FIN254 Final Report Snt Pharmacetuicals

July 17, 2017 | Author: Tanvir Khan | Category: Return On Equity, Investing, Profit (Accounting), Investor, Stocks
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The pharmaceutical industry in Bangladesh is one of the most developed technology sectors within Bangladesh. Manufacture...

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NORTH SOUTH UNIVERSITY INTRODUCTION TO FINANCIAL MANAGEMENT (FINAL REPORT)

Performance Evaluation and Ratio Analysis of Beximco in Bangladesh SECTION - 12

Submitted to Shanila Taneem (SnT)

Submitted by Ashik Ur Rahman Udoy - 1210157030 M. Tafsir Uddin - 081444030

Lecturer

Md. Asif Amin - 1210092030

School of Business

Md. Mohiuddin 1220045030

Course: FIN254

Nafis Fuhad Khan - 1210370030 Samuel Mursalin – 1210051030

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Table of Contents Abstract..........................................................................................................................................3 Corporate Profiles..........................................................................................................................4 Beximco.......................................................................................................................................4 Square..........................................................................................................................................4 Ratio Analysis.................................................................................................................................5 Current Ratio.............................................................................................................................5 Quick Ratio.................................................................................................................................6 Days Sales Outstanding (DSO).................................................................................................7 Inventory Turnover....................................................................................................................8 Fixed Asset Turnover.................................................................................................................9 Total Asset Turnover Ratio......................................................................................................10 Debt Ratio.................................................................................................................................11 Return on Assets (ROA)..........................................................................................................12 Return on Equity (ROE).........................................................................................................13 Net Profit Margin.....................................................................................................................14 Book Value per Share...............................................................................................................15 Earnings per Share (EPS).......................................................................................................15 Price of Share/Earnings per Share (P/E ratio)......................................................................16 Conclusion:...................................................................................................................................17

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Abstract This is a report on four of the most renowned pharmaceutical companies from the pharmaceutical industry of Bangladesh. It includes how they have been performing in the past 5 years, ratio analysis, interpretations on what caused them to flourish and graphical representations to bring the four market leaders into the same frame. Companies that have been chosen are Square, Beximco, The comparison is based on the performance of the past four years, spanning from 2009 to 2013. Based on these values, we will give a summarized insight on how the companies have been able to achieve the position they currently hold.

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Corporate Profiles Beximco Beximco Pharmaceuticals Ltd. is a leading manufacturer of pharmaceutical formulations in Bangladesh. It is a concern of Beximco Group, the largest industrial conglomerate in the private sector of Bangladesh. It produces over 500 different products that treat vital areas, such as gastro intestines, respiratory, antibiotics, cardiovascular, anti-diabetics, allergy etc. The company boasts a massive workforce of 2700 employees. Currently, it is proudly the only Bangladeshi company to get enlisted in AIM of London Stock Exchange.

Square

Square Pharmaceuticals Ltd. is a renowned company in Bangladesh. It is a flagship company in the pharmaceutical industry which has reached this mountain of success by fighting many potential competitors like BEXIMCO Pharma, INCEPTA, ACME, RENETA, OPSONIN, SK+F, SANOFI-AVENTIS etc. It initially started as a Partnership in 1958. It was incorporated as a Private Ltd. Company in 1964 and converted into Public Limited Company in 1991. Its initial public offering started in Dhaka and Chittagong stock exchange simultaneously in 1995. Their mission is to produce and provide quality & innovative healthcare relief for people, maintain stringently ethical standard in business operation also ensuring benefit to the shareholders, stakeholders and the society at large. With facts and figures to display a proper picture of the performances of these companies. Financial ratios are useful indicators of a firm's performance and financial situation. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms. Financial ratios can be classified according to the information they provide. 4

Ratio Analysis

Current Ratio Current ratio = Current assets / Current liabilities

Company Name Beximco Square

2009

2010

2.97 13.86

2.46 2.39

2011 2.69 1.50

2012 2.67 1.58

2013

Industry

2.63 1.59

Average 2.70 4.83

16 14 12 10

Beximco Square

8

Ibn Sina

6

Orion

4 2 0 2009

2010

2011

2012

Interpretation: In Beximco pharmaceuticals the Current ratio decreases because current asset over the last 4 years increases gradually followed by more gradual increase in current liabilities. In the year 2013 Square Pharmaceuticals Ltd. current assets were 1.59 times than the current liability. In 2009 current assets were 13.86 times than its current liability and it decreases in 2010 5

to 2.39 and decreases at 2011 to 1.50. The values of 5-year current ratio show an increasing trend. The Current ratio increases because current asset over the last year increases gradually followed by slight increase in current liabilities.

Quick Ratio Quick Ratio = (Current Asset – Inventories) / Current Liabilities

Company Name Beximco Square

2009 2.23 4.13

2010 1.67 1.16

2011 1.83 0.95

2012 1.88 0.95

2013

Industry

1.89 .96

Average 1.90 1.80

4.5 4 3.5 3

Beximco

2.5

Square

2

Ibn Sina

1.5

Orion

1 0.5 0 2009

2010

2011

2012

Interpretation InBeximco the quick ratio decreases because the current asset excluding the inventories is gradually increasing even though the increasing of liabilities of the year. In the year 2013 Square Pharmaceuticals Ltd. Current assets excluding inventory were 0.96 times than its current

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liability. Current assets excluding inventory were 4.13 times at 2009 than its current liability and decreases to 1.16 in 2010 and decreases to 0.95 in 2011. Days Sales Outstanding (DSO) Days Sales Outstanding (DSO) = Receivables / (Annual sales / 365) Company Name Beximco Square

2009

2010

52.04 0

46.18 1.00

2011 45.25 0

2012 45.79 0

2013

Industry

45.79 0

Average 47.31 0.25

80 70 60 50

Beximco

40

Square Ibn Sina

30

Orion

20 10 0 2009

2010

2011

2012

Interpretation DSO for Beximco has increased in between 2009-13 but has fallen in 2012 to 45.79. For Square, on an average, it takes 0 days to collect its accounts receivables from the creditors. From, 20092012 it shows a similar pattern. But the term is related to average payment period and also important for the management in order to minimize its period. However, an increasing DSO trend means that its ability to collect receivables rapidly has been decreasing.

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Inventory Turnover Inventory Turnover = Sales/ Inventory

Company Name Beximco Square

2009

2010

2.82 2.91

3.27 2.85

2011 3.44 3.03

2012 3.81 3.41

2013

Industry

3.83 3.48

Average 3.34 3.05

30 25 20

Beximco Square

15

Ibn Sina 10

Orion

5 0 2009

2010

2011

2012

Interpretation For Beximco Pharmaceuticals the inventory turnover ratio has been increasing which shows the sales have been increasing at a higher rate than inventories. In 2013, Square has completely sold out and restocked its inventory 3.48 times. From 2009-2010 it follows a decreasing trend but in 2011 the turnover improved. Because, relative change in cost of goods sold was more than change in inventory.

Fixed Asset Turnover

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Fixed Asset Turnover = Sales/Net Fixed Assets Company Name Beximco Square

2009

2010

0.37 1.09

0.42 1.13

2011 0.49 1.08

2012 0.56 1.09

2013

Industry

.58 1.09

Average 0.46 1.10

6 5 4

Beximco Square

3

Ibn Sina

2

Orion

1 0 2009

2010

2011

2012

Interpretation Beximco had good improvements from 2009-2013. The ratio 0.58 in 2013 is higher than 2011 so it is quite satisfactory for the company. Square, in 2012, every tk.1 (one taka) worth of fixed assets generates 1.09 taka worth of sales. From, 2009-2012 it follows quite unstable trend. For This shows that sales generated by the use of the fixed assets of the company have been increasing.

Total Asset Turnover Ratio

Total Asset Turnover = Sales/Total Assets 9

Company

2009

2010

2011

2012

2013

Industry

Name Beximco Square

0.24 0.79

0.30 0.79

0.34 0.69

0.37 0.75

.38 .79

Average 0.31 0.76

3 2.5 2 Beximco Square

1.5

Ibn Sina 1

Orion

0.5 0 2009

2010

2011

2012

Interpretation Sales of Beximco were high in the year 2013, in comparison to other years. The increase in sales accompanied by rise in total asset has caused the total asset turnover to rise slightly. For Square, in 2012, every taka, 1 (one taka) worth of total assets generates 0.075 taka worth of sales. From 2011-2012 it follows an increase trend.

Debt Ratio Debt Ratio = Total Debt/Total Assets Company

2009

2010

2011

2012

2013

Industry 10

Name Beximco Square

0.45 0.27

0.25 0.21

0.25 0.29

0.25 0.24

.25 .23

Average 0.3 0.25

0.7 0.6 0.5 Beximco

0.4

Square Ibn Sina

0.3

Orion 0.2 0.1 0 2009

2010

2011

2012

Interpretation For Beximco, the debt ratio decreased but from 2010 to 2013 it remained constant. For Square, in 2012, 24% of company total asset were financed by debt. From 2009 to 2011 Debt ratio went up (29%) and started to decrease (24%). Compare to 2011 to 2012 debt to asset ratio decrease because relative change in total asset was more than change in total debt.

Return on Assets (ROA) ROA = Net Income/Total Asset 11

Company

2009

2010

2011

Name Beximco 3.10 4.90 5.20 Square 5.20 4.98 4.09 (These values are given in percentage for convenience)

2012

2013

Industry

5.40 3.98

5.50 3.82

Average 4.65 4.56

35 30 25 Beximco

20

Square 15

Ibn Sina Orion

10 5 0 2009

2010

2011

2012

Interpretation Beximco, with a higher return on asset ratio of 5.36 percent, is in a more favorable position compared to other years. For Square, in 2010, every tk.100 worth of total asset generates 3.98 taka worth of operating income. From 2007-2010 it showed a downward trend because for these consecutive times, relative change in operating income less than change in total asset..This increased ROA was really satisfactory for the company as it would more investors to invest in the company.

Return on Equity (ROE)

ROE = Net Income/ Total Common Equity Company

2009

2010

2011

2012

2013

Industry 12

Name Beximco Square

5.70 34.10

6.50 46.45

6.99 42.39

7.10 44.10

7.30 44.20

Average 6.57 41.76

70 60 50 Beximco

40

Square 30

Ibn Sina Orion

20 10 0 2009

2010

2011

2012

Interpretation Normally, it is the return earned on the common stockholders’ investment in the firm. Beximco shows an increasing trend which puts it in a more favorable position to the investors. For Square, in 2012, the shareholders of this company earned 44.10 taka against every 100 taka worth of investment on the company. From 2009 to 2010 it increased because of relative change in net income was more than total common equity.

Net Profit Margin Net Profit Margin = Net Income/Sales

Company Name

2009

2010

2011

2012

2013

Industry Average 13

Beximco Square

12.00 24.83

16.00 31.33

15.00 27.04

14.00 27.10

14.00 27.12

14.25 27.58

35 30 25 Beximco

20

Square

15

Ibn Sina Orion

10 5 0 2009

2010

2011

2012

Interpretation For Beximco, the main reason behind the profit margin decline in 2012 and 2013 is high cost that occurs as a result of inefficient operations although its net profit increased from 2009 to 2010 due to increase in net income generated by higher sales. For Square, in 2012, every taka 100 worth of total sales generates taka 42.37 worth of operating profit margin. It increased from 2011 to 2012 because of relative change in gross operating profit was more than sales. Otherwise, from 2009-2010 it remains almost same.

Book Value per Share Book Value per Share = Shareholders’ Equity/No. of shares Company Name Beximco Square

2009

2010

2011

295.20

Data Not Available 401.10 402.33

2012

2013

Industry Average

383.03

383.02

370.42 14

450 400 350 300 250 200 150 100 50 0 2009

Square Ibn Sina Orion

2010

2011

2012

Interpretation For Square, the book value remained fairly constant after 2010. However, the price went down significantly in 2010-2011. The main reason behind this decline is the number of shares skyrocketing from 1,080,000 (2010) to 12,960,000 (2011) (almost 12 times). From 2011, the book value has increased till 2012. This enables people to buy more shares at cheaper rates. Earnings per Share (EPS) EPS = Net Income/No. of Shares Company

2009

2010

2011

2012

2013

Industry

Name Beximco Square

4.13 34.40

5.17 43.59

4.76 43.59

4.33 38.20

4.32 38.19

Average 4.60 39.95

15

60 50 40 Beximco Square

30

Ibn Sina Orion

20 10 0 2009

2010

2011

2012

Interpretation EPS for Beximco and Orion remained fairly constant with very little fluctuations. For Square, EPS values show rapid fluctuation.

Price of Share/Earnings per Share (P/E ratio) Company Name Beximco Square

2009

2010

2011

2012

2013

Industry Average

16.97

Data Not Available 12.77 17.95

21.84

21.87

17.38

16

25

20

15 Square Ibn Sina 10

Orion

5

0 2009

2010

2011

2012

Interpretation For Beximco, due to the decrease in EPS, P/E ratio has an increasing trend.

Conclusion: After looking a glance in the pharmaceutical industry where we did analysis on Beximco, Square, Ibn Sina and Orion, we came to a conclusion that this is very potentially growing industry where few companies are doing well and the others are trying to match them If I am an investor I will try to invest on the company which has the highest return on equity and the highest return on asset that is the Orion pharmaceutical company so it is better to invest on it which has a higher rate of return. 17

Any potential investor must keep an eye on high return on equity and return on assets. From an investor’s perspective, it can be said that Orion Pharma has successfully benefitted from high returns on both equity and assets. Besides, in a low-income country like Bangladesh, Orion gives out its shares at a very cheap rate which makes it easier for potential stockholders to purchase their shares. Therefore, investing in Orion will be most advantageous and profitable, compared to other pharmaceuticals in the list.

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