Master of Professional Finance (MPF) Program

Assignment on Equity Investment

Topics: Pharmaceutical Industry of Bangladesh

Submitted To:
Dr. Gazi Mohammad Hasan Jamil
Professor
Department of Finance
University of Dhaka

Submitted By:
GROUP: 2
ID Name
03-16-043 Khandakaer Shahadat Anwar Tamal
09-19-002 Monmoth Dutta
09-19-019 Rakhal Debnath
09-19-020 Abul Kalam Azad
09-19-027 Panchali Das
09-19-030 S.M.Shahidul Alam

Date of Submission:
 Letter of Transmittal

Date:
Professor Dr. Gazi Mohammad Hasan Jamil
Master of Professional Finance (MPF) Program
Department of Finance
University of Dhaka

Subject: Letter of Transmittal

Dear Sir,
We have completed our report on Equity Investment on Pharmaceutical Industry of
Bangladesh as per your instruction. The report and analysis is prepared according to your
instructions and Guidelines. This report contains porter’s five forces, SWOT analysis, ratio
analysis, Common Size Analysis, Trend Analysis of these three companies.
It gives us immense pleasure to prepare this report. As there was a time and privacy limitation,
we work hard to make a clear picture of management practice on accounting. Relevant
information’s were gathered from respective company’s website.
If you require any further clarification or information in this regard, we will provide you as per
requirements.
Thanking you
Yours faithfully,
ID Name Signature
03-16-043 Khandakaer Shahadat Anwar
Tamal
09-19-002 Monmoth Dutta
09-19-019 Rakhal Debnath
09-19-020 Abul Kalam Azad
09-19-027 Panchali Das
09-19-030 S.M.Shahidul Alam
Table of Content
 Acknowledgement

All praises are for the almighty Allah. We are really grateful to Him in all regards. Here, we
thank the almighty that Allah has given us the strength and ability to prepare this case study
timely. We express our thanks to our honorable Course teachers for assigning us a case study
dealing with a very important issue. Without his kind supervision, this Paper would not come in
light. We also do sincerely declare that this Paper has been submitted, in partial fulfillment of the
requirement for the Equity Investment course of MPF degree. We collected much information
from annual reports of selected companies.
 Chapter 1: Introduction

1.1 Origin of the Study

The pharmaceutical industry in Bangladesh is one of the most developed technology sectors
within the country. Manufacturers produce insulin, hormones, and cancer drugs. This sector
provides 97% of the total medicinal requirement of the local market. The industry also
exports medicines to global markets, including Europe. Pharmaceutical companies are
expanding their business with the aim to expand the export market.
 Our target industry is Pharmaceutical industry in Bangladesh. And on the basis of Market
capitalization we have chosen Renata limited as our target company. Renata owns the
property of Pfizer in Bangladesh and has a promising future in the post covid pharma
market. As per the current market capitalization, the top five companies are bellow. For
Benchmarking Square Pharma has been chosen as market Leader Company and Beximco
as the peer company of Renata limited. (data source-www.investing.com)

Market Capitalization(B)

ORION(ORIO)

Beacon (BEAC)

Beximco(BXPH)

Renata(RNTL)

Square(SQPH)

0 50 100 150 200 250

Market Capitalization(B)

 Reneta Limited :

Renata Limited (formerly Pfizer Limited) is one of the leading and fastest growing
pharmaceutical and animal health product companies in Bangladesh. The company started its
operations in 1972 as Pfizer (Bangladesh) Limited. In 1993, Pfizer transferred the ownership
of its Bangladesh operations to local shareholders and the name of the company was changed
to Renata Limited.

The core businesses of Renata Limited are human pharmaceuticals and animal health
products. In Bangladesh, it is the 4th largest pharmaceutical company and the market leader
in animal health products. In addition, Renata products are exported to Afghanistan, Belize,
Cambodia, Ethiopia, Guyana, Honduras, Hong Kong, Kenya, Malaysia, Myanmar, Nepal,
Philippines, Sri Lanka, Thailand, United Kingdom, and Vietnam. Renata is a publicly traded
company on the Dhaka Stock Exchange with a market capitalization of over US$1 Billion.
Renata has two subsidiaries, Purnava Limited and Renata Agro Industries Limited. The
company has ten manufacturing facilities spread over three manufacturing sites. 19 depots
carry out distribution of products across the country.

 Beximco Pharma :

Beximco Pharmaceuticals Ltd also known as Beximco Pharma, is a pharmaceutical company

in Bangladesh. It is part of the Beximco Group of Companies. Beximco Pharma was founded
in 1976 and started operations in 1980, manufacturing products under the licenses
of Bayer AG of Germany and Upjohn Inc. of United States. Today Beximco Pharma
manufactures and markets its own branded generics for several diseases
including AIDS, cancer, asthma, hypertension, and diabetes for both national and
international markets. It was the first drug company from Bangladesh to sell its products in
the US. In May 2020, the company introduced world's first generic remdesivir for COVID-
19 treatment. Beximco Pharma is the first company gets production and marketing
authorization for Molnupiravir, the first and only specific oral anti covid drug in Bangladesh
along with Eskayef Pharmaceuticals. Beximco Pharma's branded generic version
of molnupiravir is being marketed as Emorivir.

 Square Pharmaceuticals Ltd. is a Bangladeshi multinational pharmaceutical company.

It was founded in 1958 by Samson H. Chowdhury along with three of his friends PK
Saha, Kazi Harunur Roshid and Radhabinod Rai as a private firm. It went public in 1991
and is listed on the Dhaka Stock Exchange and on the Chittagong Stock Exchange (ID of
 SPL: 13002) Square Pharmaceutical started to export different antibiotics and medicine
across the world from 1987. Now it exports its medicine to 36 countries of the world.
In 2008 and 2009 it had the highest market share in the pharmaceutical industry of
Bangladesh. For the last couple of years, it has been seeing double digit revenue every
year. The Forbes list said Square Pharmaceutical Company of Bangladesh, involved in
drug and chemical business, has sales volume worth $512 million. The local pharma's
market capital is $1.7 billion. Its net income is $150 million and has employed 9,234
people.

1.2 Objective of the Report

a) Primary objective: Analyzing Financial Statements of three companies.

b) Secondary objective: Taking a product, quality, Market and investment decision and find out
which company is performing well.

1.1Data Source :

Main source of information of the three companies is Annual Report. The annual financial report
present financial data of a company's position, operating performance, and funds flow for an
accounting period .We use the annual reporting of three companies for the year 2018-2019and
2019-2020. We used some data from balance sheets for different kind of ratio such as liquidity
ratios, asset management ratios, debt management ratios. In contrast, we was used some sources
from income statement. All types of ratio are most important for how well a company to generate
its assets, liquidity, revenue, expense, shareholder equity profit or loss etc. We compared
financial ratios of two companies and recommended which company is doing better from another
company.
We use some data from IVQA. We used data from www.Investing.com
https://www.dhakatribune.com/business/stock/2021/10/30/leading-pharmaceuticals-dominating-
post-covid-stock-market
1.4 Time Frame:
This report is based on 3 years’ data for Renata Limited., Beximco Pharma, Square Pharmaceuticals
Ltd.

1.1Methodology:

This report is to use Industry Analysis (Porters Five Forces Model Structure, Competitive
Structure Industry) ratio analysis, common size analysis, and trend analysis of financial
statements of these three companies. We compared financial ratios of three companies and
recommended which company is doing better from another company.
1. Porters Five-Factor and SWOT analysis of Pharmaceuticals Industry.
Ans : PORTERS FIVE FORCES ANALYSIS - PHARMA INDUSTRY Using Porter's Five
Forces we can analyse the scope of the pharmaceutical industry. It looks into five factors
namely, competitive rivalry, threat of new entrants, threat of substitute products, bargaining
power of suppliers and bargaining power of customers.
1. Threats of entry posed by new or potential competitor ( Low)
Threat of New entrants: This force determines how easy (or not) it is to enter a particular
industry. If an industry is profitable and there are few barriers to enter, rivalry soon
intensifies. When more organizations compete for the same market share, profits start to
fall. It is essential for existing organizations to create high barriers to enter to deter new
entrants. Threat of new entrants is low.
 To enter into the Pharmaceutical industry in Bangladesh requires a huge amount
of Capital and this would create a significant barrier to the market.;
 National Drug Policy 2016, which replaced Drug Policy 2005 that focuses largely
on controlling counterfeit and adulterated drugs, requires firms produce drugs
with international standard. This puts a barrier to high and threat to a low level.
 The Drug Administration permission to establish a new firm is highly regulated
that keeps
 Although Customer switching costs are low (it doesn’t cost a lot of money for a
firm to switch to other industries) the customers are loyal to the brands.
 Economies of scale from the reputed industries also put the new entrants a huge
barrier.
 Access to distribution channel creates further barrier. This causes threat
of new entrants in the industry significantly low.
2. Degree of rivalry among existing firms (HIGH)
The degree of rivalry among existing firms is a HIGH Competitive force High rivalry
among main companies in the industry. Top companies dominates the major share of the
 Market Share of Top Five company

5.20% 4.80% 4.20% 3.40% 2.80%

5.20% 5.10% 5.00% 5.30% 5.50%
8.30% 8.40% 8.40% 8.60% 8.50%

11.10% 10.60% 10.30% 10.20% 10.30%

17.00% 17.02% 18.20% 18.70% 18.60%

Square Incepta Beximco Renata Health Care

market The market share of top five player for last five years

This force is the major determinant on how competitive and profitable an industry is. In
competitive industry, firms have to compete aggressively for a market share, which results in low
profits. Rivalry among competitors is intense in the Bangladesh market.

Doctor Reach Prescription Share

Health
Health Care 36.00% Care

Renata 44.00% Renata

Beximco 53.00% Beximco

Incepta 55.00% Incepta

Square 74.60% Square

 There are many competitors.

 Exit Barriers are high.
 Industry growth is slow or negative.
 Products are not differentiated and can be easily substituted.
 Competitors are of equal size.
 Low Customer Loyalty.

3. Bargaining power of buyers (Medium)

  Hospitals & other health care organizations buy in bulk quantities and exert
pressure on pharmaceutical companies to keep prices in check.
 . Pharma companies are free to set up the price of other drugs. The patient
typically
depends on the prescription provided by physicians. Thus they have no choice to
take alternative medicine.

4. Bargaining power of Suppliers : ( High)

 Currently, Bangladesh imports 99.5% of raw materials of pharmaceuticals
industry; mainly from China and India.
 We can also source API from European supplier. But sourcing API from
European country lead to more cost.
 Concentration of the supplier and high switching cost creates high bargaining
power of the supplier.
 However, commercial operation of API Park in Munshiganj will certainly
decrease import dependency for raw material. Hence, bargaining power of
supplier is expected to decrease in future Switching costs to other supplier are
low;

5. Threat of substitutes.( Medium)

This force is especially threatening when buyers can easily find substitute products with
attractive prices or better quality and when buyers can switch from one product or service
to another with little cost. For example, to switch from coffee to tea
 ALternative prduct

Homeopathic Unani Ayurvedic Herbal Allopathic

Manufacturer Registered Drugs: Retail Pharmacy wholesale Pharmacy

does not cost anything, unlike switching from car to bicycle.

2. SWOT Analysis of pharmaceutical industry in Bangladesh

ANS:

The SWOT analysis of the industry reveals the position of the Bangladesh pharmaceutical
industry in respect to its internal and external environment.

Figure 1.2: SWOT Analysis of pharmaceutical industryin Bangladesh

Strengths

1. Market Expansion: The growth of middle class in the country has resulted in fast
changing lifestyles in urban and to some extent rural centers. This opens a huge market for
lifestyle drugs, which has a very low contribution in the Bangladesh market.

2. Lowest Cost and scalable labor force: Bangladesh pharmaceutical manufacturers are
one of the lowest cost producers of drugs in the world. With a scalable labor force,
Bangladesh manufacturers can produce drugs at 40%to50% of the cost to the rest of the
world. In some cases, this cost is a slow as 90%.

3. Good Transportation: Excellent transport-link the ease of access to/from the company.

4. Creating Strong Brand: Some companies have a good reputation in the market. Some
companies have strong brand reputation in the market, these industries have well known
brand in the market. Some companies of the pharmaceuticals industry have got the license of
the global brand. Such as Health care Pharmaceuticals Company limited manufacture the
brands of the F.Hoffmann-LaRoche limited.

5. Skill Workforce and Process: Bangladeshi pharmaceutical industry posses ‘excellent

chemistry, skilled workforce and process reengineering skills. This adds to the competitive
advantage of the Bangladeshi companies. The strength in chemistry skill helps Bangladeshi
companies to develop processes, which are cost effective.

6. Good MIS System: The pharmaceuticals industry has MIS system. These companies
have knowledge about diseases, which are available in our country. Most of the companies
are more sophisticated. They are more concern or aware about each other.

7. Good Communication and Selling Method: The pharmaceutical companies follow the
relationship selling method. The company representatives try to motivate the doctors to
prescribe the in medicine for the patients. The medical representatives of the pharmaceutical
companies maintain the relationship with the doctors.
8. Loyalty for customers and vendors: The pharmaceutical industry has the loyalty of the
customers and vendors. Drug is essential for life. So these companies have certain markets to
sell the medicines in Bangladesh.

9. Creating Competitive Advantages for strong manufacturing capacity: These

industries have some competitive advantages over the other industries. The pharmaceutical
industries have strong manufacturing capacities.

10. Qualityful Control Systems: Most of the companies have the quality control system.
They are committed to formulate and supply drugs and formulations in a qualified manner.

11. Latest Technology: Latest technologies are installed in the pharmaceuticals sector in
Bangladesh. Some companies in our country got the technical guidance from the globally
reputed pharmaceuticals company. For example, the Healthcare pharmaceuticals company
manufactures the drugs with the active support and technical guidance of the globally reputed
pharmaceuticals company F. Hoffmann-La Roche Limited, Basel, Switzerland.

12. Designing MDI PLANT: Beximco Pharmaceuticals Company introduced the Metered
Dose Inhalation Aerosols for the first time in Bangladesh by commissioning of its state of the
art Metered Dose Inhalers (MDI) plant. The MDI plant has been designed in such a way to
ensure highest possible quality at every stage of manufacturing and quality control.

13.Expanding Foreign Export Market : Some companies export medicines in many

countries of the world. For example Beximco Pharmaceuticals Company limited has obtained
the National Export Trophy (gold)for two consecutive years(1998-1999,1999-2000).
Itisagoodopportunityfor the pharmaceuticals company in Bangladesh. The export markets for
the pharmaceuticals products are Bhutan, Cambodia, Czech Republic, Germany, Iran, Iraq,
Kenya, Malaysia, Mozambique, Myanmar, Nepal, Pakistan, Philippines, Russia, Singapore,
South Korea, Sri Lanka, Thailand, Ukraine, Vietnam, and Yemen.

14. Qualityful Performances :To ensure all the qualities, a highly dedicated academically
sound and professionally competent team consisting of pharmacist, chemist, biochemists,
microbiologists and engineers are using most modern and sophisticated equipment like high
performance liquid chromatography, Gas chromatography, infrared spectrophotometer,
Ultraviolet spectrophotometer, Homogenizer, in vitro bioavailability tester, Lung simulator,
Disintegrator, Dissolution test errand many other latest computer aided quality control
instruments and diseases.

15. Strong Distribution Systems: The distribution systems of the pharmaceuticals company
are strong in Bangladesh. Some medicines require quick transportation services. Otherwise it
will damage. The companies have depots through which the company distributes the
products all over the 64 districts in Bangladesh.

Weaknesses

1. Rules or Regulations of Market: The Bangladesh pharmaceutical industries are marred

by the price regulation. Over a period of time, this regulation has reduced the pricing ability
of companies. The DGDA (Directorate General of Drug Administration),which is the
authority to decide the various pricing parameters, sets prices of different drugs, which leads
to lower profitability for the companies. The companies, which are lowest cost producers, are
at advantage while those who cannot produce have either to stop production or bear losses.

2. Lack of Product Patent or innovation: Bangladesh pharmaceutical sector has been

marred by lack of product patent, which prevents global pharmaceutical companies to
introduce new drugs in the country and discourages innovation and drug discovery. But this
has provided an upper hand to the Bangladesh pharmaceutical industry.

3. Slow Market Growth: Bangladesh pharmaceutical market is one of the least penetrated
in the world. However, growth has been slow to come by. As a result, most of the
pharmaceutical companies are relying on exports for growth.

4. Low Financial Position: Most of the pharmaceutical companies are in low financial
positions, Due to the low financial position; it is not possible for some companies to install
the latest technology in their premises.

5. Unskilled Workforce: Some of the pharmaceutical companies are in unskilled

workforce. As a result these companies cannot minimize the cost of the production.
6. Price Competition: Due to very low barriers to entry, Indian pharmaceutical industry is
highly fragmented with about 250 large manufacturing units and about 18,000 small units
spread across the country. This makes Bangladesh pharmaceutical market increasingly
competitive. The industry witnesses price competition, which reduces the growth of the
industry in value term. To put things in perspective, in the year 2004 the industry actually
grew by8.6%.

7. Difficult to maintain quality: Most of the companies do not up to date their

machineries, they perform their activities with the traditional machineries, and so it is
difficult to maintain the quality of the medicines.

8. Huge Cost of Production: Some of the companies in this industry have the rented
premises, as a result it add costs to the production. So the selling prices are increasing day by
day.

9. Lack of innovative effectiveness: Innovative effectiveness is low in our country due to

the lack of the sophisticated equipment, lack of the capital, lack of the skilled manpower, and
the lack of the professional in our country.

10. High imported and traded Cost: Sometimes per unit cost of the medicines are higher
than the imported medicines. The selling prices of the medicines become higher. So the
domestics company has to fight with the multi-national companies.

Opportunities

The SAARC region, Bangladesh stands out a sanction with a vast potential to become a
leading pharmaceutical producer. Currently the country is producing mostly the drug
formulation sand nearly 250 units are engaged in this activity. The production by these units
is adequate to meet almost 95 percent of the national requirements. With many large
pharmaceutical units, the international manufacturing standards are largely absent amongst
most of the small units .Regulatory procedures are yet to fully evolve. However companies
like Beximco Pharmaceuticals, Square Pharmaceuticals, etc are now trying to adopt
international manufacturing standards in their facilities.
New drug policy will help to expand pharmaceuticals industry: Life saving international-
standard drugs are now being produced in Bangladesh and the country is about to achieve
self-sufficiency in production of pharmaceuticals. Unveiling the plaque of an essential
medicine-producing project there, The Essential Drugs Company Limited (EDCL) is already
supplying drugs to different international organizations and also exporting abroad.

After implementation of the new policy, the industry would further expand and generate new
job opportunities in the country. As a least developed country Bangladesh would get
opportunity to produce patent medicine still2 016.

BAPI Eyes to expand Pharmaceutical Markets: Bangladesh is now exporting

pharmaceuticals to about 30 countries and also eyeing expansion of more markets next year.
Bangladesh had started exporting pharmaceuticals to some neighboring countries like
Myanmar, SriLanka and Nepalin the1980s and since thenthe export to
marketexpandinggradually.

Bangladesh Association of Pharmaceutical Industry (BAPI) said that the country would get
the opportunity for exporting pharmaceuticals and other related items to India and China and
other countries next year. Bangladesh is, among the 49 least developed countries (LDCs),
which has the strongest base of manufacturing pharmaceuticals and so the country would get
share of exporting the items after the global market will open up for all in the year
2005.Besides, the regular brands, Bangladesh are also exporting high-tech specialized
products like inhalers, suppositories, Nasal Sprays, injectables and infusions.
Threats

1. Concerns over the patent: There are certain concerns over the patent regime regarding
its current structure. It might be possible that the new government may change certain
provisions of the patent act formulated by the preceding government.

2. Intense competition: The competition is increasing day by day in the pharmaceuticals

sector. So the pharmaceutical companies have to face competition in the market.

3. Cost of the wages: the basic wages, so it effect on total cost of the production and it will
increase the selling prices of the medicines.

4. Increasing the interest rate: the interest rate of the bank is increasing day by day. So the
investors do not agree to borrow from the bank.

5. Threats from other low cost countries: Threats from other low cost countries like
China and Israel exist, so, differentiation in the contract manufacturing side may wane.

6. Uncertainty regarding the implementation of VAT: The short-term threat for the
pharmaceutical industry is the uncertainty regarding the implementation of VAT. Though
this is likely to have a negative impact in the short- term, the implications over the long-term
are positive for the industry.

7. Wrong Focus: There is a worrying development in the industry. Some companies appear
to be focused on the maximization of short-run sales as opposed to long-run profits. This
shift in focus is never good for the industry.

8. Bad selling practices: Bad selling practices in the pharmaceuticals industry by some
companies are likely to dampen the market growth.

9. Lower Industry Growth: The pharmaceuticals sector attained a lower growth rate of
8.6% only during the year 2004 as against 5.90% during the previous year.
 10. Fast changes in customer choices: Existing product become unpopular run fashionable,
the quality or the ingredients of the medicines are changing day by day. So the company has
to face the losses.

3. Ratio Analysis
Liquidity Ratio

Ratio  Year Square Renata Beximco

Overall Liquidity 2020 13.57 1.27 1.28
(40% CR 60% QR) 2019 12.00 1.32 2.77
2020 14.62 2.53 1.38
Current Ratio(CR)
2019 12.93 2.67 2.82
2020 12.86 0.43 1.21
Quick Ratio(QR)
2019 11.38 0.41 2.73
Renata's Over all liquidity position for the year is not changed much and it is more than
1 . It means Renata is well in position to meet up its current liability with current asset.
However, the quick ratio is less than 1 means inventory is piled up and settling the
liabilities with current assent is not adequate. On the other hand square pharma is too
liquidity is not good as well and Beximco is doing well.
 Liquidity Ratio
16.00

14.00

12.00

10.00

8.00

6.00

4.00

2.00

0.00
2020 2019

Square Renata Beximco

Operating Efficiency ratio

RATIO YEAR Square Renata Beximco

Operating Efficiency 2020 16.95 10.21 2.01
(Weight-RT-30%IT-30%-PT30% FAT-10%) 2019 17.61 11.73 1.02
2020 30.2 9.5 0.8
Receivable turnover Ratio
2019 28.2 9.8 0.5
2020 10.29 5.20 4.24
Inventory turnover Ratio
2019 11.27 5.60 0.74
2020 35.47 23.46 1.20
Payables turnover Ratio
2019 35.58 27.99 1.87
2020 0.69 2.20 0.16
Fixed Asset Turn Over Ratio
2019 2.46 2.24 0.70
Renata's Over all Operational Efficiency position for the year is not changed much and it is more than 1 . It
means Renata is well in position to meet up its Working Capital to generate the Revenue . However the
access working capital might be more than cost of capital depends on the financial leverage.
 Operating Effi ciency
17.61
16.95

11.73
10.21

2.01
1.02

Square Renata Beximco

Financial Efficiency

10.0
2020 76281.24 0.90
Overall Financial Efficiency 1
(65% Fin Leverage. 35% Interest .Coverage ) 13.0
2019 90653.66 22.04
2
2020 0.94 0.74 0.49
Equity/Total Assets Ratio
2019 0.94 0.63 0.02
2020 0.06 1.24 1.04
Debt/Equity Ratio
2019 0.06 1.23 66.37
Financial Leverage Ratio 2020 0.50 0.99 0.76
(50% E/TA- R 50% D/E- R) 2019 0.50 0.93 33.20
26.7
2020 217945.46 1.16
6
Interest Coverage
35.4
2019 259009.51 1.31
7
Renata is highly geared firm. They should be concerned on the high interest expenses. There has been
contrasting scenario on the competitor. As Square is mainly all equity firm and Beximco is mainly
relying on the Debt.
 Growth and Profitability Ratio

Ratio  Year Square Renata Bexim

co
Growth And Profitability (Sales-25%, 2020 0.90 2.97 0.02
Profitability-40%Margin-35%)
2019 3.54 8.18 11.33
Sales Growth 2020 0.04 0.09 0.12
2019 0.11 0.19 0.29
Operating Profit growth 2020 0.04 0.12 0.17
2019 0.10 0.14 0.15
PAT Growth 2020 0.09 0.08 0.17
2019 0.10 0.16 0.17
ROA Growth 2020 -0.08 -0.04 -0.16
2019 -0.06 0.03 -0.02
ROE Growth 2020 -0.07 -0.08 -0.68
2019 -0.07 -0.01 0.11
Profitability Growth 2020 -0.01 0.02 -0.13
(Op35%,PAT 35%ROA15% ROE15%) 2019 0.02 0.08 0.10
Operating Profit Margin 2020 0.32 0.25 0.18
2019 0.32 0.24 0.17
PAT Margin 2020 0.28 0.17 0.14
2019 0.27 0.17 0.13
Operating expense/Sales 2020 0.19 0.23 0.04
2019 0.18 0.26 0.04

Margin Growth 2020 0.25 0.22 0.11

(OPM-30% PAT M30% Sales/Op EX 40%)
2019 0.25 0.23 0.11
 Profitability and Growth Ratio

Square Renata Beximco

The Growth in 2020 is significantly low. Because of the ROE and ROA, growth is
negative. We understand that due to the Shutdown of the chamber of the doctors
only lifesaving drugs were sold. Thus, the sales growth is lower resulting all the
returns growth are lower. However, the companies keeps their profit margins
same.
 4. Common size analysis Tabular Form
Balance Sheet
Beximco Square Renata
Detail 2020 2020 2020 2020 2020 2020
2020 2020 2020 2020 2020 2020
Cmn Size Cmn Size Cmn Size Cmn Size Cmn Size Cmn Size
cash 299 0.2% 350 0.27% 32,564 39.80% 27,004.0 37.43% 1,373 5% 798 3%
A/R 28,092 21.4% 51,729 40.27% 1,520 1.86% 1,561.8 2.16% 2,544 9% 2,266 9%
Inventories 7,268 5.5% 2,782 2.17% 5,687 6.95% 4,596.5 6.37% 5,127 18% 4,172 17%
Total CA 57,579 43.9% 87,211 67.89% 47,384 57.91% 38,411.6 53.24% 15,313 53% 12,337 51%
Gross FA 72,185 55.0% 40,937 31.87% 22,844 27.92% 22,729.5 31.50% 17,355 60% 14,915 62%
Depriciation 16,533 12.6% 15,052 11.72% 1,970 2.41% 1,875.5 2.60% 5,601 19% 4,687 19%
Net FA 55,652 42.4% 25,885 20.15% 20,874 25.51% 20,854.0 28.91% 11,754 40% 10,228 42%
Total Asset 131,144 100.0% 128,453 100.00% 81,820 100.00% 72,146.1 100.00% 29,045 100% 24,201 100%

120.00%
100.00%
80.00%
60.00%
Series1
40.00%
Series2
20.00% Series3

0.00%

Asset Portion

Explanation- The cash position of Renata is 4.7 percent of total asset which good.
Beximco has very low cash on the other hand Square has 39 percent of their total asset in
the form of cash means they are in good position to invest in the profitable project.
Renata has very high percentage of inventory held up in term of Total asset and their
receivable percentage is high. Square is in good shape and it seems that they do the all
cash sales strategy.
The fixed asset percentage of Renata and Beximco is identical however Square holds
only 25 percent of Fixed asset.
 In summary, we can say that Renata and Beximco should focus on receivable and
inventory management in contrast Square can buy more Fixed asset with their cash to
invest in future growth project.

Beximco Square Renata

Detail 2020 2020 2020 2020 2020 2020
2020 2020 2020 2020 2020 2020
Cmn Size Cmn Size Cmn Size Cmn Size Cmn Size Cmn Size
Accounts Payble 13,173 10% 9,985 8% 553.79 0.68% 716.99 0.99% 509 2% 568 2%
Total Cur Liabi 41,624 32% 30,907 24% 3,241.55 3.96% 2,971.09 4.12% 6,062 21% 4,613 19%
Total Liabilities 66,731 51% 64,038 50% 4,514.30 5.52% 4,265.44 5.91% 7,505 26% 5,916 24%
Liabilities Common Sock 8,736 7% 185 0% 8,442.39 10.32% 7,890.08 10.94% 886 3% 805 3%
retain earning 16,981 13% 16,957 13% 64,981.07 79.42% 55,492.80 76.92% 20,545 71% 17,300 71%
Total Equity 64,413 49% 64,415 50% 77,305.84 94.48% 67,880.62 94.09% 21,539 74% 18,285 76%
Total Lia & Equi 131,144 100% 128,453 100% 81,820.14 100.00% 72,146.05 100.00% 29,045 100% 24,201 100%

120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00% Series1
Series2
Series3

Liabilty Portion
Explanation: It seems that Renata has a 74:26 debt /Equity and Beximco 50:50 and
Square has almost all equity firm.
In Summary we can say that Renata can raise some debt to invest in the growth project.
 Common size analysis Tabular Form
Income Statement
Beximco square Renata
Details
20202020 common size 20202020 common size 20202020 common size
Sales 21,305,688,558 100.00% 52,926,218,655 100.00% 24,164,022,473 100.00%
COGS 13,891,162,203 65.20% 22,536,669,960 42.58% 12,632,907,753 52.28%
Other exp 907,305,994 4.26% 8,609,357,322 16.27% 5,560,432,008 23.01%
EBITDA 7,717,987,849 36.23% 16,700,547,631 31.55% 6,885,887,039 28.50%
depri & Ammort 1,480,767,487 6.95% 1,970,126,072 3.72% 915,204,327 3.79%
Income Statement EBIT 6,237,220,362 29.27% 14,730,421,559 27.83% 5,970,682,712 24.71%
interest exp 5,390,501,231 25.30% 107,090 0.00% 223,159,798 0.92%
taxable income 806,339,172 3.78% 16,997,582,524 32.12% 5,992,007,966 24.80%
tax 328,624,790 1.54% 4,251,005,177 8.03% 4,251,005,177 17.59%
Net Income 477,774,382 2.24% 13,354,413,889 25.23% 4,129,595,803 17.09%
Common Dividend 438,159,440 2.06% 3,313,835,557 6.26% 805,356,750 3.33%
Income Statement Portion

Explanation-Renata has COGS of 52 percent and other expenses of 23 percent which is

much higher then that of the competitor . If Renata focuses on cost reduction or cost
 optimization technique in the operation that will help their EBTIDA much better from 28
Percent and close to their competitor. The Such indicator for Square and Beximco is
close to 32 percent and 36 percent respectively.
The net income for Renata is 17 percent that is due to the high tax percentage of Renata.
If renata invest its future project with some debt that can reduce the tax burden .

5. Trend Analysis
Revenue

2020 2019 2018 2017 2016

 The net revenue of Renata as well as the industries are growing over the five year period.
Square Pharma maintained a steady growth as a market leader. However The peer
companies sales was not steady over the period.
 We can understand the sales turnover position if we look at the revenue growth trend.

Revenue Growth Trend

29%

19%

14%
12% 12% 13%
12%
11% 10%
9% 9%
4%
Square Beximco Renata 0%

Revenue grows for Renata in a steady line of average 10%. Although in 2020 it was only 4
%.However the market leader squares growth also down from 18% to 9 percent and for Beximco
it is Halved as well. So we can conclude that growth in sales on 2020 were not good..

Growth of EBIT

Square Beximco Renata

EBIT grows for Renata in last two year steady line of average 10%. Squares grown on 15% in
the 2019 however their growth of EBIT in 2020 is 4 % only this might happen due to the low
sales revenue growth.
Profit after Tax

Square Beximco Renata

The Profitability trend of the top player of the industry are almost identical. However in 2020
all the indicator for all company is halved. It is due to the covid situation. From April to July all
the Doctors chamber were closed

Dividend grown by year

$0.40

$0.30

$0.20

$0.10

$0.00
2016 2017 2018 2019 2020

-$0.10

-$0.20

Square Beximco Renata

• The dividend was grown however there was not constant growth for reneta. Square
provided increased dividend year by year.

6. Summary

After looking at the trends it can be summarized that the firm Renata is not Rapidly
growing in terms of neither revenue nor earning and also they are not investing
aggressively without paying dividend.

Instead it is apparent that their earnings and dividends are still increasing but at a slower
rate as competitive forces reduce profit opportunities and the need for reinvestment.

Thus we can conclude that our company as well as the Pharmaceutical industry of
Bangladesh is going through a Transition phase from growth to mature stage and our next
part of equity valuation forecast will be calculated on multistage dividend discount
model.