 3,5 00

million)
12. 00%

Square Hospitals Limited is 400-bed tertiary care hospital 3,0 00

Revenue NPAT NPAT Margin 11. 00%

8.62%
a 400 beds tertiary care located at Panthapath, Dhaka. 2,5 00

3,831
10. 00%

8.56%
hospital and one of the The hospital is an affiliate 2,0 00
8.33% 9.0 0%

3,437 8.30%
2,349
leading contributors of partner of Methodist
1,5 00

2,507
2,937 8.0 0%

private healthcare services

1,0 00 7.0 0%

Healthcare, Memphis, 318

500 216 245 294 318 6.0 0%

in Bangladesh. Square Tennessee, USA, SingHealth, 0 5.0 0%

Pharmaceuticals Limited 2013 2014 2015-16 2016-17 2017-18

hold 49.94% share of
Square Hospitals Limited.
The hospital can serve up
to 1800 patients daily,
through 100+ consultation
rooms.
Singapore, Bangkok Hospital
Medical Centre, Thailand and
Christian Medical College,
Vellore, India. Major healthcare services provided by Square Hospitals Limited are radiology and
imaging, chemotherapy, fine needle aspiration cytology, bone marrow therapy, intensive care
unit, coronary care unit, cardiac care, neonatal incentive care, physiotherapy, telemetry service
and cardiac surgical intensive care. Square Hospitals Limited has appointed highly qualified
doctors from Bangladesh. Besides the hospital also appointed foreign doctors, many of them
came from CMC-Vellore, India etc.
Square Hospitals Limited started its operation in the year 2006. The main building of the hospital
is 18 storey and the second building is 16 storey with an area of 450,000 square feet and 136,000
square feet respectively. The second building started its commercial operation in 2011. The
outpatient department of the company has the capacity to serve 1,200 patient daily. Square
Pharmaceuticals Limited hold 49.94% share of Square Hospitals Limited.
3. Square Fashions Limited: NPAT and NPAT growth of Square Fashions Limited (Amount in BDT
million)
Square Fashions Limited was NPAT Growth
established in 2001 with an
113.4%
establishment cost of BDT 1,200
1,8 00 120 .00%

1,6 00

100 .00%

million. The company started its 1,4 00

1,2 00 80. 00%

operation in June 2002. It 1,0 00

1,690 60. 00%

involves in the Readymade Knit

800

18.0% 600
1,367 40. 00%

1,094
Apparel business with the target 400

782 39.8% 23.6%

20. 00%

366 200

25.0%
market in USA and Europe. 0 0.0 0%

2014 2014-15 2015-16 2016-17 2017-18

Share Money Deposit: BDT
169.11 mn, Convertible
Zero-coupon bond of BDT:
396.7 mn, Preference
Shares of 116.36 mn, Non-
Convertible Zero Coupon
Bonds of BDT 300.01 mn
and Marketable Securities
of BDT 2,480.07 mn
9
Square fashion limited produces
T-shirt, Polo shirt, tank tops, pajamas, sport wear, sportswear, under garments, men’s and ladies
fashion wear, kids wear etc. The production capacity of Garments Unit-1 & 2 (within the brand
name of Square Fashions Limited) is 60000 pcs/day & 45000 pcs/day respectively and the total
production capacity of Fabrics Unit-1 & 2 is 39.5 (Solid-32 tons, Yarn Dyed-3.5 tons, Mercerized
Fabric-4tons) tons fabrics/day. Square Pharmaceuticals Limited hold 48.46% share of Square
Fashions Limited.
Other Minority Investments by Square Pharmaceuticals Limited:
Square Informatix Limited: Square Pharmaceuticals Limited has invested in Square Informatrix
Limited. The company gave share money deposit of BDT 100.00 mn for 1,000,000 ordinary
shares of BDT 100 each. Besides, Square Pharmaceuticals holds 120,000 shares of BDT 100.00
each amounting to BDT 12.0 mn of United Hospital Ltd. (UHL), 5,711,804 shares of BDT 10.00
each in the Capital of CDBL. Square Pharmaceuticals Limited also holds 250,002 Zero Coupon
Bonds amounting to BDT 180.05 mn of Lanka Bangla Finance Ltd., 250,000 Zero Coupon Bonds
amounting to BDT 128.95 mn of IDLC Finance Ltd., 200,000 Zero Coupon Bonds amounting to
BDT 87.70 mn of BSRM Ltd., 150,000 preference shares amounting to BDT 116.36 mn of Raj
Lanka Power Company Ltd., Non- Convertible Zero Coupon Bonds amounting to BDT 127.70 mn
of Shanta Holdings Ltd., Non-Convertible Zero Coupon Bonds amounting to BDT 40.81 mn of
Durable Plastics Ltd., 100,000 Non-Convertible Zero Coupon Bonds amounting to BDT 84.60 of
Flamingo Fashions Ltd., 40 Non-Convertible Zero Coupon Bonds amounting to BDT 46.90 mn of
 Envoy Textiles Ltd. Square Pharmaceuticals Ltd. has investment in marketable securities (as on
June, 2018) amounting to BDT 2,480.07 mn (at cost).
Dissolved subsidiaries and associates of Square Pharmaceuticals Limited
1. Square Cephalosporin Limited: Incorporation: August 29, 2005 as a private limited
company. Square Pharmaceuticals Limited held 99.48% share of Square Cephalosporin
Limited. Separate operation of Square Pharmaceuticals Limited was uneconomical and
costly. That’s why Square Cephalosporin Limited merged with Square Pharmaceuticals
Limited on 1st April, 2014.
2. Square Biotechs Limited: Square Biotechs Limited was incorporated to carry out the
business of inter alia manufacturing, marketing, sales and distribution of all kinds of
biotechnological medicines/drugs for life saving and healthcare. However, the company
could not go on to operation. The company was liquidated in the year 2011-12 and all the
assets of the company sold out to Square Pharmaceuticals Limited.
Incorporated on: June 12, 2006, Authorized Capital: BDT. 1,000 million, Paid up capital: BDT
670 million. Square Pharmaceuticals Limited held 99.25% shares in Square Biotechs Limited.
The company has been wounded up on August 30, 2012.
3. Square Multi Fabrics Limited: Square Multi Fabrics limited carried out the business of
manufacturing, marketing in all types of knit fabrics, yarn, garments for gents, ladies and
children's including the preparation, sizing, mercerizing, processing, printing, embroidering,
dyeing, coloring and finishing and other ancillary work. The company discontinued its
commercial operation from January, 2012 due to various technical and operational
problems. All the assets of the company were sold out to Square Fashions Limited in the
year 2011-12.
Incorporated on: June 24, 2008. Authorized Capital: BDT 500 million, Paid up capital: BDT
100 million. Square Pharmaceuticals Limited held 99.50% shares in Square Multi Fabrics
Limited.
4. Square Knit Fabrics Limited: Square Kint Fabric Limited was involved in the business of
producing Knit Fabrics. The company was established in 2001 with the production capacity
of 12,000 kilograms every day. This company was dissolved and currently integrated with
Square Textiles Limited and operates as 2nd manufacturing facility of its vertical integration.

Con tr ib u tio n o f co m p an ies to Sq u ar e Square Pharmaceuticals Ltd. contributes significant

Ph ar m a's NPAT (Latest) portion of SQURPHARMA’s NPAT (though the
1.84% contribution shows a descending trend but still its above
1.37% Square Pharmaceuticals Ltd.
0.00% 69%. Square Formulations also contribute around 20%
7.05%
0.00% Square Formulations Ltd. to SQURPHARMA’s NPAT and after the post-merger
Square Cephalosporins Ltd. contribution of Square Formulations has increased
20.65%
notably (mainly due to synergistic benefits arouse from
Square Multi Fabrics Ltd.
69.40% using basic chemical and pellet in pharma production
Square Textile Limited
which are produced by Square Formulations). Square
Square Hospitals Limited Textiles Ltd., Square Hospitals Ltd. and Square Fashions
Square Fashions Limited Ltd. contributes less than 10% to SQURPHARMA’s NPAT
in FY’18.

10
 Contribution of Companies to Square Pharma's NPAT (Last 5-years)

2017-18

2016-17

2015-16

2014-15

2013-14

2013-14 2014-15 2015-16 2016-17 2017-18

Square Pharmaceuticals Ltd. 79.88% 93.62% 80.79% 71.72% 69.40%
Square Formulations Ltd. 0.00% -7.26% 8.44% 19.47% 20.65%
Square Cephalosporins Ltd. 6.37% 0.00% 0.00% 0.00% 0.00%
Square Multi Fabrics Ltd. 0.00% 0.00% 0.00% 0.00% 0.00%
Square Textile Limited 7.59% 6.15% 3.75% 1.80% 1.84%
Square Hospitals Limited 3.21% 1.80% 1.33% 1.38% 1.37%
Square Fashions Limited 3.59% 6.30% 5.76% 6.22% 7.05%

Shareholding Pattern

Sponsor Inherits added No. of Shares and Percentage of Sponsors declined due to Sponsor Inherits added with the
with the General Public as General Public as per newly introduced definition of "Sponsor" by BSEC (Public Issue) Rules, 2015
per newly introduced and Listing Regulation, 2015 which has been depicted through declined sponsor/director
definition of "Sponsor" by percentage in December-15 and corresponding increased in public shareholding. Besides, due
BSEC (Public Issue) Rules, to their consistant performance and dividend payout with sound coprorate governance attracts
Sponsor/Director holding both instritutional and foreign invetsors to invest in this scrip.
of the company shares
decreased with a
Shareholding Pattern During Last 5 Years
corresponding increase in Dec/18 Dec/17 Dec/16 Dec/15 Dec/14
54.21%
53.52%

public shareholdings
37.76%
36.34%

35.76%

35.29%
34.43%

34.43%

20.40%
19.78%
19.46%
17.80%

16.26%

15.85%

15.05%
12.11%

10.85%
10.35%

10.34%
10.01%

SPON./DIR INST. FOR. PUB.

Shareholding Pattern of the Company

Date Spon./Dir. Govt. Inst. For. Public
As on December 31, 2017 34.43% 0.00% 10.35% 19.46% 35.76%
As on March 31, 2018 34.43% 0.00% 10.13% 20.00% 35.44%
As on June 30, 2018 34.43% 0.00% 10.12% 19.85% 35.60%
As on December 31, 2018 34.43% 0.00% 10.01% 17.80% 37.76%
As on March 31, 2019 34.43% 0.00% 9.90% 20.34% 35.33%
As on April 30, 2019 34.43% 0.00% 9.95% 20.32% 35.30%

11
 Shareholding Structure (December 31, 2018) Shareholding Structure (March 31, 2019)
Spon./Dir Inst. For. Pub. Spon./Dir Inst. For. Pub.

35.33%
37.76% 34.43%
34.43%

9.90%
10.01%
20.34%
17.80%

Composition of Shareholding Structure among Top Stakeholder

Key Shareholders (As on 30th March, 2013) Key Shareholders (As on 30th June, 2018)

6.07%
3.07% 7.06%
3.02% 7.06% Mr. Samuel S Chowdhury Mr. Samuel S Chowdhury
Mrs. Ratna Patra 7.31% Mrs. Ratna Patra
Mr. Tapan Chowdhury
7.31% 6.77% Mr. Tapan Chowdhury
Mr. Anjan Chowdhury
6.77% Mr. Anjan Chowdhury
Mr. Kazi Iqbal Harun
Mr. Kazi Iqbal Harun
Dr. Kazi Harunar Rashid
7.22% 7.22%

During the last 5 years, key shareholders of the company remained in the same proportion. Only
Chowdhury Family change which has been taken place is the transmission of 26.25 mn shares of late Sponsor Dr.
members hold 28.36% Kazi Harunar Rashid to his legal heirs: 13.13 mn to Mr. Kazi Iqbal Harun (son, Director of the
shares of Square Company), 6.56 mn shares to Mrs. Nilufar Ferdous (daughter) and 6.56 mn shares to Mrs. Nargis
Pharmaceuticals Limited
Ferdous (daughter) in 2017. This has increased Mr. Kazi Iqbal Harun’s share possession in the
as on June 30, 2018.
company.
Positions of Chowdhury Family members in Square Pharmaceuticals Limited

Late Mr. Samson

H Chowdhury,
Founder

Samuel S Anjan
Ratna Patra, Vice Tapan Chowdhury, Kazi Iqbal
Chowdhury, Managing Director Chowdhury,
Chairman Chairman Harun, Director
Director

Chowdhury Family members hold 28.36% shares of Square Pharmaceuticals Limited as on June
30, 2018
Product Quality: Square Pharmaceuticals Limited produces product by following GMP (Good
Manufacturing Practice) standards of World Health Organization. The company also maintains
strict surveillance to withdraw expired product from the market.
Production Units: Square Pharmaceuticals Limited has 17 manufacturing units.
1. Dhaka Unit: This unit is about 50 kilometre in the north of capital city, Kaliakoir, Dhaka.
Bovis Lend Lease, UK designed this plant. All the facilities in this unit has been developed by
meeting the requirement of cGMP CFR 21. This plant has approval from UNICEF and MHRA-
UK. In the year 2012, Dhaka unit and Square Cephalosporin Limited got “Therapeutic Goods

12
 Administration (TGA)” of Australia approval (Cephalosporin unit was a subsidiary company
of Square Pharmaceuticals Limited in 2012). This plant has started operation from 2002.
There are seven manufacturing units in this location which is engaged in producing
formulation products. Those units are as follows:
a) Solid Dosage Unit-1 or General Production Unit (GPB): General Production Unit is used for
bulk production of tablet & capsule and their packaging. This unit started operation in 2002.
This unit is the main production building of Dhaka unit.
b) Solid Dosage Unit-2: To cope with increasing demand, another manufacturing plant was
developed in 2014. This unit has a production capacity of 8.0 bn tablets and 2.0 bn capsules.
This unit was also designed and commissioned as per international regulatory and GMP
guidelines. This steel structure building is designed jointly by international consultant and
Square project team.
c) Cephalosporin Unit: Cephalosporin Unit is used for producing cephalosporin. This unit
started operation in November, 2006. Cephalosporin Unit complies with the requirement
of international GMP standards like EMEA (European Agency for the Evaluation of Medical
Products), UK MHRA (UK Medical and Healthcare products Regulatory Agency), TGA
(Therapeutic Goods Administration, Australia) and US FDA (US Food and Drug
Administration).
d) Small Volume Parenteral & Ophthalmic Unit: Small volume parenteral & ophthalmic unit
was built in accordance with US FDA and UK MHRA cGMP specifications. This facility is built
by Telstar S.A. of Spain a world renowned pharmaceutical manufacturing facility expert and
the machines are designed and manufactured by Weiler Engineering, USA. To maintain
aseptic environment, this unit uses Blow-Fill-Seal (BFS) Technology while manufacturing.
e) Insulin Unit: Insulin unit is used for producing insulin solution and suspension. The
infrastructure and major production machineries was provided by Tpro, a well-known
Spanish company. For filling insulin product, IMA-MAC vial washing, filling machine was
brought from Italy.
f) Large Volume Parenteral Unit: Large Volume Parenteral Unit of Square Pharmaceuticals
Limited is a facility that follows strict cGMP compliance. The building as well as the facility
of this unit was designed in accordance with the EU GMP and USFDA guidance industry
regulation. Wide ranges of sterile dosage forms – Large Volume Parenterals (BFS PP bottle
technology, Glass bottle and PVC bag Infusion), Small Volume Parenterals (Glass Ampoules,
Glass vial- Lyophilized and Liquid filled Injection), Pre-filled syringe and non-sterile dosage
forms of Haemodialysis solution, Nasal spray and Topical Spray are manufactured in this
unit.
g) Metered Dose Inhaler Unit: Meter dose Inhaler unit is engaged in producing a specific types
of device that delivers specified amount of drugs to lungs. This unit is started in September
2008. This manufacturing facility was established by Tpro (Telster Projects) and MA-MAC
vial washing, filling machine from Italy is used to fill insulin products in this unit.
2. Pabna Unit: Pabna Plant is the first manufacturing facility of Square Pharmaceuticals
Limited and started operation in year 1958. This plant complies with WHO – cGMP (current
Good manufacturing Practice) requirement. This unit has upgraded its Quality Management
System in 2008. The production facilities in this units are:
a) Hormone & Steroid Unit: Manufacturing procedures including Tablet Compression, Tablet
Coating, Tablet Blistering, Personal Cleaning, and Dispensing Booth & Automatic
Granulation for producing hormones & steroids products are completed in Hormone &
Steroid unit.
b) Liquid Unit: This unit produces syrup, suspension, dry-powder, cream gel. This unit started
its operation from 2010.
c) Penicillin Unit: According to cGMP unit, Pharmaceuticals companies need to set up
penicillin unit separately to avoid cross contamination of other drugs with penicillin. To

13
 meet up the requirement with cGMP, Square Pharmaceuticals Limited has set up penicillin
unit separately.
3. Pet bottle unit: PET bottle unit has the production capacity to produce 5,000 pcs per hour.
It can run 24 hours continuously in a day. This unit started its operation from 2004. The
whole process of producing pet bottle is completed in this division having a self-diagnosis
program to turn PET resins into finished container.
4. AgroVet Division: Agro vet Division produces 73 types (133 presentations) of poultry and
livestock products. This division has started its operation in 1998. This unit produces
different therapeutic classes comprising antibacterial agents, anthelmintics, NSAIDs,
antihistamine, antidiarrhoea, vitamins, digestive stimulants etc. Besides this unit also deals
with versatile imported products like vitamins & mineral premixes, enzymes, growth
promoters, antioxidants, liver tonic, mould inhibitors, toxin binders, salmonellas killers, pH
lowering agents, electrolyte & minerals, coccidiostat, larvicide, feed grade amino acids,
respiratory stimulant, anti mastitic products etc. of renowned principals. Last year, Square
Pharma commenced the marketing of Schering Plough Animal Health, the biggest global
veterinary pharmaceutical company. Besides company has signed agreement with
renowned veterinary injectable manufacturer of UK, Norbrook Laboratories & DOW, USA.
5. Pharmaceutical Bulk Manufacturing Plant (API Unit): Pharmaceutical bulk manufacturing
unit of Square Pharma is one of the largest pharmaceuticals bulk producing unit of the
country. This unit was established in 1992 and started commercial operation in 1995. Until
1996, thus manufacturing unit was used only for own consumption of the company. From
1997, the company starts marketing of API products to many pharmaceutical company
including (but not limited to) Aventis Pharma, Novartis Bangladesh Ltd., ACI Ltd., Beximco
Pharmaceuticals Ltd., The Acme Laboratories Ltd, Eskayef Bangladesh Ltd., Opsonin
Chemicals, Renata Ltd., Essential Drugs Co. Ltd.
6. Pesticide Unit: The main operations include repacking, selling and marketing of insecticides,
fungicides, and herbicides of Chimac-Agriphar s.a., Belgium and FMC Corporation, USA. This
unit also produces formulation of mosquito control aerosol.
7. Square Formulations Limited: The factory of Square Formulations Ltd. is located at Momin
Nagar, Gorai, Mirzapur, Tangail. This unit started operations in 2014. The company has the
capacity to produce 8,000 million tablet and 2,000 million capsule annually. Total
operational area of this unit is 36,644 square meters.
Distribution network: Square Pharmaceuticals Limited maintains strategic distribution network
to ensure uninterrupted supply of pharmaceuticals products throughout the country. The
company has 21 depot in 21 different districts of the country to reach wide range of customers.
Export: Square Pharmaceuticals Limited is the pioneer of exporting medicine from Bangladesh
and they initiated their export in 1987. The company exports pharmaceuticals finished products
since 1995. The company currently export antibiotics and other pharmaceuticals products to 42
counties including 3 countries in Oceania, 19 countries in Asia, 13 countries in Africa, 6 countries
in Central and South America. Besides Square Pharmaceutical has contract manufacturing
facilities in UK. Square Pharmaceuticals Limited offers more than 300 off patent and on patent
molecules in different dosage forms. The company exports pharmaceuticals products in the
market of Europe, Australia and USA and finished formulations ASEAN, SAARC region. Square
Pharmaceuticals Limited has 700 product approvals for Bangladesh Market.
Foreign Accreditation: UK-MHRA, USFDA and TGA-Australia

14
 During last 7 years Pharma Pharma Market Growth Vs Square Pharma Growth
market in BD grew by 14.21% Pharma Sector Growth Sales Growth Square Pharma

whereas 7-years CAGR of 25.0%

22.6%
Square Pharma was 10.43%. 19.6%
20.3%

7-years CAGR of Pharma In FY’13 and FY’18, sales 20.0%

17.0% 16.0%
market in BD was 14.21% growth of Square Pharma
whereas was 10.43% for moved in the opposite 15.0%
Square Pharmaceuticals 10.3%
direction to markets whereas 15.0% 16.3% 14.0%
Ltd.
in other years Square Pharma 10.0% 13.0%
8.5%

outperformed market. With 8.6%

growing income and 5.0% 6.2%
increased life-expectancy it is 3.1%

anticipated that individual’s 0.0%

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
propensity to consume
pharma products will increase thus it is expected that pharma market will grow in days ahead.
Considering historical trend, and considering the industry growth, as a market leader Square
Pharma has the potentiality to grow in days ahead.
Blockbuster drugs:

Industry Rank Brand Name Market Share Generic

1st Seclo 1.86% Omeprazole

Cefixime
5th Cef 3 0.78% Trihydrate

Square Pharmaceuticals
14th Zimax 0.42% Azithromycin
Ltd has 14 blogbuster
drugs ranked within 50 in
the industry and 26 17th Neotack 0.39% Ranitidine
blogbuster drugs ranked
within 100 in the industry Vitamin B1,
19th Neuro-B 0.37%
B6 & B12
Calcium
20th Calbo-D 0.37% Carbonate +
Vitamin D
Metformin
25th Comet 0.35%
Hydrochloride

28th Ceevit 0.31% Ascorbic Acid

29th Ciprocin 0.31% Ciprofloxacin

Losartan
32nd Angilock 0.29%
Potassium

Production Capacity
Square Pharmaceuticals Limited produces medicine in different forms. Those forms include
tablet, capsule, liquid etc. In the year 2017-18, production capacity of tablet was 7,887 million
piece where actual production was 4,601 million piece. Capacity utilization rate was 58%.
Production capacity of tablet has shown decreasing trend during the last 2 years. Over the last
5-years, tablet production capacity was decreased by 6%, whereas average capacity utilization
rate was 55% during this five years. Square Pharmaceuticals Limited always maintains buffer
production capacity. Competitive structure of the industry forces the company to maintain

15
 buffer capacity so that they can meet up any unforeseen demand promptly which will help them
to retain market position.
Tablet (in million pcs)
Tablets (pcs) Capacity Tablets (pcs) Production Tablets (pcs) Utilization (%)

10, 000
66% 70%

59%
Production capacity for both 9,0 00
56% 58% 58%
60%

52%
tablet and capsule segments
8,0 00

7,0 00
48% 50%

are decreasing in recent 6,0 00

periods, whereas capacity

40%

5,0 00

utilization remains stagnant; 5,296 30%

4,0 00
4,862 4,870 4,601
4,091 4,357
meanwhile own use of 3,0 00
3,940 20%

liquid chemicals is 2,0 00

10%

increasing 7,345 7,348 8,396 8,437 9,023 8,226 7,887

1,0 00

0 0%

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Before 2013-14, Square Pharma utilized more than 100% of its capacity and in 2013-14 company
increased its production capacity but actual production remained in the same level thus
utilization rate decreased. But in recent 2 years, both production capacity and utilization ratio
of capsule unit have decreased. Current capacity of capsule stands at 1,205 million pcs whereas
capacity utilization rate is 40%. During last 5 years, production capacity of capsule units
decreased by 32.15% during last 5 years and average capacity utilization rate was 51%. Square
Pharmaceuticals Limited has buffer capacity in capsule production line to meet any unforeseen
demand in the industry.
Capsule (in million pcs)
Production Capacity Actual Production Utilization (%)
2,0 00

125% 140 %

1,8 00

120 %

1,6 00 102% 1,776 1,783 1,769

100 %
1,4 00

1,2 00

80%

1,253 1,205
1,0 00

1,151 54% 63%

60%

800

934 54%
600
40% 42%
40%

400

20%

1,171 1,177 955 1,122 945 502 512

200

0 0%

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Sales from liquid unit is increasing day by day and accordingly revenue from this segment is also
growing. Own use of chemical plant products is increasing whereas previously company used to
sale them to outsiders. As a result gap between production and sale proceeds from liquid unit
has lessened than that of earlier.
Liquid (In MT)
Sales (MT) Revenue (in mn BDT)
600

511.8
500

420.4
400 470.76

244.75 379.83
300

238.79
209.22
189.13 185.3
200

239.55
100
60.91 61.63 165.01
136.27
0

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

16

5 year CAGR of export by
Square Pharma was 11.38%;
current exports to 42
countries and submitted
several ANDAs to USFDA for
approval.
Square Pharma shows consistent growth in its export over the last few years. 5-year CAGR of
export was 11.38%. To promote exports, government is giving trust in this sector by allowing
exporter 10% subsidy (cash incentives) on its exports. Currently Square Pharma covers 42
countries and received approval of first ANDA in April, 2018 and submitted several ANDAs to
USFDA for approval. Besides company is trying to avail contract manufacturing options for USA
and UK market to boost annual export volume. Last year this company was awarded with gold
trophy for becoming the largest pharmaceutical exporter in Bangladesh.

Export (In BDT MN)

Export (In BDT MN)
1,6 00.00

1,450.53
1,386.83
1,4 00.00

1,120.21
1,2 00.00 1,076.55

1,0 00.00

846.33
799.05
800 .00

538.65
600 .00

400 .00

200 .00

0.0 0

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

It is important for the Pharmaceuticals Companies of Bangladesh to ensure uninterrupted

Government has allowed
10% subsidy on export of
pharmaceutical products
from Bangladesh. Besides
pharmaceutical ingredients
makers are allowed to enjoy
tax holiday benefits till 2032
and Vat will be waived for
API import till 2025
production and supply of the pharmaceutical products. Failure of meeting the demand may
result in switch to substitute product by the customer, thus will result in the reduction of market
share of the company.
Regulatory changes that may favorably affect the business operation of Square
Pharmaceuticals Limited
 10% subsidy on net FOB value of the export of pharmaceutical products from Bangladesh.
 Corporate tax holiday benefits till 2032 for pharmaceutical ingredients makers as per API
export and production policy
 Exemptions and concessionary rate of duties of some pharmaceutical raw materials, raw
materials of Active Pharmaceutical Ingredients (API) have been proposed.
 VAT exemption on import of Erythropoietin which is used for anti-cancer and kidney
disease.
 VAT waiver on import of API raw material upon fulfillment of some conditions till 2025 8.

8
https://thefinancialexpress.com.bd/trade/api-raw-material-imports-to-get-vat-waiver-until-2025-1557201150
17
 Competitor Analysis (Based on the 2018, Q3 An. Financial Statements)
Profitability (Amount in BDT mn) Profitability Margins
ACI (Solo) ACMELAB BXPHARMA (Solo) RENATA (Solo) SQURPHARMA (Solo) NPAT Margin OP Margin GP Margin

Revenue 49.75%
35,858 54.59%

Gross Profit 46.64%

17,839
38.94%
Operating Profit 44.77% 28.38%
10,176
25.56%
Operating Expense 22.78%
22.32%
7,664 27.91%

14.26% 17.20%
9.06%
Net Profit 9.54%
10,009
4.19%
- 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

Return To Asset And Equity Employeed

Financial Positions (In BDT mn) ROA ROE
ACI (Solo) ACMELAB BXPHARMA (Solo)
RENATA (Solo) SQURPHARMA (Solo)
63,220

80,0 00.00

20.31%
57,778

70,0 00.00
17.32%
10.34%
45,018

8.48% 13.96% 15.83%

40,666

60,0 00.00

6.28%
35,590

50,0 00.00

6.62%
28,812

26,146

4.30%
24,817

40,0 00.00

2.24% ROE
18,053

17,537
17,065

16,206
14,520

30,0 00.00

ROA
7,752
5,442

20,0 00.00

ACI (Solo) ACMELAB BXPHARMA RENATA (Solo) SQURPHARMA

10,0 00.00
(Solo) (Solo)
-

Total Asset Total Equity Total Liability

Earnings Per Share

NAV Per Share SQURPHARMA (Solo) 12.69

291.05
RENATA (Solo) 43.03
211.89
BXPHARMA (Solo) 7.35

85.32 71.04 73.23 ACMELAB 7.24

ACI (Solo) 18.27

ACI (Solo) ACMELAB BXPHARMA (Solo) RENATA (Solo) SQURPHARMA
(Solo) - 5 10 15 20 25 30 35 40 45 50

18
 Financial Performance
In order to analyze financial performance of Square Pharmaceuticals Limited, annual
information’s from 2014-15 to 2017-18 and 2018-19 ‘6-month’ annualized information is
considered.
Liquidity Position: HEALTHY
From 2014-15 to 2017-18, all the liquidity ratios i.e. current ratio, quick ratio and cash ratio
showed an increasing trend. Up to Q2 ’19, liquidity ratio decreased slightly due to an increase in
sundry creditor from BDT 447 mn to BDT 2,371 mn but still liquidity ratios are much higher than
standard average. Consistent improvements in liquid assets were fueled by bulk amount of Cash
and Cash Equivalent (by the end of December ’18, Square Pharma has BDT 20.43 bn as cash and
cash equivalent which is almost near to their replacement costs of PPE).
From the period 2014-15 to 2017-
Liquidity Position
18, Current ratio, quick ratio and
Cash Ratio Quick Ratio Current Ratio
cash ratio have increased. This
12.93
improvement is attributed by the 11.63
increased of current asset, 9.81
specially increase of cash in a 10.91
9.95
large amount. From 2014-15 to 6.34 8.23
2018-19 period the companies 4.26 4.97 9.14 8.41
6.69
cash and cash equivalent has
2.85 4.05
increased by four times. By the
2.17
end of December, 2019, the 2014-15 2015-16 2016-17 2017-18 2018-19
current ratio stands at 11.63,
meaning that the company has BDT 11.63 current asset in order to pay BDT 1 of current liability.
Quick ratio shows companies liquidity position excluding the inventory taken in account. It
shows that the company has BDT 9.95 current asset excluding inventory to pay BDT 1 current
liability. Finally cash ratio shows that the company has BDT 8.41 cash and cash equivalent to pay
off its short term liability. During the period 2018-19 (after 6 months), those ratios has slightly
decreased. Nevertheless, the company maintains strong liquidity position in all sorts’ liquidity
analysis.
Operating Efficiency: GOOD
From 2014-15 to 2016-17 Inventory Turnover Ratio Receivable Turnover Ratio

periods Square Pharma 9.79

9.26 30.28
8.95 8.95
shows consistent
7.52 24.76 24.55 25.17
improvements in its
inventory turnover ratio 16.58
which decreased in 2017-
18 and then further
2014-15 2015-16 2016-17 2017-18 2018-19 2014-15 2015-16 2016-17 2017-18 2018-19
improved in 2018-19. As
on December, 2018 Average Collection Period Cash Conversion Cycle (Days)
(Days)
Inventory Turnover Ratio 44.42
41.84
45.51
21.71 40.13 40.95
stands as 9.26 times
which means that yearly
14.54 14.67 14.30
sales of Square Pharma is
11.89
9.26 times of their
2014-15 2015-16 2016-17 2017-18 2018-19 2014-15 2015-16 2016-17 2017-18 2018-19
inventory.
Square Pharma has also improved its Receivable Turnover during 2014-15 to 2016-17 (when
their Receivable Turnover Ratio came to the lowest point). During the last two years average
collection period of the company extended and Square Pharma collects its average receivable
around 25.17 times each year. Average Collection Period (days) suggests that it is around 14.3
days during which Square Pharma’s sales remain as accounts receivable.
19
 Cash conversion cycle swivels around 40 to 45 days thus it resembles that company has control
over their liquidity i.e. it takes around 1.5 months for the company to convert their investment
in inventory and other resources into cash.
Total Asset Turnover shows a decreasing trend over period Total Asset Turnover (%)
which depicts that company’s efficiency while generating
75.14% 74.65%
sales/revenues using the assets is deteriorating over times. 0 0
This so happen because company is piling up huge cash 69.56%
0 64.72% 65.52%
and cash equivalent which may otherwise be used for
0 0
other revenue generating purposes. As a consequence of
this increase in Cash and Cash Equivalents which 2014-15 2015-16 2016-17 2017-18 2018-19
eventually raise the amount of total assets without
contributing to generate any revenue has deteriorated Total Asset Turnover Ratio of Square
Pharma.
Profitability: GROWING
Square Pharma shows steady growth in its Margins
Net Profit Margin (NPM) Operating Profit Margin (OPM)
profitability. During last 5 years Gross Profit
Gross Profit Margin (GPM)
Margin reached to 51.03% from that of
44.57% in 2014-15. This shows that cost of 49.99% 49.34% 51.03%
48.35%
sales pharma product is decreasing and it
44.57%
costs Square Pharma less than half of the
33.65% 32.23% 33.10%
sales price to produce the product (on 32.64%
27.66%
average). Economies of scales i.e. bulk 28.01%
22.29% 26.60% 26.46%
production allows them to attain such 17.00%

efficiency in reducing cost of production and

improve margin. 2014-15 2015-16 2016-17 2017-18 2018-19

Operating profit margin shows

improvements as well, with progress in gross profit mainly due to a decrease in COGS
correspond with less hike in operating expenses, Operating Profit Margin shows a steady
growth. From 2014-15 to 2018-19 Net Profitability (ROA & ROE)
Return on Total Assets (ROA) Return on Equity (ROE)
Profit Margin escalates remarkably. Almost
dried financial expenses, increase in Other 19.82% 19.55%
Non-operating Income foster Net Profit 18.17%
18.50% 18.14%
18.35%
Margin over the last few years. As per Q2 16.64% 17.12%

FY’19 (An.) Net Profit Margin stands at 14.22%

12.77%
28.01% compared to 17.0% in 2014-15.
From 2014-15 to 2016-17 both Return on
Asset (ROA) and Return on Equity (ROE) 2014-15 2015-16 2016-17 2017-18 2018-19

show an increasing trend. After a bump in 2017-18 it has started to raise again. After December
’18, annualized ROA stands at 18.35% and ROE stands at 19.55% which is attractive for a pharma
sector company.
Leverage ratio: Close to ‘0’
Square Pharmaceuticals Limited is less dependent on debt (both long term and short term).
Currently, the company has no long term or short term loans. After 2014-15 company repaid all
their outstanding loans. Due to their huge cash and cash equivalent, they needn’t take loan in
any form which also makes them less vulnerable to interest rate volatility. As their financial
expenses are too trivial they have strong capacity to repay financial expenses using available
operation profit. But in future, to avail tax benefits in Kenya Subsidiary, Square Pharma will avail
USD 9 million loan which will raise their financial expenses and debt-equity ratio in future.

20
 2014-15 2015-16 2016-17 2017-18 2018-19 A
Leverage Ratios
Total Debt to Equity 0.9% 0.0% 0.0% 0.0% 0.0%
Debt to Total Assets 0.9% 0.0% 0.0% 0.0% 0.0%
Coverage Ratios
Times Interest Earned (TIE) 66.00 2,037.14 79,644.40 136,550.99 226,484.86

Investment Insights
Investment Positive
 Square Pharmaceuticals Limited is the market leader of pharmaceutical industry in Bangladesh
and possess 16.95% market share as per IQVIA Health Report for Q1, 2018. Company has strong
fundamentals and brand image among the customers. It occupies 26 blockbuster drugs among
the top 100 medicine sold in Bangladesh according to IQVIA. They have 14 blockbuster drugs
ranked within top 50 drug list of the country.
 Government has declared 10% cash incentive for export of pharmaceutical products.
Approximately 4% of company revenue is generated from exporting pharma products. 5-year
CAGR of export was 11.38%; current exports to 42 countries and submitted several ANDAs to
USFDA for approval. Thus, this incentive will encourage company to initiate more exports. Thus,
this incentive will encourage company to initiate more exports.
 The company is setting up a subsidiary manufacturing plant in Nairobi, Kenya. Square Pharma
has invested BDT 216.26 mn as share money deposit in this subsidiary as on June, 2018. Ground
development and construction works for this formulation plant is underway which is expected
to be completed by 2020.
 Square Pharmaceutical is well-known for their strong corporate governance. Besides, they are
good at paying dividend as well. Historically, company maintained a mixture of cash and stock
as its dividend policy and now moving towards disbursing cash rather than stocks.
 The company is allocated three plots in API Park in Munshigonj. It is expected that the
production cost will significantly decrease with the commercial operation of API Park.
 Square Pharma maintains large cash and cash equivalents. Current balance of cash and cash
equivalent is almost equal to the replacement cost of their PPE.
 After Renata (Solo), Square Pharma has highest Operating Profit margin, Net profit margin in the
Pharma Industry of Bangladesh. It’s latest ROA and ROE also exceeds its close competitors.
 According to latest financial disclosure available up to March, 2019, Square Pharmaceuticals
Limited doesn’t have any debts of i.e. they don’t have any outstanding long term or short term
loans thus less vulnerable to interest rate volatility.
 Company margins (gross, operating, pretax and net) are one of the highest in the industry (only
solo margins of Renata is higher than Square Pharma). ROA and ROE of the company are also
attractive which currently stand at 18.35% and 19.55% respectively.
Investment Concern
 According to IQVIA Q1, 2018 Square Pharmaceutical Limited holds 16.95% which was 18.06% in
2017 and 18.48% in 2016. Gradually company is losing its market share due to fierce competition
among the current players and they don’t have any remarkable recent investment in PPE thus it
will become difficult for them to retain leading market position in future.
 Pharma Industry in Bangladesh is almost oligopolistic in nature (10 companies’ hold 68.04% of
Pharma market share. Top 20 companies hold 87.01% market share). But competition is
intensified nowadays as new comers are entering into the market (very recently 19 companies
have invested BDT 6,500 mn to setup their facilities and will commence operations within the
next one and a half years) thus the oligopolistic nature of the market may become monopolistic
in near future.

21
  Square Pharma will avail USD 9 million loan to establish Square Pharmaceuticals Kenya EPZ Ltd.
Company may result payment for financial expenses in coming days which is close to ‘zero’ now.
 Company is exposed to foreign exchange and raw materials risk because ≈80% of company raw
materials are imported thus any unfavorable change in currency rate will adversely affect
company profit.
Key Assumptions Underlying the Valuations
 Competition in the industry is growing and new entrance into the industry posits challenges
while retaining current market share by Square Pharmaceuticals Ltd. Recently company lost
approximately 2% of the market share (during the last 2-years). Besides production capacity of
tablet unit is also shrinking. Thus we assume a revenue growth which is slowed than current
pace in days ahead.
 Fully owned subsidiary in Kenya (having capacity of 2,000,000,000 tablets and 60,000,000
bottles which will commence operation from February 2020) will improve its growth soon after
2020 and we incorporate this in assuming revenue growth rates of the company.
 Cost of Goods sold showing downward trend, besides API Park (which supposed to commence
operation from 2019) will further contribute to reduce the COGS of the company.
 Selling and marketing expense will continue to grow because of the competition. Besides
subsidiary in Kenya will also uplift their selling expenses because of free samples, recruiting
medical representative and other marketing expenses to promote company.
 Due to economies of scale from large scale operation, Square Pharma will be able to reduce
their administrative cost as percentage of their net sales. Considering this we assume
administrative cost as proportion to net sales will decrease over times.
 During last 2-3 years, Square Pharma decelerated their investment in PPE. As a result their
market share also reduced. Besides, decreasing production capacity of current machinery and
current growth in the industry makes it essential to initiate PPE acquisition. Square Pharma has
large amount of cash and cash equivalents in hand thus they can easily fund new PPE acquisition
using their idle fund. We assume that to retain and increase current market share, Square
Pharma will gradually invest in PPE. Besides investment in Kenya subsidiary will also increase
consolidated PPE.
 As company will invest in their PPE thus portion of their PPE investment will remain in work in
progress and considering this we assume our capital work in progress.
 Square Pharma has 3 associate companies (Square Textiles Ltd. 46.36%, Square Fashions Ltd.
48.63%, Square Hospitals Ltd. 49.94%) and all of them are profitable companies. We assume
that, company will make further investments in these associate companies to facilitate their
growth and finance need in near future.
 We assume that company will move towards paying cash dividend rather paying stock as it
dilutes earnings
 USD 9 mn loan will be availed by Square Pharma for their Kenya subsidiary. Company doesn’t
have any long-term loan right now and considering (USD 1 = BDT 85) as exchange rate, we
assume that BDT 765 mn will be total long-term loan of the company and company will gradually
avail this amount within 2020 (probable commencement date of the subsidiary is February
2020). We assume that 2/3rd of the project will be completed by June 2020 and rest will be
completed by the end of December 2020 and accordingly assume long term loan which company
planned to avail.
 We also assume that company will start repayment of their long-term loan from 2021 from the
revenue it generates from the subsidiary. Accordingly, we decrease long-term loan of the
company.
 As company is going to expand business by opening new subsidiary in Kenya, thus to attain tax
benefits, they may also avail short term loans for managing working capital needs in Kenya.
Considering this, we assume that short-term loan will increase in future

22
 Effective Tax rate: The effective tax rate history of Square Pharmaceuticals Limited is as follows:
The tax rate for Square Pharmaceuticals Limited is 25%. However, considering the effective tax
rate of the company over the last few years, tax rate for forecasted period is determined:

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 (An.) Avge.
25.35% 25.45% 26.45% 23.61% 21.91% 23.14% 23.51% 21.93% 23.64%

Discount Rate: The appropriate WACC (Buildup Method)

discount rate for Square Risk Free rate (cut off yield 1-year T-bill) 4.23%
Pharmaceuticals Limited is calculated Expected Equity Risk Premium- SQURPHARMA 7.75%
by using weighted average cost of Cost of Equity 11.98%
After Tax Cost of Debt 0.00%
capital method where the cost of
Cost of equity (Buildup) 12.00%
equity is calculated by using Capital Total Debt 0
Asset Pricing Model. But due to strong Shares Outstanding 789.0
correlation between market return Share Price (Intrinsic Value, in BDT) 292.5
Market value of Equity (in mn) 230,783
and Square Pharma return calculated
Weight of Equity 100%
beta was inconsequential. Thus using Weight of Debt 0%
buildup method WACC of the WACC 12.23%
company was determined. Cut off
yield of government 364 days T-bill rate was considered as risk free rate. The weighted average
cost of capital for Square Pharma in this valuation is 12.00%.
Terminal growth rate: Five years average ROE (17.9%) and retention rate (74.7%) for 2017-18
indicates terminal growth rate of 13%. Besides it was anticipated that riding on expanded
domestic market and new export frontiers BD pharmaceutical market is expected to grow 15%
in next 5-years. During the last 5-years our GDP growth was ≈7% and it is expected to remain
robust till 2023. Considering all these issues, we have used 7% as terminal growth rate. Large
number of population, high population growth, increase in income level of people (provisional
income currently stands at $1,909), increased awareness of health among the people and
propensity to consume more healthcare products with increased income level will cause to grow
the Square pharmaceuticals Limited at assumed 7% rate infinitely.

Quarterly Restated EPS Trend (BDT

4.02

3.97

3.92
3.82

3.78
3.72

3.62
3.62

3.42
3.27

3.12
3.07
2.68
2.51
2.30
2.04
1.94
1.76

1.65

Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar
2014-15 2015-16 2016-17 2017-18 2018-19

23
 Technical Indicators and performance in DSE
Rebased Price Rebased Index
During last 1-year, Square Pharmaceuticals
Limited has underperformed then DSEX index. 130
125
During this period Square Pharmaceuticals 120
Limited lost around 15% of its price (dividend 115
110
adjusted price decrease was 9.78%) whereas 105
DSEX decreased by 9.35%. 100
95
The resistance and support level for Square 90
Pharmaceuticals Limited is 272.9 and 245.5 85

respectively.

Free cash flow to firm Valuation

With discount rate of 12.00% and terminal growth rate of 7%. DCF analysis gives Net Present Value (PV)
of Free Cash Flow to Firm (FCFF) of BDT 205.49 billion as of June, 2019. The fair value using DCF method
stands at BDT 292.5 per share for the company, which implies an upside of 17.58% from current market
price.

(Figures in BDT million) 2019-20 2020-21 2021-22 2022-23 2023-24 Terminal

Profit for the Year 12,746 13,639 14,629 15,802 17,133

Add: After Tax Interest Expenses 72 86 88 90 94
Add: Depreciation & Amortization 2,684 3,082 3,562 4,144 4,729
Less: Investment in NWC 1,803 742 842 1,000 1,148
Less: Capital Expenditures 3,538 4,266 5,177 5,203 5,641
Free Cash Flow to the Firm 10,161 11,800 12,260 13,833 15,167 283,244

Enterprise Value 205,490

Plus: Cash & cash equivalent 25,323
Less: Interest Debt -
Equity Value 230,813
No. of Share Outstanding 789.0
Value per Share (BDT) 292.54

Sensitivity Analysis
We have also checked the sensitivity analysis of FCFFF value per share on discount rate and
terminal growth rate. We considered a discount with a range from 11.8% to 13.0% and terminal
rate with a range from 5.0% to 7.6%. As a result, we got values range from 223.4 to 351.8.

Sensitivity Analysis
Discount Rates
292.5 11.5% 11.6% 11.8% 12.0% 12.2% 12.4% 12.5% 12.6%
Terminal Growth

5.00% 252.4 249.1 242.7 236.7 231.0 225.6 223.0 220.5

6.00% 280.0 275.6 267.3 259.5 252.2 245.4 242.2 239.0
7.00% 319.9 313.7 302.2 291.5 281.7 272.6 268.3 264.1
7.20% 330.1 323.4 311.0 299.5 289.0 279.3 274.7 270.2
7.40% 341.3 334.1 320.5 308.2 296.9 286.5 281.6 276.9
7.60% 353.7 345.7 331.0 317.7 305.5 294.3 289.0 284.0

24
 Relative Valuation Methods
We conducted relative valuation using different relative valuations techniques.

Relative Valuation
Particulars Multiple Valuation
Average Historical PE multiple 24.22 14.64 354.7
P/NAVPS 3.80 81.95 311.5
Pharma Sector Forward PE 19.84 14.64 290.5
Market Forward PE 12.20 14.64 178.6
Sector PB 2.40 81.95 196.7
Market PB 1.62 81.95 132.8

Average Price Per Share 266.4

Calculations
Historical PE of SQURPHARMA P/E
Current P/E 15.62
PE at YE 2013-14 35.09
PE at YE 2014-15 31.05
PE at YE 2015-16 22.48
PE at YE 2016-17 20.47
PE at YE 2017-18 20.60
Average 24.22

Sector in DSE P/E P/NAV Price NAV

SQURPHARMA 15.6 3.04 248.8 81.95

BXPHARMA 10.5 1.09 77.4 70.99

IBNSINA 24.0 5.71 254.0 44.5

GLAXOSMITH 31.4 10.71 1,390.1 129.85

ACMELAB 9.8 0.83 71.0 85.32

RENATA 27.7 5.37 1,158.1 215.71

Sector Avg. PE 19.84 3.80

25
Key Terminologies/ Acronyms:
1. SQURPHARMA= Square Pharmaceuticals Limited
2. CAGR=Compound Annual Growth Rate
3. DCF: Discounted Cash Flow Valuation Method
4. Div. Yield = Dividend Yield Based on Historical and
Expected Fair Value per Share
5. DPS: Dividend Per Share
6. EBIT= Earnings before Interest and Tax
7. EBITDA= Earnings before Interest, Tax, Depreciation &
Amortization
8. EPS= Earnings per Share.
9. EV=Enterprise Value
10. FCFF: Free Cash flow To Firm
11. Free Float Share= Total shareholding- Sponsor or directors
holding
12. GDP= Gross Domestic Product
13. API= Active Pharmaceutical Ingredient
14. NAVPS= Net Asset Value Per Share
15. NPAT: Net Profit after Tax
16. OPEX= Operating Expenditure
17. PBT: Profit Before Tax
18. ROA= Return on Average Assets
19. ROE= Return on Average Equity
20. Others: Q = Quarter, mn= Million, bn=Billion
An. = Annualized, Exp. = Expected, YoY= Year on Year

Formulas Used
1. 𝐸𝑃𝑆 = 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝐴𝑓𝑡𝑒𝑟 𝑇𝑎𝑥 ÷ 𝑁𝑜. 𝑜𝑓 𝑆ℎ𝑎𝑟𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
2. 𝐸𝐵𝐼𝑇 = 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 + 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 + 𝑇𝑎𝑥
3. 𝐸𝐵𝐼𝑇𝐷𝐴 = 𝐸𝐵𝐼𝑇 + 𝐷𝑒𝑝𝑟𝑖𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠
4. 𝑁𝐴𝑉𝑃𝑆 = 𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦 ÷ 𝑁𝑜. 𝑜𝑓 𝑆ℎ𝑎𝑟𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
5. 𝑅𝑂𝐴 = 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 ÷ 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
6. 𝑅𝑂𝐸 = 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 ÷ 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦
7. 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 = 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑 ÷ 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
8. 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 = 𝑁𝑒𝑡 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 ÷ 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠
9. 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑜𝑙𝑙𝑒𝑐𝑡𝑖𝑜𝑛 𝑃𝑒𝑟𝑖𝑜𝑑 (𝐷𝑎𝑦𝑠) = 360 ÷ 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜
10. 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝐶𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑃𝑒𝑟𝑖𝑜𝑑(𝐷𝑎𝑦𝑠) = 360 ÷ 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜
11. 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑦𝑐𝑙𝑒 = 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑜𝑙𝑙𝑒𝑐𝑡𝑖𝑜𝑛 𝑃𝑒𝑟𝑖𝑜𝑑 + 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝐶𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑃𝑒𝑟𝑖𝑜𝑑
12. 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 = 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑 ÷ 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑃𝑎𝑦𝑎𝑏𝑙𝑒𝑠
13. 𝑃𝑎𝑦𝑎𝑏𝑙𝑒𝑠 𝑃𝑎𝑦𝑚𝑒𝑛𝑡 𝑃𝑒𝑟𝑖𝑜𝑑 (𝐷𝑎𝑦𝑠) = 360 ÷ 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜
14. 𝐶𝑎𝑠ℎ 𝐶𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝐶𝑦𝑐𝑙𝑒 (𝐷𝑎𝑦𝑠) = 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑦𝑐𝑙𝑒 − 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝑃𝑎𝑦𝑚𝑒𝑛𝑡 𝑃𝑒𝑟𝑖𝑜𝑑
15. 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = 𝑁𝑒𝑡 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 ÷ 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡
16. 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = 𝑁𝑒𝑡 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 ÷ 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡
17. 𝑇𝑖𝑚𝑒𝑠 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑎𝑟𝑛𝑒𝑑 = 𝐸𝐵𝐼𝑇 ÷ 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠
18. 𝑃𝐸𝐺 𝑟𝑎𝑡𝑖𝑜 = 𝑃/𝐸 𝑅𝑎𝑡𝑖𝑜 / 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐺𝑟𝑜𝑤𝑡ℎ 𝑅𝑎𝑡𝑒

26
 Statement of Consolidated Income (BDT mn)

2014-15 2015-16 2016-17 2017-18 2018-19An 2019-20 Ex. 2020-21 Ex. 2021-22 Ex.
Gross Turnover 31,845 38,326 42,285 45,887 49,742 53,423 57,456 62,010
Less: Value Added Tax 4,314 5,252 5,742 6,233 6,754 7,141 7,680 8,289
Net Turnover 27,531 33,074 36,543 39,654 42,988 46,282 49,776 53,722
Cost of Goods Sold 15,260 17,082 18,275 20,090 21,525 23,141 24,838 26,794
GROSS PROFIT 12,271 15,991 18,268 19,564 21,463 23,141 24,938 26,928
Total Operating Income 12,271 15,991 18,268 19,564 21,463 23,141 24,938 26,928
Operating Expenses: 4,655 5,195 5,972 6,783 7,398 7,661 8,373 9,183
Selling and Distribution Expenses 3,862 4,350 5,057 5,751 6,300 6,480 7,108 7,825
Administrative Expenses 793 845 915 1,032 1,097 1,182 1,265 1,358
PROFIT FROM OPERATIONS 7,616 10,797 12,296 12,781 14,065 15,480 16,565 17,745
Financial Expenses 115 5 0 0 0 96 115 117
Other Non-Operating Income 332 657 1,094 1,768 2,200 2,216 2,383 2,572
PROFIT BEFORE WPPF 7,833 11,448 13,390 14,549 16,265 17,600 18,834 20,200
Allocation for WPPF 395 544 647 701 786 855 915 982
PROFIT BEFORE TAX 7,438 10,904 12,743 13,848 15,479 16,744 17,918 19,219
Provision for Income Tax 1,756 2,390 2,949 3,255 3,768 3,999 4,279 4,590
Provision for Deferred Income Tax 174 227 75 102 158 - - -
Deferred Tax Income -75 -48 - - - - - -
PROFIT AFTER TAX 5,507 8,287 9,719 10,491 11,553 12,746 13,639 14,629
NCI 827 916 - - - - - -
PROFIT AFTER TAX FOR THE YEAR 4,680 7,371 9,719 10,491 11,553 12,746 13,639 14,629
Profit/(Loss) from Associate Undertakings 827 916 929 1,115 1,008 1,127 1,259 1,408
Unrealized gain/(loss) on Investment in Sec. -95 -3 330 -404 -25 - - -
Total Comprehensive Income for the Year 5,507 8,287 10,648 11,606 12,561 13,872 14,899 16,037
EPS 5.93 9.34 12.32 13.3 14.64 16.15 17.29 18.54

27
 Statement of Financial Position (BDT mn)

2014-15 2015-16 2016-17 2017-18 2018-19An 2019-20 Ex. 2020-21 Ex. 2021-22 Ex.
Non-Current Assets: 25,598 27,240 29,355 32,831 33,655 38,279 43,251 49,131
PPE 18,147 18,848 19,324 20,545 20,900 23,853 27,390 31,656
Capital Work-in-Progress 88 - - - - 443 531 672
Deferred Tax Assets 72 - - - - - - -
Investment - Long Term (at Cost) 234 556 589 941 746 828 915 1,006
Investment in Marketable Securities 898 1,072 1,938 2,891 2,972 3,188 3,419 3,667
Investment in Associates Companies 6,159 6,765 7,505 8,454 9,036 9,968 10,996 12,130
Current Assets: 11,041 17,063 23,176 28,442 36,486 41,724 47,462 51,729
Inventories 3,661 3,695 3,731 4,433 4,725 5,271 5,669 6,119
Accounts Receivable 909 1,336 2,204 1,616 1,598 1,777 1,911 2,063
Other Debtor - - - - - - - -
Advanced, Deposits and Prepayments 852 1,131 1,451 2,281 3,278 2,777 3,061 3,386
Short Term Investment 1,095 2,379 21 3,132 1,562 2,328 2,504 2,703
Cash and Cash Equivalents 4,524 8,523 15,769 16,980 25,323 29,570 34,316 37,458
TOTAL ASSETS 36,639 44,304 52,531 61,273 70,140 80,003 90,713 100,860
SHAREHOLDERS' EQU. & LIABILITIES:
Shareholders' Equity: 32,912 40,558 49,040 57,841 64,659 74,760 84,847 94,672
Share Capital 5,543 6,236 6,859 7,374 7,890 8,285 8,699 8,916
Share Premium 2,035 2,035 2,035 2,035 2,035 2,035 2,035 2,035
General Reserve 106 106 106 106 106 106 106 106
Tax Holiday Reserve - 302 853 1,950 2,212 2,328 2,504 2,703
Retained Earnings 24,960 31,612 38,578 46,159 52,242 61,832 71,328 80,738
Gain on Marketable Sec. (Unrealized) 270 267 597 192 174 174 174 174
Non-Controlling Interest -2 1 13 25 - - - -
Non-Current Liabilities: 1,137 1,054 1,129 1,231 1,350 1,667 2,009 2,032
Long Term Loans - Secured 237 - - - - 510 765 689
Deferred Tax Liability 900 1,054 1,129 1,231 1,350 1,157 1,244 1,343
Current Liabilities: 2,590 2,691 2,361 2,200 4,131 3,576 3,857 4,156
Short Term Bank Loans 2 3 - - - 231 249 269
Long Term Loans - Current Portion 73 - - - - 26 38 34
Creditors and Other Payables 651 694 844 525 679 953 1,025 1,106
Liabilities for Other Finances 1,766 1,952 1,490 1,586 3,438 2,297 2,470 2,666
Liabilities for Expenses 98 43 28 90 14 69 75 81
SHAREHOLDERS' EQUITY & LIABILITIES 36,639 44,304 52,531 61,273 70,140 80,003 90,713 100,860
Net Asset Value (NAV) Per Share 59.38 65.04 71.49 78.44 81.95 94.75 107.54 119.99
No. of Share Outstanding (in mn) 554.3 623.59 685.95 737.39 789.01 828.46 869.88 891.63

28
 Ratio Analysis

Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

Liquidity Ratios:
Current Ratio 4.26 6.34 9.81 12.93 8.83 11.67 12.3
Quick Ratio 2.85 4.97 8.23 10.91 7.69 10.19 10.84
Cash Ratio 2.17 4.05 6.69 9.14 6.51 8.92 9.55
Operating Efficiency Ratios
Inventory Turnover Ratio 7.52 8.95 9.79 8.95 9.10 9.26 9.10
Receivable Turnover Ratio 30.28 24.76 16.58 24.55 26.89 27.42 26.99
Average Collection Period (Days) 11.89 14.54 21.71 14.67 13.39 13.13 13.34
Inventory Conversion Period(Days) 47.88 40.22 36.75 40.24 39.57 38.88 39.56
Operating Cycle (Days) 59.77 54.76 58.47 54.91 52.95 52.01 52.9
A/C Payable Turnover Ratio 23.45 24.61 21.65 38.29 31.7 28.35 25.11
Payables Payment Period (Days) 15.35 14.63 16.62 9.4 11.36 12.7 14.34
Cash Conversion Cycle (Days) 44.42 40.13 41.84 45.51 41.6 39.31 38.56
Total Asset Turnover 75.14% 74.65% 69.56% 64.72% 61.29% 57.85% 58.31%
Fixed Asset Turnover 151.71% 175.47% 189.11% 193.01% 205.68% 194.03% 194.27%
Operating Profitability Ratios
Gross Profit Margin (GPM) 44.57% 48.35% 49.99% 49.34% 49.93% 50.00% 50.10%
Operating Profit Margin (OPM) 27.66% 32.64% 33.65% 32.23% 32.72% 33.45% 33.28%
EBITDA 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Pre Tax Profit Margin 27.02% 32.97% 34.87% 34.92% 36.01% 36.18% 36.00%
Net Profit Margin (NPM) 17.00% 22.29% 26.60% 26.46% 26.87% 27.54% 27.40%
Return on Total Assets (ROA) 12.77% 16.64% 18.50% 17.12% 16.47% 16.98% 15.98%
Return on Equity (ROE) 14.22% 18.17% 19.82% 18.14% 17.87% 18.28% 17.09%
Leverage Ratios
Total Debt to Equity 0.90% 0.00% 0.00% 0.00% 0.00% 1.00% 1.20%
Debt to Total Assets 0.90% 0.00% 0.00% 0.00% 0.00% 1.00% 1.20%
Coverage Ratios
Times Interest Earned (TIE) 66 2,037 79,644 136,551 226,485 161 144
Cash Coverage Ratio
Valuation Ratios
P/B (price to book) Ratio 26.22 26.57 29.01 29.31 29.25 29.25 29.25
Book Value Per Share 10 10 10 10 10 10 10
EPS (Diluted) 5.93 9.34 12.32 13.3 14.64 16.15 17.29
EPS (Basic) 8.44 11.82 14.17 14.23 14.64 15.38 15.68
Dividend (C%/B%) 30%/12.5% 40%/10% 35%/7.5% 36%/7% 40%/5% 50%/5% 60%/2.5%
Dividend per Share 3.0 4.0 3.5 3.6 4.0 5.0 6.0
Dividend Payout Ratio 35.53% 33.84% 24.70% 25.30% 27.32% 32.50% 38.27%
Retention Rate 64.47% 66.16% 75.30% 74.70% 72.68% 67.50% 61.73%
P/E Ratio 31.05 22.48 20.47 20.6 19.98 18.11 16.92
EV/EBITDA 15.24 12.16 12.45 12.57 11.52 10.94 10.48
EV/Sales 5.13 4.75 5.01 5.02 4.78 4.61 4.44
Price/Sales 7.51 6.34 6.26 5.83 5.37 4.99 4.64
Tobin's q 3.97 3.74 3.79 3.53 3.29 3.03 2.81
Sales/ Share 34.89 41.92 46.32 50.26 54.48 58.66 63.09
Growth Rates
EPS Growth Rate 29.88% 57.50% 31.85% 7.94% 10.12% 10.33% 7.01%
Dividend Growth Rate 0.00% 33.33% -12.50% 2.86% 11.11% 25.00% 20.00%
Sales Growth Rate 13.88% 20.13% 10.49% 8.51% 8.41% 7.66% 7.55%
Gross Profit Growth Rate 15.72% 30.32% 14.24% 7.09% 9.71% 7.82% 7.76%
Operating Profit Growth Rate 21.17% 41.77% 13.89% 3.94% 10.05% 10.06% 7.01%
Net Income Growth Rate 29.88% 57.50% 31.85% 7.94% 10.12% 10.33% 7.01%
Dividend Payout Ratio -11.46% -4.76% -27.00% 2.44% 7.96% 18.97% 17.74%
Retention Rate 7.68% 2.63% 13.81% -0.80% -2.70% -7.13% -8.54%
Total Asset Growth Rate 14.42% 20.92% 18.57% 16.64% 14.47% 14.06% 13.39%
Other Data
29
Stock price- Period End 262.2 265.7 290.1 293.1 292.54 292.54 292.54
No. of shares outstanding (in mn) 554.3 623.59 685.95 737.39 789.01 828.46 869.88
Market Cap (in bn) 145.34 165.69 198.99 216.13 230.81 242.35 254.47
EBITDA (in bn) 9.26 12.92 14.71 15.85 17.83 19.52 21.11
EV (in bn) 141.13 157.17 183.22 199.15 205.49 213.55 221.21
Depreciation (in bn) 1.71 2.01 1.97 2.00 2.35 2.68 3.08
DUPONT ANALYSIS
Net Profit AT/Sales 17.00% 22.29% 26.60% 26.46% 26.87% 27.54% 27.40%
Sales/Total Assets 80.19% 81.72% 75.48% 69.69% 65.42% 61.65% 58.31%
ROA 13.63% 18.21% 20.07% 18.44% 17.58% 16.98% 15.98%
Net Profit AT/Total Assets 13.63% 18.21% 20.07% 18.44% 17.58% 16.98% 15.98%
Total Assets/Stockholders. Equity 1.13 1.1 1.08 1.06 1.07 1.08 1.07
ROE 15.36% 20.07% 21.69% 19.63% 18.86% 18.28% 17.09%
Extended DUPONT ANALYSIS
Net Profit/Pretax Profit 62.92% 67.60% 76.27% 75.76% 74.63% 76.12% 76.12%
Pretax Profit/EBIT 97.66% 101.00% 103.63% 108.35% 110.05% 108.17% 108.17%
EBIT/Sales 27.66% 32.64% 33.65% 32.23% 32.72% 33.45% 33.28%
Sales/Assets 80.19% 81.72% 75.48% 69.69% 65.42% 61.65% 58.31%
Assets/Equity 1.13 1.1 1.08 1.06 1.07 1.08 1.07
ROE 15.36% 20.07% 21.69% 19.63% 18.86% 18.28% 17.09%

30
 Important Disclosures
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EBLSL Rating Interpretation

Overweight : Stock is expected to provide positive returns at a rate greater than its required rate of return
Accumulate : Stock is expected to provide positive inflation adjusted returns at a rate less than its required rate of return
Market weight : Current market price of the stock reasonably reflect its fundamental value
Underweight : Stock expected to fall by more than 10% in one year
Not Rated : Currently the analyst does not have adequate conviction about the stock's expected total return
About EBL Securities Ltd.: EBL Securities Ltd. (EBLSL) is one of the fastest growing full-service brokerage companies in Bangladesh
and a fully owned subsidiary of Eastern Bank Limited. EBLSL is also one of the top ten leading stock brokerage houses of the
country. EBL Securities Limited is the TREC-holder of both exchanges of the country; DSE (TREC# 026) and CSE (TREC# 021). EBLSL
takes pride in its strong commitment towards excellent client services and the development of the Bangladesh capital markets.
EBLSL has developed a disciplined approach towards providing capital market services, including securities trading, margin loan
facilities, depository services, foreign trading facilities, Bloomberg Terminal, online trading facilities, research services, panel
brokerage services, trading through NITA for foreign investors & NRBs etc.

EBLSL Key Management

Md. Sayadur Rahman Managing Director sayadur@eblsecurities.com
Md. Humayan Kabir SVP & Chief Operating Officer (COO) humayan@eblsecurities.com

EBLSL Research Team

M. Shahryar Faiz
Mohammad Asrarul Haque
Mohammad Rehan Kabir
Asaduzzaman Ashik
Md. Abdullah Al Faisal
Arif Abdullah
Farzana Hossain Laizu
FAVP & Head of Research shahryar@eblsecurities.com
Research Analyst asrarul@eblsecurities.com
Senior Research Associate kabir@eblsecurities.com
Research Associate ashik@eblsecurities.com
Research Associate faisal@eblsecurities.com
Research Associate arif@eblsecurities.com
Junior Research Associate farzana@eblsecurities.com

EBLSL Institutional & Foreign Trade Team

Asif Islam Associate Manager asif@eblsecurities.com
Khairul Alam Probationary Officer khairul@eblsecurities.com

For any queries regarding this report: research@eblsecurities.com

EBLSL Research Reports are also available on:

The Financial and Risk business of Thomson Reuters

To access EBLSL research through Bloomberg use <EBLS>

Our Locations:

Head Office: HO Extension-1: HO Extension-2:

Jiban Bima Bhaban, Modhumita Building Bangladesh Sipping Corporation

10 Dilkusha C/A, Dhaka-1000 160 Motijheel C/A (2nd (BSC) Tower
Floor) 2-3, Rajuk Avenue (4th floor),
+8802 9553247, 9556845
Dhaka-1000. Motijheel,
+8802 47111935; +88 02 9569480, 9564393, Dhaka-1000
FAX: +8802 47112944 +88 02 8825236 +880257160801-4
info@eblsecurities.com

Dhanmondi Branch: Chattogram Branch:

Sima Blossom (4th Floor) House # 390 (Old), 3 (New), Suraiya Mansion (6th Floor);
Road # 27 (Old), 16 (New), 30, Agrabad C/A
Dhanmondi R/A, Dhaka-1209. Chattogram-4100
+8802-9130268, +031 2522041-43
+8802-9130294