University of Dhaka

Report on Kohinoor Chemical Company (Bangladesh)

Ltd.

Course Title: Business Analysis

Course Code: PF- 608
Masters of Professional Finance (MPF)

Prepared for
Dr. M. Masud Rahman
Professor, Department of Finance

Prepared by Group 3
Name ID

S.M Shagedul Karim Fin-05-17-012

MD Imtiaz Ferdous Fin-05-17-026
Shah MD. Habibul Asad Fin-05-17-040
Al Amin Fin-06-18-006

Submission Date
19th September, 2020
19th September, 2020

Dr. M. Masud Rahman

Professor, Department of Finance

Faculty of Business Studies University of Dhaka

Dear Sir,

Subject: Submission of report on Kohinoor Chemical Company (Bangladesh) Ltd.

Dear Sir,

It is a great pleasure for us to submit a detailed report on the topic of - “Analysis of Kohinoor
Chemical Company (Bangladesh) Ltd.” - that you have asked us to prepare. We have prepared
this report, as mandatory requirement of the course - “Business Analysis”. To make this
report up to the standard, we tried our level best to fulfill the requirements by implementing
the knowledge we have gathered from class.

Thank you very much for giving us the opportunity and necessary guidance as well as
direction which were needed to prepare this type of report.

We will be highly grateful and happy, if you go through this report, give us any suggestion
and update regarding this report

Sincerely
I. S.M Shagedul Karim
II. MD Imtiaz Ferdous
III. Shah MD. Habibul Asad
IV. Al Amin
 Student’s Declaration

We, the member of this group three, the students of Masters of Professional Finance-MPF
Program at University of Dhaka declaring that this term paper on the topic of “Analysis of
Kohinoor Chemical Company (Bangladesh) Ltd.” have only been prepared for the fulfillment
of the course of – “Business Analysis” as the partial requirement of the MPF degree.

It has not been prepared for any other purpose or reward.

 Acknowledgement

We are deeply indebted to our honorable faculty Dr. M. Masud Rahman sir for his inspiring
and invaluable guidance throughout the work. We would like to thank him for all the advice,
encouragement, help and everything that we learned from him. Without him this report
would not have been possible. With his support the entire course and the term paper helped
us to increase our eagerness of learning.
 Table of Content

SL No. Particular Page No.

1 Introduction 1-2
1.1 Origin of The Study 1
1.2 Objective of The Study 1
1.3 Scope of The Study 1
1.4 Methodology 2
1.5 Tools of Analysis 2
1.6 Limitations 2
2 Industry Analysis 3-6
2.1 Overview Of Cosmetics & Toiletry Industry of Bangladesh 3
2.2 Market Size & Share of Cosmetics & Toiletry Industry 4
2.3 Companies of Cosmetics & Toiletry Industry of Bangladesh 5
2.4 Competitive Structure of the Cosmetic & Toiletry Industry in 6
Bangladesh
3 Company Analysis 7-8
3.1 Overview of Kohinoor Chemical Company (Bangladesh) Ltd. 7
3.2 Business Strategy of Kohinoor Chemical Company (Bangladesh) Ltd. 8
3.3 Major Selling Products of Kohinoor Chemical Company (Bangladesh) 8
Ltd
4 SWOT Analysis 9-10
5 Financial Statement Analysis 11-14
5.1 Kohinoor Chemical Company (Bangladesh) Ltd Financial 11-12
Position Analysis
5.2 Kohinoor Chemical Company (Bangladesh) Ltd Income 13-14
Statement
6 Cash Flow Analysis 15
7 Operating & Cash Cycle Analysis 16-17
8 Ratio Analysis 18-23
9 Sustainable Growth Rate Analysis & Forecasting With 24-25
Different Growth Rate
10 Prediction of Distress and Turnaround and Z-score 26-27
11 Conclusion 28
12 Reference 29
 Introduction

The report has three parts. The first part consists of industry analysis of cosmetics and
toiletry industry, the second part of the report consists of company analysis and the third
part of the report is various calculation of the company financial to identify the value,
expected price and ultimately the wealth maximization of the company. We have selected
Kohinoor Chemical Company (Bangladesh) Ltd. for analysis. Kohinoor Chemical Company
(Bangladesh) Ltd. belongs to cosmetics and toiletry manufacturing sector and it is the 2nd
largest Cosmetics and Toiletry company in Bangladesh.

Origin of the Study

The report has been conducted as per essential requirement of the course “Business
Analysis” offered at the MPF Program. It has been conducted in order to find out the wealth
maximization of a firm and its financial condition in terms of financial statement analysis,
cash flow analysis, operating and cash cycle analysis, ratio analysis, sustainable growth rate
analysis and forecasting with different growth rate, Z score analysis.

Objectives of the Study

 The main objective of the study is to determine the wealth maximization of a firm
and its financial condition
 To conduct such analysis several methods such as - financial statement analysis,
cash flow analysis, operating and cash cycle analysis, ratio analysis, sustainable
growth rate analysis and forecasting with different growth rate, Z score analysis.

Scope of the Study

This report will help us to find out the future perspective of the company along with industry,
also help us to determine the wealth maximization and value of the firm for its investor or
shareholder.

1
Methodology
This report is mainly a presentation of companies’ financial condition and expected wealth
maximization. So, most of the data have been collected from –
 Company’s Website.
 Annual Reports of the company.
 Dhaka Stock Exchange.
 World Bank.
 Newspaper.
 Bangladesh Bank.
 Class lecture of Honorable Course Teacher: Dr. M. Masud Rahman.

Tools of Analysis

In order to conduct the study, we have used financial tools like financial statement analysis,
cash flow analysis, operating and cash cycle analysis, ratio analysis, sustainable growth rate
analysis and forecasting with different growth rate, Z score analysis.

Limitations

In spite of having the wholehearted effort, there were some limitations that we have faced
while preparing the report.

 The first limitation that we faced while preparing the report was time constrains.
 Also we have faced information gap which we think, a major limitation while
conducting the study.

2
 Industry Analysis

Overview of Cosmetics & Toiletry Industry of Bangladesh

Cosmetics and toiletries industry is one of the major economic sectors in Bangladesh, which
contributes at the national economy. In Bangladesh, International Cosmetics and Toiletries
brands are playing a dominant role at the upper-end market. Here, pricing of the Cosmetics
and Toiletries are playing a vital role at the market. Rich and solvent buyers are reluctant to
buy local products. On the other hand, most local manufacturers are producing lower-priced
toiletries and perfumes with their own brands, and focus on the middle-to-low price market
segments. Cosmetics known as are care substances used to enhance the appearance of the
human body. They are generally mixtures of chemical compounds, some being derived from
natural sources, many being synthetic. Although modern make-up has been traditionally
used mainly by women, an increasing number of males are gradually using cosmetics usually
associated to women to enhance or cover their own facial features. Locally produced
toiletries now play a significant role in a sector that has been dominated by imports in the
past. Most of the products in this sector are common consumer goods which have a large
demand in the domestic market. Imports of cosmetics and toiletries are targeted mostly to
the middle and high-end segments of the market. Most of the local customers are quite happy
with the domestic products as long as product performance is satisfactory and the price is
reasonable. While most of the manufacturers focus primarily on meeting the demands of the
local market, some firms have started exporting cosmetics and toiletries products from
Bangladesh. A large number of firms produce toiletries products like toilet detergent,
cosmetics and other perfumes. However, only few firms control 95 % of the market share.
These firms are Unilever, Keya Cosmetics, Kohinoor Chemical Company, Lalbag Chemical
company, Mousumi industries, Millat chemicals, Reckitt Benckiser Bangladesh Ltd and
Squares Toiletries.

3
Market Size & Share of Cosmetics & Toiletry Industry

In Bangladesh the cosmetics and toiletries market is around 9000 core BDT and the Unilever
Bangladesh captures almost 60% of it. The local companies also give it good run for money.
The major players of local markets are Square toiletries ltd, Kohinoor chemicals ltd, Keya
cosmetics limited, and Mousumi industries limited. Unilever capture more than 60% of the
market share. Kohinoor, Square, and Keya have 20%, 15%, 5% of share respectably
(approximate). The cosmetics and toiletries industries depend on import chemical for
manufacturing process. Besides some local company also provide some chemicals for this
purpose. Basically 90% of the chemicals are imported chemicals and these chemicals are
generally come from India and China for their low price and low distribution cost. Besides
some companies who has positioned themselves as quality service provider import chemical
from Germany, France, Malaysia, Indonesia, Italy UK and USA.

Source: Bangladesh Bureau of Statistics

4
Companies of Cosmetics & Toiletry Industry of Bangladesh

Companies that exist in cosmetics and toiletry industry are-

 Unilever
 Kohinoor Chemical Company (Bangladesh) Ltd.
 Square Toiletries Limited
 Keya Cosmetics Ltd.
 Reckitt Benckiser Bangladesh Ltd
 ACI Limited
 Aromatic Cosmetics Ltd
 Kashem Cosmetics Ltd
 Lily Cosmetics Ltd.
 Kallol Cosmetics LTD.

5
Competitive Structure of the Cosmetic & Toiletry Industry in Bangladesh.

Threat of new entry (Low)-

The cosmetic and toiletry industry has relatively a low threat of new entrants. This is due to
several factors. The first is the huge costs of entry. Developing unique products requires a lot
of resources both in terms of research and development and the actual manufacturing
process. Few middle and small scale firms have access to the funds and expertise required
to perform this effectively. Another factor which discourages entry into this industry is the
huge competition present in the industry.

Bargaining power of customers (High)-

There is a high bargaining power of customers cosmetic and toiletry industry. This is due to
the increase competition and availability of products from a variety of manufacturers. Since
these products have high substitutes, then it is possible for consumers to force
manufacturers to reduce their product prices through purchasing those of their competitors.
This is a challenge which manufacturers of this industry face across the world.

Bargaining power of suppliers (High)-

This happens due to the high number of market players and large supply of diverse products
to the market. There are many cosmetic and toiletry products which are developed by both
large and small scale manufacturers. Due to the huge supply, consumers have the power to
influence the market prices as opposed to the suppliers.

Threat of substitutes (High)-

The threat of substitutes in cosmetics and toiletry industry is high, because of similar
products developed by competitors which satisfy the market needs. When consumers have
access to substitute products which can satisfy their market needs, then manufacturers and
suppliers lose their bargaining power. Consumers are able to purchase competitor’s
products if they are not satisfied with product price or quality. In order for suppliers to tackle
the challenge of threat of substitutes, they have to innovate products which meet the needs
of their target market segments.

6
 Company Analysis

Overview of Kohinoor Chemical Company (Bangladesh) Ltd.

Kohinoor Chemical Company (Bangladesh) Limited (KCCL) established in 1956. The
management of KCCL subsequently completed an arduous BMRE program with the technical
collaboration of a reputed industrial conglomerate of Europe. This enabled the enterprise to
become a repositioned cosmetics and toiletries manufacturing company of Bangladesh with
the most advanced technology. It is a Public Limited Company, listed with both the bourses
of Bangladesh, the Dhaka Stock Exchange and the Chittagong Stock Exchange.

Most of the products of KCCL are known by the legendary brand name Tibet A number of its
other brands, such as Sandalina, Genstar, Bactrol, Ice Cool, Fair 8 Care, Xpert, Heel Guard and
Clean Master are equally famous in Bangladesh.

To strengthen the marketing activities of KCCL, the management has rearranged its
distribution system to deliver quality products throughout the country, as well as looking for
regional and overseas markets. At the same time the management has revamped the
Research 81 Development and the Quality Control departments to attain greater degrees of
excellence for all the products, batch by batch...piece by piece.

Kohinoor Chemical Company (Bangladesh) Limited (KCCL) has not only emerged as a potent
industrial entity, but also represents the brand of the mass peoples Intensifying quality
production and penetrating new markets both at home and abroad, the company advances
forward with the introduction of new products and further development of its existing items.

7
Business Strategy of Kohinoor Chemical Company (Bangladesh) Ltd.

The company follow Cost leadership strategy as its product price has slightly lower than its
competitor. The following factor gave the company the capability to sell at lower price than
its competitor.

 Economy of scale.
 Comparatively low R&D expenditure.
 Lower input & distribution cost.
 Develop new formulations
 Simplify manufacturing processes
 Bringing cost efficiency

Major Selling Products of Kohinoor Chemical Company (Bangladesh) Ltd

KCCL holds eight major items among the top hundred brands in Bangladesh and the highest
selling product of this company is toilet soap and detergent powder which is the brand Tibet.
Out of eight items these two items generated BDT 1,739 million (from soap) and BDT
1,718 million (from detergent powder) sales for the company which constitute around
44%.

Particular BDT (in Million) %

Toilet Soap 1,739 43.5%
Detergent Powder 1,718 43%
Washing Soap 683.26 17.1%
Snow & Cream 168.61 4.2%
Powder 159.27 4%
Hair Oil 77.04 1.9%
Miscellaneous 63.42 1.6%
Shaving Cream 12.86 0.3%
Tooth Paste 8.33 0.2%

8
SWOT Analysis

A SWOT analysis is overall evaluation of the company’s Strengths, Weakness, Opportunities

and Threat. Strengths and Weakness are internal value creating (or destroying) factors such
as assets skills or recourses etc. And Opportunities and thereat are external value creating
(or destroying) factors a company can’t control. The SWOT analysis of KCCL will be discussed
below:

Strength of KCCL

 KCCL has good quality and hygienic products.

 It has advanced technology.
 It has good brand name Tibet.
 Pioneer in manufacturing high quality beauty and personal care products in this
subcontinent.
 Strong and qualified management.
 Commitment to be directed towards to quality service.
 Competitive price/commission.
 Trained salespeople and committed employees to customer.
 Forward looking and continuous development.
 Organizational culture to value the customers most.
 Product recognition already exists in customer mind.

Weakness of KCCL

 Difficult to manage large employees.

 High cost for the training of the salespeople.
 Less attractive packaging in case of some laundry shop.
 Absence of teamwork between branches.
 Heavily depends on head office for decision making.
 Lack of incentives and rewards from the management section.
 Sometimes Lack of Motivation of workers.

9
Opportunities of KCCL

 Expand market internationally.

 It can Increase the demand in the customer mind through most visible advertising.
 Through huge Investment in potential country, achieve maximum market share.
 To relate the Management properly.

Thereat of KCCL

 Some other company (like Keya, Uniliver, Arometic).

 Country’s strict rules and regulations.
 Customer awareness of pricing and service.
 Political stability breakdown the outcome result

10
 Financial Statement Analysis

Kohinoor Chemical Company (Bangladesh) Limited Company

Statement of Financial Position
As at 30 June
Particulars
2019 2018 2017 2016 2015
Property, plant and
313,854,039 307,824,838 312,849,492 322,959,095 298,322,570
equipment
Goodwill - - 7,144,400 9,525,866 11,907,332
Advances, deposits and
- - - - -
prepayments
Non-Current assets 313,854,039 307,824,838 319,993,892 332,484,961 310,229,902
Inventories 714,584,492 750,731,088 478,086,812 767,238,337 731,105,851
Trade & Other
4,544,635 2,327,760 2,167,018 7,308,265 8,239,430
Receivables
Advances, deposits &
416,805,294 471,032,537 315,975,211 346,425,721 300,373,494
prepayments
Fixed Deposits with Banks 31,882,247 30,086,725 28,680,150 26,728944 24,599,302
Investment in marketable
178,563,503 185,134,228 147,542,355 147,546,916 147,551,754
securities
Inter Company Current
3,689,602 3,793,304 3,890,602 3,655,021 5,824,876
Account
Cash & Bank Balances/
235,533,652 183,199,401 234,473,700 76,824,199 128,543,724
Cash & Cash Equivalent
Current Assets 1,585,603,425 1,626,305,043 1,210,815,848 1,375,727,403 1,346,238,431
Total Assets 1,899,457,464 1,934,129,881 1,530,809,740 1,708,212,364 1,656,468,333
Share Capital 168,187,500 140,156,250 121,875,000 101,562,500 101,562,500
Revaluation reserve 7,143,605 7,143,605 7,143,605 7,143,605 7,143,605
Revaluation reserve of
31,021,231 37588366 - - -
marketable securities
Retained Earnings 675,291,440 542,989,305 425,054,997 308,728,142 219,898,591
Total Equity 881,643,776 727,877,526 554,073,602 417,434,247 328,604,696
Provision for gratuity 15,317,003 15,963,367 16,780,235 17,241,893 18,752,304
Loan fund 326,089,784 326,089,784 326,089,784 326,089,784 326,089,784
Deferred tax liability 30,160,825 30,430,380 29,017,977 29,950,199 30,203,335
Non-Current Liabilities 371,567,612 372,483,531 371,887,996 373,281,876 375,045,423
Short Term Loan 87,366,613 142,909,410 30,888,539 264,978,129 337,223,833
Trade & other Payables 325,255,738 313,551,202 404,740,938 465,169,940 426,676,747
Accrued Liabilities 216,616,760 362284032 155,485,384 174,602,274 177,837,941
Dividend Payable 17,006,965 15,024,180 13,733,281 12,745,898 11,079,693
Current Liabilities 646,246,076 833,768,824 604,848,142 917,496,241 952,818,214
Total Equity and
1,899,457,464 1,934,129,881 1,530,809,740 1,708,212,364 1,656,468,333
Liabilities

11
Common size Balance Sheet
Particulars 2019 2018 2017 2016 2015
Non-current assets 16.5% 15.9% 20.9% 19.5% 18.7%
Total current assets 83.5% 84.1% 79.1% 80.5% 81.3%
Total equity 46.4% 37.6% 36.2% 24.4% 19.8%
Total non-current liabilities 19.6% 19.3% 24.3% 21.9% 22.6%
Current liabilities 34.0% 43.1% 39.5% 53.7% 57.5%
Total liabilities 53.6% 62.4% 63.8% 75.6% 80.2%
Market Value per share 442 417.6 356.1 353.9 442

Interpretation:

The Non-current assets of KCCL has increased to 16.5% in 2019 which was 15.9% of total
assets in last year. Company’s investment amount of money for their fixed assets are
gradually increases which was seen earlier from 2015 to 2017.

On the other side, Total liabilities also decreased to 53.6% in 2019 which was consecutively
decreasing since last five years. The company decreasing their debt financing and decreases
their fixed assets as well. Moreover, Total equity of the firm is increased to 46.4% in 2019
which was 37.6% in 2018 and gradually increasing since last 5 years as due to decrease in
total debt of the firm. For this reason, the share price also has high in 2019 though price was
experiencing upward trends.

12
 Kohinoor Chemical Company (Bangladesh) Limited Company
Statement of Profit or Loss and other Comprehensive Income.
As at 30 June
Particulars
2019 2018 2017 2016 2015
Net Sales 3,995,804,807 3,661,324,088 3,393,185,456 2,996,245,717 2,656,900,567
Cost of Goods Sold (3,275,506,984) (3,003,180,758) (2,784,391,769) (2,458,285,505) (2,179,286,324)
Gross profit 720,297,823 658,143,330 608,793,687 537,960,212 477,614,243
Operating Expenses (473,135,945) (428,334,851) (400,245,800) (346,710,706) (324,964,735)
Profit from operation 247,161,878 229,808,479 208,547,887 191,249,506 152,649,508
Finance Cost (11,251,427) (7,637,229) (7,759,766) (25,081,141) (38,207,325)
Amortization of
- (7,144,400) (2,381,466) (2,381,466) -
Goodwill
Other Income 8,009,809 6,945,587 7,851,077 5,018,970 9,662,874
Net Operating Profit
Before WPPF & 243,920,260 221,972,437 206,257,732 168,805,869 124,105,057
Income Tax
Worker's Profit
(11,615,251) (10,570,116) (9,821,797) (8,038,375) (5,909,765)
Participation Fund
Net Profit Before
232,305,009 211,402,321 196,435,935 160,767,494 118,195,292
Income Tax
Income Tax Expenses (57,956,002) (56,905,513) (49,640,330) (41,469,192) (26,737,849)
Net Profit After
174,349,007 154,496,808 146,795,605 119,298,302 91,457,443
Income tax
Other comprehensive
- - - - -
income
Unrealized loss on
(6,567,135.00) 37,588,366 - - -
quoted shares
Total Comprehensive
167,781,872 192,085,174 146,795,605 119,298,302 91,457,443
Income for the year
No of Shares 16,818,750 14,015,625 12,187,500 12,187,500 10,156,250
Earnings per Share
10.37 9.19 12.04 9.79 9.01
(EPS)
Stock Price 384.60 442.00 417.60 356.10 353.90

13
Common size Income statement
Particulars 2019 2018 2017 2016 2015
Revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold -82.0% -82.0% -82.1% -82.0% -82.0%
Gross profit 18.0% 18.0% 17.9% 18.0% 18.0%
Total Operating Expenses -11.8% -11.7% -11.8% -11.6% -12.2%
Operating profit (EBIT) 6.2% 6.3% 6.1% 6.4% 5.7%
Profit after tax 4.4% 4.2% 4.3% 4.0% 3.4%

Interpretation-
Though the operating expenses did not change very much in 2019 as compared to last 5
years. cost of Goods Sold are also consistent throughout the last five years which was 82%
in 2015 and 82% in 2019. For this reason, Net profit of KCCL is increased to 4.4% in 2019
which was 3.4% in 2015

14
 Cash Flow Analysis

Kohinoor Chemical Company (Bangladesh) Limited Company

Statement of Cash Flow
Particulars 2019
EBIT 247,161,878
Add depreciation 21,513,626
Less tax (57,956,002)
Operating cash flow (Source of cash) 210,719,502
Capital spending:
Ending net fixed investment 313,854,039
Less beginning fixed investment (307,824,838)
Add depreciation 21,513,626
Net fixed investment (Use of cash) 27,542,827
Changes in net working capital
Ending net working capital 939,357,349
Less beginning net working capital (792,536,219)
Changes in net working capital (Use of cash) 146,821,130
Free Cash flow from assets
Operating cash flow (Source of cash) 210,719,502
Net fixed investment (Use of cash) (27,542,827)
Changes in net working capital (Use of cash) (146,821,130)
Free Cash Flow from assets (Source) 36,355,545
Cash flow from/to creditors
Interest paid (Uses) 11,251,427
Less Issue of new borrowing -
Cash flow from creditors (source of cash /Use Of Cash) (11,251,427)
Cash flow from investors
Dividend paid 25,104,118
New equity -
Cash flow to investors (Use of cash) 25,104,118

Interpretation on Cash Flow-

Dividend (BDT-25,104,118) has paid from free cash flow since company has generated
enough cash flow from operation which is (BDT- 210,719,502) after having investment in
fixed asset (BDT-27,542,827) and using cash in net working capital (BDT-146,821,130).
Also the company did not need to issue of new borrowing to pay off dividend as it already
could pay dividend from FCF which is good sign for the company.

15
 Operating & Cash Cycle Analysis

Inventory Period-

Inventory Period 2019 2018 2017 2016

Average Inventory 732,657,790 614,408,950 622,662,575 749,172,094
Inventory Turnover 4 5 4 3
Inventory Period (Days) 81.50 74.67 81.62 111.24

Interpretation- The average inventory period is a usage ratio that calculates the average
number of days, over a given time period, goods are held in inventory before they are sold.
In other words, it shows how long it takes a company to sell its current inventory. The
inventory period lower is better for the company normally. Low inventory period means
company is moving faster its inventory into sales. From the chart we can see though in 2019
inventory period is slightly higher than inventory period in 2018 which 74.67 but still it is
lower than 2017 and 2016 respectively. That means company can turn faster its inventory
into sales.

Receivable Period-
Receivable Period 2019 2018 2017 2016
Average Receivable 3,436,198 2,247,389 4,737,642 7,773,848
Receivable Turnover 1163 1629 716 385
Receivable Period (Days) 0.31 0.22 0.51 0.95

Interpretation- This ratio is very important for management to assess the collection
performance as well as credit sales assessments. Account receivable collection period
measures the average number of days that credit customers usually make the payment to
the company. From chart we can conclude KCCL has good receivable period due to having
lower average receivable in 2019 and 2018 compare to 2017 and 2016. That means company
is better capable of the collection in order to avoid bad debt experience.

16
Payables Period-
Payables Period 2019 2018 2017 2016
Average Payable 319,403,470 359,146,070 434,955,439 445,923,344
Payable Turnover 10 8 6 6
Payables Period (Days) 35.59 43.65 57.02 66.21

Interpretation- Here we see the average payable period of the KCCL was comparatively
reduced. That means the company was able to meet up the obligations to the suppliers faster
than earlier which is good sign of the company.

Operating & Cash Cycle-

Operating & Cash Cycle 2019 2018 2017 2016
Operating Cycle 81.81 74.90 82.13 112.18
Cash Cycle 46.36 31.25 25.12 45.97

Interpretation- Operating cycle is the summation of inventory period (Days) and receivable
period (Days). From the chart we can conclude that KCCL operating cycle is lower in 2019
and 2018 Compare to 2017 and 2016. That means they efficiently manage their inventory
and receivables collection than before. They able to reduce their inventory and receivables
without hampering their sales growth. From cash cycle chart we saw that it has been
increased in FY 2019 compare to FY 2018, FY 2017and FY 2016. That means company has
to finance inventory more days than it before.

17
 Ratio Analysis

A ratio analysis is a quantitative analysis of information contained in a company’s financial

statements. Ratio analysis is used to evaluate various aspects of a company’s operating and
financial performance such as its efficiency, liquidity, profitability and solvency.

When investors and analysts talk about fundamental or quantitative analysis, they are
usually referring to ratio analysis. Ratio analysis involves evaluating the performance and
financial health of a company by using data from the current and historical financial
statements. The data retrieved from the statements is used to - compare a company's
performance over time to assess whether the company is improving or deteriorating;
compare a company's financial standing with the industry average; or compare a company
to one or more other companies operating in its sector to see how the company stacks up.

 Current ratio & Quick Ratio:

Ratio Formula 2019 2018 2017 2016 2015

Current ratio Current asset/ Current liability 2.454 1.951 2.002 1.499 1.413
Quick Ratio Current Asset- 1.35 1.05 1.76 1.34 0.65
inventory/Current liability

Interpretation: If Shares price increases, it brings a positive sign for current ratio and if
shares prices decreases, it brings negative sign for current ration of Kohinoor Chemical
Company (Bangladesh) Limited (KCCL). So the highest and lowest current ratio cannot be
measurement of it, according finance language. Although current ratio increases, it is
commonly considered good for the company and it had the highest Current ratio in 2019 and
2017. However, quick ratio increases is generally attributed to good for the company, but
quick ratio decreases has also beauty, because there is high possibility in case of obsolesce
of inventory and waste of inventory, but it remains shortage of cash and there is possibility
of Bankruptcy.

18
  Inventory Turnover Ratio:

Ratio Formula 2019 2018 2017 2016 2015

Inventory COGS/Inventory 4.58 4.00 18.87 16.66 2.98
turnover ratio

Interpretation: Although inventory turnover, in general, a higher number is better

compared to previous period, and it was increasing gradually from 2015 to 2019 but we can
see that in 2019 from the comprehensive income from other sources, stock price decreases.
So it is not meeting the goal of the company because wealth maximization is the main goals
of the company’s.

 Days Sales Outstanding:

Ratio Formula 2019 2018 2017 2016 2015

DSO Account Receivable/daily 0.409 0.229 50.723 92.184 1.116
sales (360)

Interpretation: Days sale outstanding is aggressively decreasing compared to last 2 years

and it is considered for good for the company, but bad news is stock price decreasing .so this
aggressively credit sales decrease is not worthwhile. The Most Important Variable thing is
Stock Price in Secondary Market, so investors and creditors, even internal stakeholders
should focus on that subject as a major concern so than the company may gain the wealth
maximization.

 Fixed Asset Turnover Ratio:

Ratio Formula 2019 2018 2017 2016 2015

Fixed Asset Sales/Net 12.73 11.89 10.85 9.28 8.91
turnover ratio fixed asset

Interpretation: It is shown that from in 2015 to 2019 fixed assets of Kohinoor Chemical
Company (Bangladesh) Limited (KCCL) are utilizing in good process because for the future
19
sale increases, the company which fixed material purchased, it is worthy and the rate of fixed
assets turnover was gradually increasing. Company is using its fixed assets to generate
revenues and it can improve company’s asset-turnover ratio by increasing sales. Fixed
assets may be producing enough products, but it may not be selling them quickly enough.
Examine operation to see if you are warehousing products for long periods of time. Find
ways to move those products more quickly, including discounting bulk purchases, holding
sales on old products and initiating promotional campaigns.

 Total asset turnover:

Ratio Formula 2019 2018 2017 2016 2015

Total asset Sales/ 2.10 1.89 2.22 1.75 1.60
turnover Total
Assets

Interpretation: Company increases the sales value of current year significantly which is
good sign for the company in general but stock price of company is decreasing that is bad for
the company. It is calculated by dividing a company's sales by its total assets.

 Debt Ratio

Ratio Formula 2019 2018 2017 2016 2015

Debt Ratio Total 0.54 0.62 0.64 0.76 0.80

debt/assets

Interpretation: Higher debt is desirable if EPS is higher because according ‘Modigliani

Miller” theory dictates that higher debt is more desirable and better if EPS is higher, but the
company’s EPS decreases because the company is only working on current year sales, not
anticipated sales.

20
  EPS (earning per Shares) Ratio:

Ratio Formula 2019 2018 2017 2016 2015

EPS Net Income/ Number 9.98 13.71 12.04 9.79 9.01
of Share outstanding

Interpretation: Although earning per brings a good for company, but last two years it’s
values decreases and another bad news for the company is stock price which is also
decreasing. As we know that The Most Important Variable thing is Stock Price in Secondary
Market and wealth maximization is the ultimate goal of the company.

 Profit Margin Ratio:

Ratio Formula 2019 2018 2017 2016 2015

Profit NI/Sales 0.04 0.05 0.04 0.04 0.03
Margin

Interpretation: Kohinoor Chemical Company (Bangladesh) Limited (KCCL) has too much
inventory procurement in the current year reduced profit. Profit margin may also indicate
certain things about a company’s ability to manage its expenses. High expenditures relative
to revenue (i.e. a low profit margin) may indicate that a company is struggling to keep its
costs low, perhaps due to management problems. This is an indication that costs need to be
under better control. High expenditures may occur for many reasons, including that the
company has too much inventory (relative to its sales), that it has too many employees, and
that it is operating in spaces that are too large and thus is paying too much in rent.

21
  ROA (Return on Asset):

Ratio Formula 2019 2018 2017 2016 2015

ROA NI/Total Assets 0.09 0.10 0.10 0.07 0.06

Interpretation: It is very surprising that last two years from 2018 to 2017 years, the figure
is constant, but in 2019 it was slightly declined. More importantly, the company should focus
on how to increase the share price.

 ROE (Return on Equity):

Ratio Formula 2019 2018 2017 2016 2015

ROE NI/Total 0.19 0.26 0.26 0.29 0.28
Equity

Interpretation: Investors are happy as equity has gone up for growth firm. By using total
equity Kohinoor Chemical Company (Bangladesh) Limited (KCCL) earned good amount in
profit in 2018 but it decreases in 2019 and it brings profit in the previous year. ROE is more
than a measure of profit; it's a measure of efficiency. A rising ROE suggests that a company
is increasing its ability to generate profit without needing as much capital. It also indicates
how well a company's management is deploying the shareholders' capital. In other words,
the higher ROE the better the company is able to generate profit. The decreasing ROE was a
result of decreasing asset turnover, but also profit margins.

22
  Book Value per Share:

Ratio Formula 2019 2018 2017 2016 2015

Book Value Equity / 52.42 51.93 45.46 34.25 32.35
per Share Number of
Share

Interpretation: Book Value per share is continuously in up trend since 2015 to last ended
year which is very good strength for the company.

 Market: Book ratio:

Ratio Formula 2019 2018 2017 2016 2015

Market: Book Market 7.34 8.51 9.19 10.40 10.94
ratio value /
Book value

Interpretation: Investors does not like the strategy, price of share has gone down.

 P:E ratio:

Ratio Formula 2019 2018 2017 2016 2015

P:E Market value of 37.09 48.10 34.68 36.37 39.28
ratio Share / EPS

Interpretation: Trust of investors has gone down in 2019.

23
 Sustainable Growth Rate Analysis & Forecasting with Different Growth
Rate

𝐑𝐎𝐄∗𝐑𝐞𝐭𝐞𝐧𝐭𝐢𝐨𝐧 𝐑𝐚𝐭𝐞
Sustainable Growth Rate (g2019) =
𝟏−(𝐑𝐎𝐄∗𝐑𝐞𝐭𝐞𝐧𝐭𝐢𝐨𝐧 𝐑𝐚𝐭𝐞)

𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆 (𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆−𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔)

∗
𝑬𝒒𝒖𝒊𝒕𝒚 𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆
= 𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆 (𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆−𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔)
𝟏− ( ∗ )
𝑬𝒒𝒖𝒊𝒕𝒚 𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆

 Here, ROE = Net income

Retention Rate = (Net income – Dividends)/ Net income

𝟏𝟕,𝟒𝟑𝟒𝟗,𝟎𝟎𝟗 (𝟏𝟕𝟒,𝟑𝟒𝟗,𝟎𝟎𝟗−𝟒𝟐,𝟎𝟒𝟔,𝟖𝟕𝟓)
∗
𝟖𝟖𝟏,𝟔𝟒𝟑,𝟕𝟕𝟔 𝟏𝟕𝟒,𝟑𝟒𝟗,𝟎𝟎𝟗
= 𝟏𝟕𝟒,𝟑𝟒𝟗,𝟎𝟎𝟗 (𝟏𝟕𝟒,𝟑𝟒𝟗,𝟎𝟎𝟗−𝟒𝟐,𝟎𝟒𝟔,𝟖𝟕𝟓
𝟏− ( ∗ )
𝟖𝟖𝟏,𝟔𝟒𝟑,𝟕𝟕𝟔 𝟏𝟕𝟒,𝟑𝟒𝟗,𝟎𝟎𝟗

𝟎.𝟏𝟗𝟕𝟕𝟓𝟒𝟓𝟖𝟐∗.𝟕𝟓𝟖𝟖𝟑𝟓𝟎𝟐𝟏 𝟎.𝟏𝟓𝟎𝟎𝟕𝟑𝟎𝟐𝟔
= 𝟏−(𝟎.𝟏𝟗𝟕𝟕𝟓𝟒𝟓𝟖𝟐∗.𝟕𝟓𝟖𝟖𝟑𝟓𝟎𝟐𝟏 = 𝟏−.𝟏𝟓𝟎𝟎𝟕𝟑𝟎𝟐𝟔
𝟎.𝟏𝟓𝟎𝟎𝟕𝟑𝟎𝟐𝟔
= .𝟖𝟒𝟗𝟗𝟐𝟔𝟕𝟒
= 0.17.75 or 17.75%

24
 Forecasting Growth Rate:
Particulars Current year Next Year 2021 F 2022 F 2020 F
2020F
2019 @g= 0.177 @g= 0.107 @g= 0.107 @g=20%

Sales 3,995,804,807 4,701,295,432 5,531,345,950 6,507,948,386 7,809,538,063

Net Income 174,349,009 205,131,692 241,349,298 283,961,406 340,753,687
Dividend 42,046,875 49,470,580 58,204,998 68,481,546 82,177,856
Addition to retained 132,302,134 155,661,112 183,144,300 215,479,860 258,575,832
earnings
Total assets 1,899,457,464 2,234,821,551 2,629,396,794 3,093,637,386 3,712,364,863
Total Debt 1,017,813,688 1,197,516,664 1,408,947,607 1,657,708,339 1,989,250,006
Common stock 168,187,500 168,187,500 168,187,500 168,187,500 168,187,500
Retained earnings 713,456,276 869,117,388 1,052,261,687 1,267,741,547 1,526,317,379
[RE + Next year
Addition(4)]
Total Financing 1,899,457,464 2,234,821,551 2,629,396,794 3,093,637,386 3,683,754,885

Funds needed( EFN) - - - - 28,609,978

Debt: Equity ratio 1.15 1.15 1.15 1.15 1.17

(Total Debt/Equity)
Sustainable Growth 0.177 0.177 0.177 0.177 0.180
Rate
EPS 10.37 12.20 14.35 16.88 20.26
P: E Ratio 37.10 37.10 37.10 37.10 37.10

Expected Price 384.60 452.50 532.40 626.40 751.68

Interpretation- From forecasting growth rate in case of Kohinoor Chemical Company

(Bangladesh) Limited (KCCL), it is found that sustainable growth rate will be same. So we
found that it’s rate is 0.1775 or 17.75% over the following 3 years and P: E Ratio will remain
same that is 37.10% forecasting following years and the most importantly, we found the
Funds needed (EFN) item Zero (o) in case of forecasting growth rate.

25
 Prediction of Distress &Turnaround & Z Score

Distress Prediction
Test of off-Balance sheet financing

Information 2019 2018 Changes

Interest 11,251,427.00 7,637,229.00 3,614,198.00

Debt 413,456,397 468,999,194 (55,542,797)

Δ Interest Changes in Interest 3,614,198.00

= = = -6.51%
Δ Debt Changes in debt (55,542,797.00)

So, this is a regular firm and they don’t have any off-Balance Sheet financing
Calculating Z score:

 Bankruptcy prediction when Z is less than 1.2,

 Z within the range between 1.2 and 2.9 is gray area.

 Z above 3 is safe.

26
Calculation of Z score:

Particular 2019 2018

X1 Net working capital/Total assets 0.49 0.41
X2 Cumulative retained earnings/Total assets 0.36 0.28
X3 EBIT/Total Assets 0.13 0.12
X4 Market value of equity/ Total liabilities 6.36 5.14
X5 Sales/Total Assets 2.10 1.89
Z ,2019 = (1.2 * 0.49) + (1.4 * 0.36) + (3.3 * 0.13) + (0.6 * 6.36) + (1.0 * 2.10) = 7.45
Z ,2018 = (1.2 * 0.41) + (1.4 * 0.28) + (3.3 * 0.12) + (0.6 * 5.14) + (1.0 * 1.89) = 6.25

Interpretation: KCCL is safe. The score increased in 2019 against 2018. The investors had
not taken that under consideration as the scores are above the hurdle of 3.

27
 Conclusion

It is a great pleasure that the price of cosmetics and toiletries remaining same for quite a long
time despite power failure and political unrest across the country. There is no crisis of this
item in the market and overall factories are running well. The demand of the item is
increasing gradually due to increase per capita income and living standard. So, much more
attention is required to be given so that this sub-sector does not suffer. Undoubtedly
domestic Cosmetics and Toiletries industries are playing vital role in an era of free market
economy. The domestic industries have been starting export to the neighboring countries
initially. Hopefully the sector would do well in future in the light of globalization.

28
 Reference

1. Data Archive. Retrieved from Daka stock exchange:

https://www.dsebd.org/day_end_archive.php

2. Bangladesh Bank. Economic Data . Retrieved from Bangladesh Bank:

https://www.bb.org.bd/

3. Bangladesh. Retrieved from The World Bank:

https://data.worldbank.org/country/bangladesh

4. About US. (n.d.). Retrieved from KCCL: http://www.kohinoor-bd.com/about-us

5. Business . (n.d.). Retrieved from The Daily Star :

https://www.thedailystar.net/business/Cosmetic & Toiletry Indsutry -market-set-hit-
511b-2023-1614133

6. Farhin, N. (n.d.). Business. Retrieved from Dhaka Tribune:

https://www.dhakatribune.com/business/2018/01/01/ Cosmetic & Toiletry Indsutry -
named-product-year-2018-2

7. Haque, M. (n.d.). Retrieved from NEWAGE: http://www.newagebd.net/print/article/63935

8. KCCL. (2015-19). Annual Report

9. Treasury Bill/Bond Auctions. (n.d.). Retrieved from Bangladesh Bank:

https://www.bb.org.bd/monetaryactivity/treasury.php

10. https://www.ukessays.com/essays/marketing/cosmetic-industry-porters-five-forces-analysis-
marketing-essay.php

11. Class lecture of Honorable Course Teacher: Dr. M. Masud Rahman.

29