HAQ &

ISLAM’s VALUATION OF
SQUARE PHARMCETICAL Ltd.

BUY
Target Price for December 2009
BDT 4925
Today’s price BDT 2885 (14th
December)
Pharmaceuticals & Chemicals
sector
Share In Issue 8.94mln
Market Cap BDT 34837.467mln

December 2008
 Valuation of Square Pharmaceutical Ltd

Course: Portfolio Management

Prepared for
Mr. Md Mohiuddin
Associate Professor
IBA, DU

Prepared by
Ashek Ishtiak Haq (ashanto123@yahoo.com)
Minul Islam (minul@gmail.com)
MBA 41st D
IBA, DU

This report is an academic endeavour. It is not, under any circumstances, to be

used or considered as an offer to sell, or a solicitation of any offer to buy. Due care
has been taken to ensure authenticity and reliability of data and information.
However, analysts make no representation or warranty as to the accuracy or
completeness of such information. All opinions and projections expressed in this
report represent our judgment as of this date and are subject to change without
prior notice.

2 | P a g e  
 
Brief Overview

Square Pharmaceuticals Limited (SPL) is leading the Pharmaceuticals sector from the very beginning.
DPL grow as pharmaceutical industry matured and yet today it is one of the fastest growing sectors of
the country with a growth rate close to 15%. The positives that differentiate is the market leader; it
controls approximately 20% of the market share. Second, the company is about to enter the
European market by next year. Third it has a large and diversified portfolio of investment and
businesses that gives it very sustainable earnings. Strong brand image, a large distribution network,
large product portfolio and creative marketing make us optimistic about the future potential of the
company. Therefore, we recommend BUY with a December 2009 target price of BDT 4925.

• The pharmaceuticals market is an Oligopoly in nature despite the presence of more than 250
companies. The top 15 players control around 73% of the market share.
• Though the sector is reaching maturity as indicated by the stable sales growth for last few
years. However, new opportunities of export are opening up and 3 year CAGR of revenue was
15%.
• Attainment of the UK MHRA certification for its manufacturing plant and opening of many new
markets within next year, as stated by company officials, convinced both the analysts of
booming growth for coming years.
• Our DDM model gives us a fair value of BDT 4,925 for December 2009 whereas our PE based
relative valuation technique gives us BDT 3,971 for the same period. On the other hand when
we value SPL by using the sum of the parts, we arrive at a value of BDT 6,332 for December
2009. Considering the assumption and market perception we back the DDM approach and our
bet is that SPL stock will reach a price of 4,925 by December 2009.

2002 2003 2004 2005 2006 2007 2008 2009 E 2010 E 2011 E 2012 E 2013 E
P/E 33.85X 33.61X 26.50X 20.47X 22.05X 19.73X 18.60X 20.11X 16.88X 14.62X 13.96X 11.82X
P/B 7.85X 6.68X 5.60X 4.62X 4.02X 3.51X 3.05X 4.25X 3.88X 3.55X 3.32X 3.01X
EV/EBITDA 15.70X 15.39X 12.29X 10.47X 9.81X 8.42X 8.22X 6.54X 5.46X 4.63X 4.23X 3.59X
EV/Sales 13.26X 12.51X 11.36X 10.05X 8.88X 7.31X 6.42X 5.04X 4.34X 3.74X 3.39X 2.90X
P/Sales 11.73X 11.06X 10.04X 8.89X 7.85X 6.46X 5.68X 4.45X 3.83X 3.31X 3.00X 2.57X
DivYield (only Cash Basis) 2.6% 2.4% 2.4% 2.7% 2.6% 1.7% 1.4% 3.0% 3.2% 3.4% 3.6% 3.8%
RoE 21.5% 23.0% 24.7% 19.5% 19.0% 17.5% 17.7% 24.0% 25.4% 24.6% 26.7%  
 

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Macro Analysis 

According to the Economist Intelligence Unit most of the developed world will be in recession in 2009.
The global economy will grow by 2.6% (on a purchasing power parity, or PPP, basis), the slowest pace
since 2002. The big industrialized countries will expand by a mere 0.3% in 2009, while developing-
world growth will slip to 5.9%, a full percentage point lower than in 2008.

World trade will increase by 3% in 2009, a third of the rate in 2006. Trade growth in emerging
markets will be healthier, at 8-9%, but this is not entirely good news: emerging Asia’s openness to
trade will leave it exposed to the downturn in the wealthier countries. South-east Asia will be hurt by a
lacklustre euro zone and will feel some of the pain from the downturn in the United States. Weaker
global demand will push commodity prices lower, including oil. As China and India slow infrastructure
spending, commodities like cement, iron, and steel’s price will fall.

The US and European central banks will cut interest rates as economies slide and inflation recedes.
With more than half a trillion dollars of assets already written off by global banks, a return to normal
credit conditions remains far away.

World Trade and GDP Pharmaceutical sales
World GDP Growth (real terms, at PPP), % World Trade Growth ($ value), %
5.4
$ bn (manufacturer's sales)
4.8 5.2 5.3 World 902.4
4.2
4.5 Eastern europe 
35
3.6 4.1 and Russia
3.8
Growth %

3 3.4 Latin America 43.2

2.4 3
2.6 Japan 67.5
1.8
Asia and 
1.2 145.2
Australasia
0.6 Western Europe 249
0
2008 2009 2010 2011 North America 420.9
Year

In the health frontier, Rapid urbanisation and a growth in sedentary living are helping to drive
epidemics in diabetes and cardiovascular complaints across Africa, the Middle East, Asia and Latin
America. India, for example, will have more than 30m diabetes sufferers in 2009, the most of any
country. That number is expected to more than double in the next 20 years. China, in a different
illness, is estimated to have more than 100m hypertension sufferers, with 3m new cases expected
each year.

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The average life expectancy of a woman in 2009 will be 75 years for the first time in history. Men will
reach a life expectancy of 70 two years later. Recession or no, global health-care spending will expand
in 2009 as longer lived consumers place a premium on having the latest therapies or drugs.

In the developing world, the swelling ranks of the middle class will increase demand for
pharmaceuticals, while rising government-provided benefits for the elderly will ensure continued
growth of the sector. Health-care spending per head will rise by 4.3% in 2009 and pharmaceutical
spending by 7.2%. Total drug sales will be worth $1.2trn in 2012. The explosion in the amount of
chronic disease in the developing world will push down the cost per treatment.

Bangladesh at a Glance
Annual data 2007(a) Historical averages (%) 2003-07
Population (m) 158.7 Population growth 1.8
GDP (US$ bn; market exchange rate) 67.8 Real GDP growth 6.1
GDP (US$ bn; purchasing power parity) 196 Real domestic demand growth 5.6
GDP per head ( US$; market exchange rate) 427 Inflation 7.5
GDP per head ( US$; purchasing power parity) 1,233 Current-account balance (% of GDP) 0.5
Exchange rate (av) Tk: US$ 68.87(b) FDI inflows (% of GDP) 1.0
(a) Economist Intelligence Unit estimates. (b) Actual.

• The political scene will remain unsettled during the early part of 2009. The general election is
expected to be held in December 2008. The electoral reforms have been completed. However, the
timing of the poll could be delayed by a few months at the most, as the EC attempts to complete
all the preparations set out in the election roadmap. Assuming that an election is held and that all
the parties take part, it is likely to be a contest between the two long-established rivals, the
Awami League and the Bangladesh Nationalist Party. However, tensions could escalate if the
caretaker government goes ahead with the formation of a National Security Council, which could
give the army a bigger role in politics than was the case before the imposition of emergency law in
early 2007. From the early perception by the international media Awami League could win the
election.
• The biggest risk to political stability centres on the timing of the next general election. Given the
huge task of holding civic elections and local government elections before setting a date for the
parliamentary poll, there are concerns that all the preparations may not be completed in time for a
general election to be held by end-2008. A sustained campaign of violence by any of the
numerous militant groups in Bangladesh would constitute another threat to political stability.
Although the leading figures in two of the country's four main banned militant groups have been
executed, huge networks of full-time and part-time activists remain intact.
• Relations with India are expected to improve during the forecast period. High-ranking officials
from Bangladesh and India have agreed to co-operate on a range of economic and security issues,
and this process is expected to continue in 2008-12.
• Economic policy in the forecast period will focus on continued economic liberalisation, although
progress will be slow. Bangladesh will seek to attract foreign direct investment, particularly in the
textile industry. Efforts to diversify the tax base and to improve revenue collection will achieve
some success. Demand for energy will continue to outstrip supply, but the situation should
improve slightly from end-2008, as new power plants come on stream.
• Real GDP growth will average 6.2% a year in 2008-12, driven largely by strong private
consumption and gross fixed investment expansion. The economy will remain dependent on both
the agricultural sector—which provides the main stimulus to private consumption—and the textile
industry, which accounts for the country's largest category of exports. Record inflows of expatriate
workers' remittances will ensure that the current-account deficit as a proportion of GDP will stay
below 1% during the forecast period.

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 Projected Figures
Key indicators 2007 2008 2009 2010 2011 2012
Real GDP growth (%) 6.4 6.2 6.0 6.2 6.4 6.4
Consumer price inflation (avg; %) 9.1 8.5 9.0 6.8 6.6 6.0
Budget balance (% of GDP) -3.9 -4.8 -5.2 -4.8 -4.8 -4.7
Current-account balance (% of GDP) 1.2 -0.3 -0.3 -0.6 -0.7 -0.7
Exchange rate Tk:US$ (av) 68.87 68.66 70.03 72.21 74.54 77.17
Exchange rate Tk:€(av) 94.27 106.26 105.05 101.63 99.51 101.09

Outlook for 2008-09

• The Economist Intelligence Unit expects the budget deficit in fiscal year 2008/09 (July-June)
to rise to the equivalent of 5.2% of GDP, compared with the official target of 5% in the
2008/09 budget.
• Real GDP is expected to grow by 6% in 2008/09, driven by strong household spending and
investment.
• Consumer price inflation is expected to remain high over the forecast period, averaging 8.2%
in 2008 and 8.8% in 2009.
• The trade deficit is expected to swell to record levels in 2008-09 as demand for industrial raw
materials strengthen and international oil prices stay high.

The Global Financial Crisis: The consequences of the ongoing global financial crisis for the
Bangladesh economy are too early to predict with a measure of reliability; much will depend on how
the crisis evolves and unravels in the near term. Three possible scenarios could unfold, though, with
the implication for economies such as that of Bangladesh depending on the width and depth of the
crisis. In the first scenario, the crisis leads to a slowdown in global economy but is followed by a quick
upturn. The financial rescue packages start to work and the developed country economies get back to
their recent growth trends. The second scenario could be a recession lasting for 1-2 years with
negative to zero growth rates. This would result in sluggish demand and higher rates of
unemployment in developed economies. The third scenario could be one where recession develops
into depression, lasting for 3-4 years, with negative growth rates, high unemployment in developed
countries, and a drastic fall in effective demand. This is likely to have dire global repercussions.
Impact on and implications for Bangladesh economy will critically hinge on which particular scenario
actually emerges from the current crisis. Anything bordering the third scenario will have adverse
consequences for economies such as Bangladesh, while even the second scenario is likely to be
detrimental to the interests of Bangladesh economy in FY09.
OPENING AND SETTLEMENT OF L/C (FY2008 VS. FY2009, JULY – AUGUST)
FY 2008 FY 2009 Growth %
Opening Settlement Opening Settlement Opening Settlement
Consumer Goods 526.04 334.56 269.59 277.29 -48.75 -17.12
Rice 149.42 69.71 0.67 81.15 -99.55 16.41
Wheat 168.24 69.06 98.1 16.79 -41.69 -75.69
Intermediate Goods 267.7 227.66 393.61 251.65 47.03 10.54
Industrial Raw Materials 1330.02 1114.18 1784.82 1619.39 34.19 45.34
Textile Fabrics Accessories 468.31 463.49 554.69 545.63 18.44 17.72
Textile Fabrics Accessories BBLCs 432.45 426.23 513.4 512.31 18.72 20.2
Fabrics 338.66 327.29 394.22 393.58 16.41 20.25
Petroleum and Petroleum Products 276.87 371.82 489.55 435.32 76.82 17.08
Capital Machinery 306.8 250.81 267.3 293.63 -12.88 17.07
Machinery for Misc Industries 262.66 207.43 353.14 281.76 34.45 35.83
Commercial Sector 368.05 250.29 427.81 357.24 16.24 42.73
Industrial Sector 252 161.59 289.63 331.1 14.93 104.9
Other L/Cs 620.05 411.88 717.44 688.34 15.71 67.12
Total 3590.14 2918.34 4275.45 3847.38 19.09 31.83

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 There are several transmission mechanisms
through which global financial crisis could
impact on the Bangladesh economy.
Exports, although earnings posted a very
high growth in July, 2008, could slow down
in the face of sluggish demand in the
developed country markets which account
for four-fifths of Bangladesh’s global
exports. Anecdotal information from
apparels exporters indicate some slowdown
in order placement, although it is still not
clear whether it is cyclical, seasonal or is
originating from the expected sluggish
consumer demand in developed countries. In general, low-priced, mass-produced items, where
Bangladesh is most strong, are not affected by economic slowdown in developed market since income
elasticity of such items tends to be very low. Economic slowdown could even induce some shift in
demand from the middle-segment of the market to the lower-end (the so-called Wal-Mart effect).
Indeed, Wal-Mart sales went up by about 3 per cent in August 2008. However, a tightening of
apparels price is to be expected, with major buyers putting pressure on exporters to reduce their price
offers. Additionally, WTO negotiations could be adversely affected because of the global crisis and
initiatives such as the DF-QF market access for LDCs may not witness much progress. Developed
countries could become more protective. Initiatives such as the New Partnership for Development Act
(NPDA 2007) could become victims of the crisis.

Remittance flow, three-fourth of which

comes from the Middle-Eastern
countries, could be affected if there is a
recession in developed economy with
knock-on effect on investment flow to
the region.

Commodity prices are coming down

already; any economic slowdown could
lead to further fall in prices. This should
benefit commodity dependent
Bangladesh and have positive impact on
the inflationary situation in the economy.
The challenge will be to identify an optimal strategy to pass on the benefits to the long suffering
consumers. Evidently, in case of commodities such as fuel cross-subsidisation considerations (between
octane, petrol, diesel and kerosene) will be required.

Bangladesh’s share market is

Bangladesh outperforms other equity markets
not exposed to global capital
July,
flows to any large extent
2005 2006 2007 2008
(only about 2.5 per cent in
Bangladesh (DSE) -15% -4% 87% 0%
the context of market
USA (S&P 500) 3% 14% 4% -14%
capitalisation of about
China (Shanghai Composite) -8% 130% 97% -49%
USD14.0 billion). However,
Japan (NIKKEI 225) 40% 7% -11% -14% the continuing need for
India (SENSEX) 42% 47% 47% -34%
strengthening of the
Pakistan (KSE 100) 54% 5% 40% -16% oversight function of SEC
Vietnam (VN-Index) 29% 144% 23% -53% should not be undermined.
Whilst the ongoing crisis sends a cautionary note with regard to risky and foreign currency
denominated derivatives, opportunities to attract portfolio investment to Bangladesh’s share market
should not be left unattended, and will need to be explored and exploited.

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Monetary Policy..In view of the global financial crisis, in addition to the already high inflation rate,
Bangladesh will need to face the challenge of following a monetary policy which can ensure adequate
liquidity in the banks and generate economic activities in order to alleviate poverty and accelerate
economic development.

The MPS of the BB for the period July-December 2008 “aims at using the monetary policy for ensuring
reasonable price stability essential to sustaining high economic growth, shielding the economy from
global price and financial turbulences and downside risks, and tapping new upside opportunities”
(Monetary Policy Statement, Bangladesh Bank, July 2008).

As a response to the current financial crisis the BB has been pursuing an accommodative policy in
view of domestic and global economic developments, and has resisted the repetitive suggestion of the
International Monetary Fund (IMF) to raise interest rate and follow a contractionary monetary policy.
It is expected that the BB will follow an independent monetary policy to control inflation and stimulate
investment as always, keeping in view the domestic and global realities.

However, in very recent times, the

Interest rate on 5‐ year NSD Inflation   Rate (12 month average)  Real rate of interest on 5‐Year NSD  
BB has raised the repo rate to
14.00
somewhat discourage credit
expansion (from 8.50 per cent in
12.00 August, 2008 to 8.60 per cent in
September 2008. Reverse repo rate
10.00 has been changed to 6.75 percent
from 6.50 per cent).
8.00
Percent

Striking a balance between high

6.00
inflation and interest rate has
4.00
always been a challenge for the BB
while devising a monetary policy.
2.00 The long term interest rates have
either declined or remained the
0.00 same over the years. For example,
June 2004   June 2005   June 2006   June 2007   December  March 2008   June 2008  
2007  
interest rates on 5-year and 10-
year Bangladesh Government
Treasury Bond (BGTB) have declined, while the interest rate on National Savings Directorate (NSD)
certificates remained same in June 2008, compared to December 2007 (Table 3.1). This implies that
the real rate of interest (RRI) has declined in the face of high inflation.

Weighted average interest rate of Government long term T-bill/bonds and inflation
BGTB NSD Real Rate of Interest on
5- 10- 3- 5- Inflation Rate 5-Year 10-Year 3-Year 5-Year
Period year year year year (12 month avg) BGTB BGTB NSD NSD
June 2004 8.00 10.00 10.50 11.00 5.83 2.17 4.17 4.67 5.17
June 2005 8.75 9.93 10.00 10.50 6.49 2.26 3.44 3.51 4.01
June 2006 10.60 12.09 10.00 12.00 7.16 3.44 4.93 2.84 4.84
June 2007 12.14 11.50 12.00 7.20 4.94 4.30 4.80
December 07 10.65 11.73 11.50 12.00 9.11 1.54 2.62 2.39 2.89
March 2008 10.60 11.72 11.50 12.00 10.00 0.60 1.72 1.50 2.00
June 2008 10.60 11.72 11.50 12.00 9.94 0.66 1.78 1.56 2.06
 

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 M2.There has been an upward trend
Growth in M2 in case of Broad Money Supply (M2)
280,000 
during the FY08. M2 has posted a
260,000  rise of 18.64 per cent as of end July
2008 compared to July 2006. This
240,000  growth has been due to growth in
the domestic credit by 21.61 per
tk in crore

220,000 
cent during July 2007 and July 2008.
200,000  Due to increased remittance flow,
Net Foreign Assets (NFA) has
180,000 
continued to increase in recent
160,000 
times. During July 2007 and July
2008, NFA increased by 13.98 per
140,000  cent. Net Domestic Assets (NDA) has
also experienced an increase of
September   

September   
December   

December   

December   
August  

August  

August  
October  

October  
November  

February  

November  

February  
Sep‐05

June  

March  

June  

March  

June  
Mar‐06

July  

July  

July  
January  ,07

January  ,08
April  

April  
May  

May  
19.51 per cent during July 2007 and
July 2008. This constant growth in
year the money supply is a sign of the
economic expansion the country is
witnessing for some years.

Falling Inflation: General, Food and Non‐food Inflation..The annual average rate

inflation (general) Point to point inflation (food) point‐to‐point inflation (non‐food) point‐to‐point of inflation (12-month annual
16 average CPI, 1995-96 = 100)
increased to 10.00 per cent in
14
August, 2008 from 7.78 per cent in
12
August, 2007. The increasing trend
continued till March, 2008 when it
10 reached 10.0 per cent. Then it
Percentage

started declining in September.

Inflation dropped drastically on
8

6 October due to adequate supply of

boro and aus rice in the market
4
following a bumper harvest. The
2
overall inflation rate on a point-to-
point basis dropped by 2.93% point
0 to 7.26% in October as price of both
food and non-food items fell.
September   

September   
August  
November  

November  

November  
March  

July  ,2006

March  

July  ,2007

March  

September
January  ,2006

January  ,2007

January  ,2008

July  
2000‐2001  
2002‐2003  
2004‐05  

May  

May  

May  

Inflation on food items fell 3.99%

and on non-food items it fell 1.24%.

Time
Interest rate..In view of high
spread between lending and
Interest Rate Spread borrowing rates, interest rate has
been a contentious issue as far as
Lending rate Deposit rate
14
business and banking community
13
were concerned. The BB has already
12 directed the major commercial banks
11 to reduce the interest rate spread
and reduce their lending rates. The
Percentage

10
9 lending rate (calculated on a
8 quarterly basis) of scheduled banks
7 was 12.29 per cent in June, 2008 as
6 compared to 12.75 per cent in
5
December, 2007. Their deposit rate
4
(also calculated on a quarterly basis)
Jun/01

Jun/02

Jun/03

Jun/04

Jun/05

Jun/06

Jun/07

Jun/08
Sep/01

Sep/02

Sep/03

Sep/04

Sep/05

Sep/06

Sep/07
Mar/02

Mar/03

Mar/04

Mar/05

Mar/06

Mar/07

Mar/08
Dec/01

Dec/02

Dec/03

Dec/04

Dec/05

Dec/06

Dec/07

stood higher at 6.95 per cent in

Time
June, 2008 as compared to 6.77 per
cent in December 2007 (Table 3.9

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and Figure 3.8).

Exchange Rate..The exchange rate

Steady Exchange Rate (end of month) between Bangladesh Taka (BDT) and
68.75 US Dollar (USD) has remained stable
68.7
for the last one year or so. This is
because of the introduction of
Exchange rate

68.65 floating exchange rate in 2003 to

68.6 contain fluctuations of Taka against
foreign currencies, particularly the
68.55 US Dollar. During August, 2007 and
68.5 August, 2008, Taka appreciated
slightly by 0.26 per cent. At the end
68.45
of August, 2008 Taka per USD
decreased to Tk.68.52 from Tk.68.70
at the end of August, 2007. Taka
depreciated against Euro by 7.38 per
cent in August, 2008 compared to
Time
August, 2007. However, very
recently taka is appreciating against
the EURO owing to the global financial crisis.

Balance of Payments..
Balance Of Payment (In million USD) Bangladesh’s external sector
July July
was in tight situation in FY08,
FY2007 FY2008 FY2008 FY2009
with export earnings of
Trade balance -3458 -5541 -502 -342
USD13.94 billion and import
Services -1255 -1525 -125 -175
payments exceeding USD19.48
Income -905 -1005 -115 -93
billion in the FY08. However,
Current transfers 6554 8743 612July 879FY09 experienced an
Official transfers 97 127 0 0
improvement in trade balance
Private transfers 6457 8616 612 879
in comparison to July of the last
of which : Workers' fiscal (In July FY08, trade
remittances 5979 7915 567 821 balance was USD507 million
Current account balance 936 672 -130 269 whereas in FY09 it came down
Capital account 490 576 1 1 to USD342 million). Trade
Financial account 762 -431 230 -243 balance recorded a larger deficit
Errors and omissions -695 -213 60 151 of USD5541 million in FY08
Overall balance 1493 604 161 178 compared to the deficit of
Reserve assets -1493 -604 -161 -178 USD3458 million in FY07.
However, balance on the
current account recorded a surplus of USD672 million in FY08 against the surplus of USD936 million
during FY07, mainly thanks to a larger current transfer of USD8743 million. There was surplus in
current account in July FY09 (USD269 million) in the backdrop of negative balance in the
corresponding month of the last fiscal year (USD130 million).

This surplus mainly originated from private transfers in the form of worker’s remittances which was
USD7915 million in FY08 with a robust growth of 32.38 per cent against USD5979 million in FY07. The
growth of workers’ remittances also continued in July FY09 (USD821 million) compared to the
corresponding period of July FY08 (USD567 million). The overall balance also showed a surplus of
USD604 million during FY08 against the surplus of USD1493 million during FY07 due to surplus in
current account and capital account of USD672 million and USD576 million respectively (Table 5.5).
Overall surplus balance was registered in the first month (July) of FY09 (USD178 million) against the
surplus of USD161 million in July of FY08.

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 Capital Market.. Stock market indicators
rose in the first quarter of FY2009, after
which they started declining. The Dhaka
Stock Exchange (DSE) general index
reached 2,966.8 points at the end of
September 2008, a rise of 7.5% from
July. The DSE general index then dropped
by 7.4% in October. Although the share
of foreign portfolio investment in the
country’s stock market is small and the
global financial crisis is not expected to
have significant effects on the domestic
stock market, the downward movements
in share prices were likely caused by
market speculation and selling pressures
from nervous retail investors. DSE
market capitalization reached Tk1,068
billion, increasing by 10.1% from July
2008 to September 2008; however, it
declined to Tk1013 billion in October
2008. Similar trends were observed at
the Chittagong Stock Exchange (CSE),
the country’s other stock exchange. The
CSE selective categories index rose to
5,892.7 in September 2008 from 5,517.5
in July 2008, a rise of 6.8%; while
market capitalization rose by 7.5% during
the same period. However, in October,
the CSE selective categories index
declined by 7.3%. Both the DSE and CSE
indexes continued to fall and reached
2,584.02 and 5,164.21 points
respectively on 9 November 2008,
representing decline of 12.9% and 12.4%
respectively from September 2008.

With respect to IPOs, the number of

companies that floated their shares in
FY08 were 12, which was 2 more
compared to the previous fiscal year.
However, total issued shares, sponsors’
part, and public offer etc. in FY08 were
not found to be very promising for
potential investors. Oversubscription in
the context of IPOs had made the share
of public offer to decrease by about 49
per cent. In case of 9 upcoming IPOs
(four from insurance and one each
from leasing, housing finance, textile,
iron steel and ICD) public offering as
percentage of total shares was found to
be low (22 per cent of total shares vis-
a-vis 37 per cent in FY08) which is a
matter of concern for small scale
investors

11 | P a g e  
 
Industry Analysis:
• With a USD 600mn industry and an average annual growth rate of 12%, the Bangladeshi
pharmaceutical industry is the biggest (in volume) amongst all the LDCs.
• Primarily a generics industry producing about 8,000 different brands which meet 97% of the
domestic demand. Local companies enjoy 86% market share. Of the 245 registered
pharmaceuticals, the top ten players account for 65% market share.
• According to the WTO TRIPS agreement, LDC’s are exempted from “Patent Protection” until
2016 allowing legal reverse engineering and sale of patented products. This provides a unique
opportunity for Bangladesh over India and China, who are under the patent regime.
• Bangladesh has made significant progress in the export market. Between 2003 and 2006
pharmaceutical exports increased to about 61 countries from 51 and quadrupled in value from
USD 7.9mn to USD 36.5mn.
• Since many companies have acquired international certifications like USFDA, UKMHRA and
TGA, Bangladesh can penetrate into regulated and unregulated markets.

Industry grew by 41.8% over last 3 years. The Pharmaceutical Sector is one of the fastest
growing sectors in Bangladesh. In 2007 the Bangladesh pharmaceutical market was worth nearly USD
600mn and it is growing at a steady average rate of 11.57% over the last five years. The last three
years has seen an average growth rate of 13.7% and the last year alone has given an impressive
growth rate of 15.8%. The Pharmaceutical Sector is the second highest contributor to the National Ex-
Chequer and the largest White Collar Labor intensive employment sector of the country. The growth of
the industry is depicted in the table below.

Bangladesh pharmaceutical market (in mn

USD)
Quarter 2004 2005 2006 2007
1st 94.1 95.8 123.7 142.2
2nd 110.6 120.4 136.8 156.6
3rd 107.5 128.2 157.9 154.2
4th 104.4 145.6 91.6 137.6
Total 416.5 490.0 510.0 590.6

The Bangladeshi Pharmaceutical Market is primarily a generic market producing both patented
and off-patented products. This is popularly known as Branded Generic Market since any manufacturer
can produce the same molecule (either patented or off-patented) and market it in different brand
names. There are currently 450 generics registered in Bangladesh, out of which 117 are in the
controlled category i.e. in the essential drug list. The remaining 333 generics are in the decontrolled
category. The total number of brands that are registered in Bangladesh are currently estimated to be
5,300, while the total number of dosage forms & strengths are 8,300 and cover all the important
groups. Local manufacturers hold over 86% market share whereas only 13% share is held by the
MNCs. Out of the top ten players in the market, nine are local pharmaceutical companies, with Snaofi-
Aventis as the only MNC. The top two domestic manufacturers, namely Square and Beximco
Pharmaceuticals have a cumulative market share of over 27%, while the top five have a market share
of 44.5% and the top ten domestic manufacturers contribute about 64% of the total pharmaceutical
market of Bangladesh.

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In Bangladesh there are currently a total of 245 companies out of which 200 have operations in the
country. The market is totally dominated by the local companies and there are only 5 multi-nationals
currently operating. The 245 companies together have 5300 brands registered in Bangladesh. The
table below lists the top ten pharmaceutical companies in Bangladesh in terms of sales value and
market share.

Top 10 Manufacturers in Bangladesh by Top 10 Market Player by Market Share

sales - 2007 20
Company Name Sales USD mn Share (%) 18 Square

Square 106.5 18.03 16

Beximco 54.3 9.19 14

Incepta 43.5 7.37

Market Share
12

Acme 31.9 5.4 10

Beximco
Eskayef 26.8 4.54 8
Incepta
Drug Int. 23.1 3.91 6
Acme Aristopharma Renata
Eskayef
Aristopharma 22.9 3.88 4 Drug Int. ACI
Sanofi aventis 22.4 3.8 2 Sanofi aventis

A.C.I. 22.4 3.79 0

Renata 21.5 3.63 0 1 2 3 4 5 6 7 8 9 10 11

Market Standing
Source: IMS Report,4th Quarter - 2007

Square Pharmaceuticals is also the market

leader in terms of the number of products
manufactured. Companies like Square,
Beximco and Incepta continue to mark their
strong presence by being in the top 5 with
Opsonin posing a strong presence at the
3rd position. Many smaller local companies
like Gaco Pharmaceuticals, produce quite a
large number of drugs without making
much revenue enough to challenge the top
10.

Top Selling Brands in 2007 (USDmn)

Brand Company Sales Share Growth
NEOCEPTIN Beximco 8 1.35 34.06
SECLO Square 7.3 1.24 63.1
NEOTACK Square 6.3 1.07 21.26
NAPA Beximco 6 1.01 10.17
CIPROCIN Square 5.7 0.97 44.8
LOSECTIL Eskayef 5.7 0.96 39.88
PANTONIX IAP 4.3 0.74 33.97
FIMOXYL Sanofi Aventis 4.3 0.73 19.26
LEBAC Square 3.6 0.61 13.75
ENTACYD Square 3.3 0.56 24.92
Source: IMS Report, 4th Quarter - 2007

The graph and table below show the sales values and the market shares of the top 10 brands in the
market. As expected, the top brand is a drug concerning the alimentary disease class. Consistently

13 | P a g e  
 
enough, Square and Beximco play a vital and predominant role. Although Square is the market leader
in terms of market share, “Neoceptin”, a product of Beximco is the market leader in terms of brands.

The Export Story.. The history of pharmaceutical exports from Bangladesh dates back to the late
80's. At that point, only one or two major pharmaceutical companies of Bangladesh took proactive
efforts to initiate export. These companies on their own initiative started exporting their bulk drugs as
well as finished formulations to some of the less-regulated overseas markets like Myanmar, Vietnam
and Nepal. After being successful in these less-regulated markets, in the early 90's, a few companies
of Bangladesh took the initiative to explore some of the moderately regulated markets like Russia,
Ukraine and Singapore.

Export Statistics (in million USD) Today, Bangladesh

Year Finished products Raw materials No. of countries Pharmaceutical Industry is
2001 4.5 0.2 17 exporting its quality products to
2002 5.9 0.6 32 around 65 countries of the world
2003 7.9 0.3 51 and the volume of exports has
2004 20.3 0.02 62 more than quadrupled from
2005 20.6 0.1 67 around USD 8 million to almost
2006 36.5 0.1 61 USD 36 million in the last 4 years.
2007 35.9 n/a 65
Source: Primary Interview, DDA Bangladesh has made significant
progress in the export market. Between 2003 and 2006 pharmaceutical exports increased to about 61
countries from 51 and quadrupled in value from USD 7.9 million to USD 36.5 million thus resulting in
an average annual growth rate of 91.8%. This growth in the export can be largely credited to the low-
cost factors of production that exist in Bangladesh in the form of low labor, infrastructure and power
costs.

Bangladesh exports a wide range of pharmaceutical products covering all major therapeutic classes
and dosage forms. Besides the regular brands, Bangladesh exports high-tech specialized products like
inhalers, suppositories, nasal sprays, sustained release products, etc. Apart from overseas retail
customers, Bangladesh has also been supplying to world-renowned hospitals and institutions like
Raffles Hospital, Singapore, KK Women & Children Hospital, Singapore, Healthway Medical Group,
Singapore, Jinnah hospital, Pakistan, Aga Khan Hospital, Pakistan, Mission for Essential Drugs (MEDs),
Kenya and State Pharmaceutical Corporation (SPC), Sri Lanka. The quality and efficacy of the products
being exported from Bangladesh have been well accepted by the doctors, chemists, patients and
regulatory bodies of all the importing countries. The packaging and presentation of the products of
Bangladesh are comparable to any international standards; in fact, they have been highly appreciated
internationally.

At present, Bangladesh imports over 80% of the local API requirement. Even though, a number of 21
local pharmaceutical companies are producing 41 APIs for pharmaceutical products. Bangladesh
currently has the capacity of producing APIs worth of USD 29.7 million.

Table 9: Major API manufacturers in Bangladesh and their products - 2007

Company List of API Products
Beximco Pharmaceuticals Amlodipine, Amoxycillin, Ampicillin, Celecocib, Rofecoxib, Paracetamol,
Ltd. Diclofenac, Cloxazillin, Flucloxacillin, Cetirizine Fluconazole,
Ciprofloxazin, Ranitidine, Cephalexin
Square Pharmaceuticals Amoxycillin, Paracetamol, Diclofenac, Cloxazillin, Flucloxacillin,
Ltd. Cephalexin
Drug International Ltd. Amoxycillin, Diclofenac, Cloxacillin, Flucloxacillin, Cephalexin
Globe Pharmaceuticals Ltd. Amoxycillin, Diclofenac, Cloxacillin, Flucloxacillin, Cephalexin

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Gonoshashtaya Amoxycillin, Paracetamol, Diclofenac, Cloxazillin, Flucloxacillin,
Pharmaceuticals Ltd. Cephalexin
Sunipun Pharmaceuticals Paracetamol
Ltd.
Opsonin Chemicals Ltd. Amoxycillin, Paracetamol, Diclofenac
Source: GTZ. (2007). 'Study on the Viability of High Quality Drugs Manufacturing in Bangladesh.'
Federal Ministry of Economic Cooperation and Development

Entry Hard
A capital intensive industry
requiring huge fixed costs in
machinery and extensive R&D
Government policy makes it
hard for the MNCs to enter
the market. 

Suppliers Strong  Rivalry Intense Buyer Strong 

Currently only 20% of the API
are produced internally the
rest are imported. Too small
size of the most of the players
makes it unattractive for
investment in API production.
About 245 firms operate with
only 5 MNCs.
Top 10 players hold about
64% of the total market.
Square and Beximco together
holds 25% market
Due to restriction on direct
promotion of drugs cos’ have
to market through key opinion
leader i.e. the doctors by
inducing them to suggest a
particular drug. This often
results in unfair practice.

Substitute High
The 245 companies have
5,300 brands many firms
offering similar products and
services because of the
absence of patent protection.
Cost of switching is relatively
low.

Porter’s Five Forces Analysis of the Industry

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Square Pharmaceuticals Ltd. Company Overview

Background

Square Pharmaceuticals started as a Partnership Firm in 1958. It converted into a Private Limited
Company in 1964. The company made its initial price offering in 1995. It has achieved MHRA
certificate as the first pharmaceutical company of Bangladesh. Square Pharmaceuticals Limited is the
largest pharmaceutical company in Bangladesh and it has been continuously in the 1st position among
all national and multinational companies since 1985. At the end of 2007 as well, Square was the
leading company with annual sales worth BDT 68.9bn (USD 106.5mn) and market share of 18%. Such
is the dominance of Square that the closest competitor Beximco has only about half the market share.

Plant & Size

Square Pharmaceuticals has three GMP facilities in Bangladesh. The first factory located in Pabna
started operations in 1958. The second, known as the "API Unit" began production in 1995. The third
unit located 50 kilometers north of Dhaka has been in operation since 2002. This facility is geared oral
capsules and tablets. The company plans to use this factory as part of its export strategy.

Products

Square manufactures products in the following categories:

Tablets: Non-Coated (plain, chewable, dispersible, vaginal) Coated (sugar coated, film coated, enteric
coated) Sustained/Extended Released (coated, non – coated).
Capsules: Granulated Material filled, Pellets Filled
Suppositories: Suppocire based
Injections: Vials containing Dry Powder for Injections, Small Volume Liquid Parenterals
Liquids: Oral Syrups (Sugar based, Non-Sugar based), Oral Suspensions, Topical Liquids
Spray, Drops, Ointment, Cream and Powder: Small Volume Sterile Eye & Ear Drops Small Volume
Nasal Drops & Sprays Topical Ointments & Creams Topical Antibiotic Powder
Oral Dry Powders: Dry Suspensions (Antibiotic & Anti Infectives), Dry Syrups (Antibiotics)
Dry Powder Inhalers: Partial Filled (Premix) Capsules for Respiratory Tract Application with a Device
Metered Dose Inhalers: Pressurized Canisters for Oral use with an Actuator

International Trade

Square pharmaceutical is already supplying products to the following markets:

Asia: Afghanistan, Bhutan, Cambodia, Macau, Malaysia, Myanmar, Nepal, Papua New Guinea, Sri
Lanka, Tajikistan, Vietnam, Yemen
Africa: Gambia, Ghana, Kenya, Libya, Mauritius, Niger, Somalia, Sudan, Tanzania
South America: Belize, Costa Rica, Guatemala

Square pharmaceuticals is also supplying to the UK further to the approval of its general plant by the
MHRA. The markets under exploration are:

Asia: Hong Kong, Iran, Laos, Maldives, Philippines, Qatar, Saudi Arabia, Thailand, UAE
Africa: Algeria, Chad, Comoros Island, Ethiopia, Malawi, Mozambique, Nigeria, Rwanda, Sierra Leone,
South Africa

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Europe: Germany, Kosovo, Romania, Russia, Ukraine
South America: Brazil, Colombia, El Salvador

Square plans to penetrate into the developed nations with its exports in the future.

API Scenario

The Pharmaceutical Bulk Manufacturing Plant:

• Established in 1992 and commercial production started in 1995.

• It is the one of the largest manufacturers of pharmaceutical bulk products in Bangladesh.
• It is well equipped with modern machinery.
• It has got the feasibility of reverse engineering of bulk drug under post WTO scenario.

Square is presently the largest quality-bulk drugs manufacturer in the country. Until 1996 it was
involved only for the internal consumption of Square Pharma. Since 1997 it started marketing the API
to all top local pharmaceuticals like Aventis Pharma, Novartis Bangladesh Ltd., Glaxo Smith Kline, ACI
Ltd., Beximco Pharmaceuticals Ltd., etc.

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SWOT Analysis of Square Pharmaceutical Ltd:

Has own API plant whereas 80% of the industry’s
API requirement is imported.
SPL is planning to capitalize on TRIPS and about to
enter in to Europe Market.
Received the UK MHRA certification for its
manufacturing plant and waiting to enter the
European market in the next year.
Square enjoys 18% of the market, making it the
biggest player in the market
Strong brand image, quality of products, the largest
distribution network in the country and doctors’
level marketing
SPL is the only pharmaceutical company in
Bangladesh that has the largest investment portfolio
in different businesses and subsidiaries. For
example, Square Spinning Mills Ltd (SCL)
contributes 14% of SPL’s revenue.
SPL has the largest product portfolio comprising of
more than 430 products. So far in 2007, 17 new
products have already been introduced.
The pharmaceuticals market is an Oligopoly in
nature despite the presence of more than 250
companies.
Given the country's lack of spending power, the
pharmaceutical market remains tiny in comparison
with the population size. Pharmaceutical spending is
amongst the lowest in the world in per capita terms.
Healthcare expenditure consists of only 3.4% of
GDP.
R&D activities of the company have to be improved
if it wants to compete with global players.
Square’s textiles subsidiaries seem not to be adding
value; rather they are taking value away from the
pharmaceutical business.
The market is dominated by cheap, locally produced
generic drugs used for the treatment or prevention
of basic illnesses. Therefore major revenue sources
come from antibiotics, vitamins, pain-killers and
anti-asthma drugs.

Industries in Bangladesh including some world class
manufacturing industries that are providing 97% of
the total medicine requirement of the local market.
The industry is worth USD 593 mn, which grew by
41.3% in the last 3 years. It has enjoyed an average
growth of 12% for last 5 years.
Price Hike of Raw materials.
Recently few new industries have been established
with hi tech equipments and professionals
Patent Law, which is valid up to 2016 for Least
Developed Countries like Bangladesh.

Local companies and MNCs together meet 95% of
the country’s drug demand but the local
manufacturers dominate the industry; they enjoy
approximately 87% of market share,
Low presence of the MNC, there are only 5 big MNCs
operating in the market.
Lack of Hi tech Quality control Laboratory,
establishment of API Park by the Govt, necessary
action for Process Loss of API by the Govt.  
After 2016 the advantage enjoyed by Bangladesh
will evaporate.

More than 97% of sales revenue comes from the

local market. Bangladesh is the 7th most populated
country with a population base of 150m. With the
prevalence of diseases, Bangladesh ranks 167 in the
world in terms of life expectancy at birth.

As per TRIPS/WTO agreements only 50 LDCs

including Bangladesh will be able to export their
patented drugs. Among the 50 LDCs, Bangladesh is
the only country which has a strong manufacturing
base for pharmaceuticals and is therefore in a unique
position to exploit this opportunity.

Bangladesh Govt. declare this Sector as “Thirst

Sector” for 2006-2009 & EPZ declares as the “Export
Product of the year 2007”

Between 2003 and 2006 pharmaceutical exports

increased to about 61 countries from 51 and
quadrupled in value from USD 7.9 million to USD
18 | P
36.5 amillion
g e   thus resulting in an average annual
growth rate of 91.8%.
 
 

Company Valuation

Our analysis of the square pharmaceutical limited (SPL) is based on Present value of cash flow, (PVCF) and Relative Valuation techniques.

In the PVCF approach, we estimate the value of the stock through estimation of future dividend (D), and free cash flow to equity (FCFE)
based on future growth rate (g) and required rate of return (k). This section discusses the underlying assumptions behind the estimations and
lists the final result.

Estimation of Financial Statements

On basis of historical data, macro-analysis, and company information, projected balance sheet and income statement for SPL has been
prepared. The complete balance sheet has been included in the appendix-2: Financial Statements-Historical & Estimated, with the
assumptions and rational governing the projection.

Required rate of return

Risk free Rate is calculated on basis of Bangladesh Government Treasury bond rate that equals to 10.6%. As the analysts consider an
investment time frame of 5 years, they believe the 5 year BGTB rate should be the base to estimate required rate of return instead of the 91-
days T-bill rate. BGTB rate is inflation-adjusted so no estimation of inflation has been done.

Stock market return from 2003-2008 with conjunction of SPL return been used to estimate the risk premium of SPL and market return which
is average of return annual return from 2003-08, is 0.38

Trade Date DSE Index Price SPL Return DSE Return SPL
01-01-03 845.85 308.39
01-01-04 967.15 545.72 0.143404 0.769577483
01-01-05 1999.71 1227.68 1.067636 1.249651836
01-01-06 1669.80 923.46 -0.16498 -0.24780073
03-01-07 1,583.09 1122.47 -0.05193 0.215504732
01-01-08 3008.913 2483.33 0.900658 1.212379841

From regression between DSE return and SPL return, we find the following

Covariance of Return of DSE and SPL, CovSPL,M = .27

Variance of DSE return, σM2 = 0.32
βSPL=0.84

Risk Premium for SPL is .84X(.25-.07)=0.15

Expected rate of return = 22% yearly

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FCFE Approach

FCFE Estimation

FCFE has been calculated from the financial statement prepared using the following formula FCFE
2009              88,87,32,304
FCFE=Net Income+Depreciation Expenses-Capital Expenditure-Change in WC+New Debt-
Repayment of Debt 2010           4,57,51,33,864
2011        12,13,21,09,167
2012        24,47,81,76,742
Value/Output
2013        35,27,08,53,418
PV of FCFE ৳ 77,34,50,05,495.20
Less Debt ৳ 89,95,87,261.00
No of share 12072240
Price ৳ 6,332.33
 
Dividend discount Model

Dividend estimation:

Historical data indicates a compound annual growth rate of -7.0%, however the dividend and net operating profit after tax (NOPAT) of Square
pharma has a negative correlation of 0.6. As square pharma is investing heavily on fixed assed (Fixed asset CAGR for the period is 30%), it
paid lesser dividend.

We depend on the total dividend paid by the pharma industry to estimate the dividend to be paid by SPL instead of historical data or NOPAT.
Our assumption is justified as correlation coefficient between dividend paid by SPL & total Pharma industry is about 90%. And it has been
found that the dividend paid by SPL vary around 23 to 25 percent of total dividend paid by the industry, however last year the dividend come
down to 12% of industry dividend. We consider three different views-pessimistic, average and optimistic, to determine the dividend paid by
SPL on basis of total dividend paid in Pharma industry.

Total dividend to be paid by pharmaceuticals is correlated to GDP measured at market price. A correlation factor of 73% has been found
between the two and for the last five years, the correlation coefficient stood at 85% the total dividend paid by the Pharmaceutical is about
10% of GDP. For estimated GDP growth rate, we consider the forecast of Intelligence unit of Economist group,

Dividend Growth rate estimation:

20 | P a g e  
 
 

Growth rate has been estimated using historical data that included two approach-using average compound growth rate, and use of Retention
rate (RR) & Return on Equity (ROE). From dividend estimation, we saw, the CAGR approach provides an unacceptable result. However, from
ROE and RR, we find better estimation of growth rate.

Growth Rate gDividend(Historical) 2003 2004 2005 2006 2007 2008

Payout Ratio 27.46% 25.98% 26.49% 31.96% 22.87% 25.89%
ROE 21.00% 23.00% 25.00% 19.00% 19.00% 18.00%
Growth Rate, g=RRXROE 15.60% 17.00% 18.20% 13.30% 14.60% 13.00%

We believe, the dividend growth rate will pick up with opening up of new
export destination in European market. However, due to political instability gDividend 2009-11 2012-14
and global financial turmoil, which hopefully will not affect pharmaceutical, In usual business/Scenario 15% 18%
we are little pessimistic. And our final standpoint is that if everything goes
Pessimistic view 13% 10%
normal, the growth rate will rise while if things go wrong the growth rate
will stumble and might come below 10%. For past data we estimate the growth rate will be around a constant figure for three years in a row.

Value/Output

Stock Price from Dividend Discount Model

Dividend payment @ Moderate Growth Rate @ Low Growth Rate
more than industry average 4,811.43 2,780.33
like before 4,925.93 3,707.11
lower than industry average 7,388.89 5,560.66

Analysts believe from discussion with company insiders and business performance that dividend payment will be as usual and the company
will grow at moderate rate. Hence our bet is on BDT 4925BDT for SPL stock.

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Relative Valuation techniques

Earning Multiplier
From historical data we find, P/E ratio for SPL is higher than industry average. Though our historical Sectoral
Year SPL
data differ from that of DSE reporting, we have continued with our calculation as we don’t know the PEa
assumptions and process DSE adopted to calculate P/E. 2003 10.76 50.42
2004 18.19 39.76
2005 10.84 30.71
From the historical data we project the P/E for SPL is likely to vary from 30 to 25. 2006 11.76 33.08
2007 21.05 29.59
Value/Output 2008 20.23 27.91
a
Source LankaBangla Finance

2009 2010 2011 2012 2013

Earnings per Share 106 126 146 153 180
Price Earnings Ratio
=30 3176.34 3784.66 4370.63 4577.26 5406.86
=25 3153.88 3642.19 3814.38 4505.72

Final value of SPL stock

We applied DDM, FCFE, and Earning multiplier approach to determine the value of SPL stock.

The DDM is based on GDP while FCFE is based projected financial statement of the company that requires estimation of revenue and expense
based on macro analysis. Earning multiplier approach based P/E ration that is pivoted on industry analysis and in depth study of the
company.

After a close look of the values that we Approach Assumptions Value Under/Overvalue
obtain, we can discard some findings as DDM 4,925 Undervalue in market by 2,050.00
those refer some unrealistic situation like FCFE 6,332 Undervalue in market by 3,475.00
paying a dividend that is more than industry Earning Multiplier Approach PE=30 3,176 Undervalue in market by 301.00
average in a low growth situation. And our
PE=25 3,153 Undervalue in market by 278.00
final valuation from three different
approaches is listed below. All the approaches indicate a buy decision. Though we believe from our market perception, a value of 6,332 is
unlikely.

Hence our final stand is that SPL stock price will be and should be BDT 4,925 by then end of 2000. And ee are recommending BUY as the
analysis show the stock is undervalued by 1526 BDT on average considering latest market price of 2885 BDT (Close of Dec 4, 2008).

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Appendix :Financial Statements

Forecasted Revenue
2004 2009 E 2010 E 2011 E 2012 E 2013 E
Square Pharma
Local:
Pharmaceuticals Product 5,07,30,41,083 10,07,52,84,369 11,80,08,23,300 13,78,45,51,079 15,24,99,70,046 17,87,97,06,652
Growth 15.5% 17.1% 16.8% 10.6% 17.2%
% of Total SPL Sales 92.54% 85.72% 84.34% 79.46% 72.43% 67.55%
Basic Chemicals 32,17,28,657 28,32,11,554 30,21,05,273 35,16,71,636 39,16,58,264 34,29,71,250
Growth -20.7% 6.7% 16.4% 11.4% -12.4%
% of Total SPL Sales 6% 2% 2% 2% 2% 1%
Agrovet products* 2,73,63,822 52,21,09,096 47,45,57,926 90,65,39,335 1,56,64,89,732 1,87,97,87,679
Growth 168.1% -9.1% 91.0% 72.8% 20%
% of Total SPL Sales 0.50% 4.44% 3.39% 5.23% 7.44% 7.10%
Pesicide Products 12,94,56,436 29,82,50,882 68,71,31,455 1,58,30,61,991 3,64,71,70,060
Growth 67.9% 130.4% 130.4% 130.4% 130.4%
% of Total SPL Sales 1.18% 2.32% 4.37% 8.42% 15.36%

Total Local Sales 5,42,21,33,562 11,01,00,61,455 12,87,57,37,382 15,72,98,93,504 18,79,11,80,033 23,74,96,35,641

Growth 17.71% 16.95% 22.17% 19.46% 26.39%
% of Total SPL Sales 98.91% 93.67% 92.03% 90.68% 89.24% 89.73%
Export: 5,99,54,358 74,37,35,384 1,11,56,03,076 1,61,76,24,460 2,26,46,74,244 2,71,76,09,093
Growth 250% 50% 45% 40% 20%
% of Total SPL Sales 1.09% 6.33% 7.97% 9.32% 10.76% 10.27%
Gross Sales for SPL 5,48,20,87,920 11,75,37,96,839 13,99,13,40,458 17,34,75,17,965 21,05,58,54,277 26,46,72,44,735
Growth 23% 19% 24% 21% 26%
VAT( 15% of Sale) 1,76,30,69,526 2,09,87,01,069 2,60,21,27,695 3,15,83,78,142 3,97,00,86,710
Net Sales 9,99,07,27,313 11,89,26,39,389 14,74,53,90,270 17,89,74,76,136 22,49,71,58,024  

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Historical and Projected Balance Sheet

Square Pharmaceuticals Limited
ASSETS: 2002 2003 2004 2005 2006 2007 2008 2009 E 2010 E 2011 E 2012 E 2013 E
Current Assets:
Cash & cash Equivalent 3,17,77,525 3,01,37,159 44979899.00 382074333.00 316720982.00 139855179.00 205295694.00 400943269.67 776004144.21 1388659587.09 1310548456.77 1690936868.36
Short Term Loan 59,26,21,908 38,63,34,814 815577152.00 1281695105.00 1897124652.00 1418893703.00 1510502334.00 2363814453.76 2711365638.64 2817566186.51 3196741288.49 3813778838.36
Merketable Securities 6,40,00,000 2,02,50,000 20250000.00 20250000.00 20250000.00 20250000.00 20250000.00 20250000.00 20250000.00 20250000.00 20250000.00 20250000.00
Advance, Deposits & Pre-payment 10,36,73,589 12,44,58,455 107177611.00 146042777.00 166492706.00 236455395.00 288806440.00 307491359.46 373905699.62 457273069.44 529684152.14 609910490.26
Accounts Receivable 14,61,44,642 14,05,36,470 225115010.00 267527741.00 288732137.00 322864637.00 360245646.00 443729272.92 502072378.22 555579468.96 638722065.99 739659121.58
Inventories 51,42,76,326 73,98,35,432 795856209.00 1144912356.00 1342364478.00 1544191798.00 2026736322.00 2335667806.62 2732921561.65 3241203711.01 3792209160.24 4421828524.94
Total Current Assets 1,45,24,93,990 1,44,15,52,330 2008955881.00 3242502312.00 4031684955.00 3682510712.00 4411836436.00 5871896162.42 7116519422.34 8480532023.01 9488155123.63 11296363843.49
Long term Investment
Investment-Long Term (at cost) 51,08,00,000 1,19,72,00,000 1221900000.00 1660833364.00 1915833364.00 2792186364.00 3611744164.00 4373169647.06 5430783611.78 6589848222.73 7446072187.62 8982590791.17
Investment- Associate Undertakings
Preliminary Expense
Total Long Term Investment 51,08,00,000 1,19,72,00,000 1221900000.00 1660833364.00 1915833364.00 2792186364.00 3611744164.00 4373169647.06 5430783611.78 6589848222.73 7446072187.62 8982590791.17
Fixed Assets
Property, Plant & Equipment-at cost 1,08,99,21,364 3,25,78,25,743 3408474009.00 3786220623.00 4030138469.00 5803500191.00 6893452889.00 6923010213.50 7363438440.69 8017660144.89 8818686838.13 9603503851.69
Less: Accumulated Depriciation 58,87,71,710 88,98,99,023 1171335118.00 1468862152.00 1756377308.00 2272496682.00 2805020718.00 2977726506.78 3156307114.96 3348570847.28 3559025184.57 3789302568.19
Net Fixed Assets 50,11,49,654 2,36,79,26,720 2237138891.00 2317358471.00 2273761161.00 3531003509.00 4088432171.00 3945283706.72 4207131325.73 4669089297.61 5259661653.56 5814201283.50
Capital Work -in -Progress 2,06,16,71,687 15,76,41,175 402266589.00 687238515.00 1077707832.00 481239419.00 59114649.00 880856454.38 1308443408.40 1602053386.48 1569634027.12 2016716050.01
Total Fixed Assets 2,56,28,21,341 2,52,55,67,895 2639405480.00 3004596986.00 3351468993.00 4012242928.00 4147546820.00 4826140161.09 5515574734.13 6271142684.09 6829295680.69 7830917333.51
Total Assets 4,52,61,15,331 5,16,43,20,225 5870261361.00 7907932662.00 9298987312.00 10486940004.00 12171127420.00 15071205970.58 18062877768.26 21341522929.83 23763522991.93 28109871968.18
Liabilities & Shareholder's Equity
Current Liabilities:
Accounts Payable 2,99,71,605 3,46,45,046 52646198.00 83848465.00 79390166.00 60601743.00 100953258.00 190530880.46 236584690.10 287587395.60 324236087.25 392015823.14
Liabilities for Expense 3,39,52,588 2,18,59,848 16928468.00 102395447.00 49771374.00 24565248.00 32290235.00 57232007.59 63371115.19 70169925.10 75055302.95 84090540.10
Liabilities for Other Finance 8,96,03,249 18,65,53,888 229034317.00 250567620.00 399018813.00 426444968.00 400905780.00 903335708.75 1127557779.72 1375874527.97 1554305923.88 1884304959.13
Short Term Bank Loan 89,04,43,212 91,86,93,533 889045030.00 1370262208.00 1471158187.00 1818777878.00 2669693184.00 5114520902.90 6445714016.50 7919955797.56 8979292393.94 10938477059.90
Current Portion of LTD 13,75,02,727 8,62,14,517 55921187.00 142875686.00 261416941.00 225176449.00 297002646.00 640042751.62 809153102.71 996435881.32 1131010483.53 1379898795.31
Total Current Liabilities: 1,18,14,73,381 1,24,79,66,832 1243575200.00 1949949426.00 2260755481.00 2555566286.00 3500845103.00 6905662251.32 8682380704.21 10650023527.54 12063900191.56 14678787177.58
Non Current Liabilities:
Long Term Loan-Secured 7,09,28,279 6,52,54,933 36544158.00 389193080.00 602349621.00 492569379.00 602584615.00 1696986043.46 2203859419.71 2765200897.02 3168560493.54 3914551842.35
Deffered Tax Liability - 0.00 0.00 33867438.00 105546727.00 182656997.00 424246510.86 550964854.93 691300224.26 792140123.39 978637960.59
Minority Interest - 0.00 0.00 0.00
Total Non Current Liabilities 7,09,28,279 6,52,54,933 36544158.00 389193080.00 636217059.00 598116106.00 785241612.00 2121232554.32 2754824274.63 3456501121.28 3960700616.93 4893189802.93
Total Liabilities 1,25,24,01,660 1,31,32,21,765 1,28,01,19,358 2,33,91,42,506 2,89,69,72,540 3,15,36,82,392 4,28,60,86,715 9026894805.64 11437204978.85 14106524648.82 16024600808.48 19571976980.51
Shareholder's Equity:
Share Capital 25,00,00,000 30,00,00,000 360000000.00 432000000.00 496800000.00 596160000.00 894240000.00 1207224000.00 1207224000.00 1207224000.00 1207224000.00 1207224000.00
Share Premium 80,00,00,000 1,36,72,45,000 2035465000.00 2035465000.00 2035465000.00 2035465000.00 2035465000.00 2035465000.00 2035465000.00 2035465000.00 2035465000.00 2035465000.00
General Reserve 10,58,78,200 10,58,78,200 105878200.00 105878200.00 105878200.00 105878200.00 105878200.00 105878200.00 105878200.00 105878200.00 105878200.00 105878200.00
Tax Holiday Reserve/Other Reserve 47,09,61,594 66,06,73,130 853731206.00 919636288.00 947678690.00 1101935237.00 1101935237.00 1417557933.54 1754128439.60 2127655583.40 2548428515.69 3013564618.37
Retained Earnings 1,64,68,73,877 1,41,73,02,130 1235067597.00 2075810668.00 2816192882.00 3493819175.00 4279522268.00 1278186031.40 1522977149.81 1758775497.61 1841926467.76 2175763169.30
Total Shareholder's Equity 3,27,37,13,671 3,85,10,98,460 4590142003.00 5568790156.00 6402014772.00 7333257612.00 8417040705.00 6044311164.94 6625672789.41 7234998281.01 7738922183.45 8537894987.67
Total Liabilities & Shareholder's Equity 4,52,61,15,331 5,16,43,20,225 5870261361.00 7907932662.00 9298987312.00 10486940004.00 12703127420.00 15071205970.58 18062877768.26 21341522929.83 23763522991.93 28109871968.18  
 
 
 
 
 
 
 
 

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Historical and Projected Income Statement  

 
 
 
Square Pharmaceuticals Limited 2002 2003 2004 2005 2006 2007 2008 2009 E 2010 E 2011 E 2012 E 2013 E
Net Turnover 3670811162 4065850882 4721551742 5332046635 6089905396 7500811349 8257843739 9990727313 11800823300 13784551079 15249970046 17879706652
Cost of Goods Sold 2192414303 2324689139 2559622865 2892918529 3273103588 3976923696 4530270057 5773568438 6704682510 7772079838 8565916296 10022893602
Gross Profit 1478396859 1741161743 2161928877 2439128106 2816801808 3523887653 3727573682 4217158875 5096140790 6012471241 6684053749 7856813051

Selling & Distribution Expense 342210097 378784260 513726087 650601644 771066429 968270120 1171156634 1453932249 1775470591 2127852203 2388163473 2855299556
Administrative Expense 98558167 103636659 129544712 146846258 169534071 208111388 300615781 172705789 310048206 370738606 414806290 489230541
Depreciation Expense 66480850 305157073 289445574 303954532 295996773 521753906 546495449 172705789 178580608 192263732 210454337 230277384
Operating Income 971147745 953583751 1229212504 1337725672 1580204535 1825752239 1709305818 2417815049 2832041385 3321616700 3670629649 4282005570

Other Income 55574367 146995504 88679623 357395181 169353845 220144368 604628504 33881517 172085686 231045655 145977348 276824175
Profit From Associate Undertaking
Minority Interest
EBIT 1026722112 1100579255 1317892127 1695120853 1749558380 2045896607 2313934322 2451696566 3004127070 3552662355 3816606997 4558829745
Interest Expenses 75699498 124494965 108673997 106451324 139863636 236845084 351868423 661373783 862979871 1072184129 1227545424 1496909633
EBT 951022614 976084290 1209218130 1588669529 1609694744 1809051523 1962065899 1790322783 2141147199 2480478226 2589061573 3061920112
Allocation for WPPF 45286791 46480204 57581816 75650930 76652130 86145311 93431709 89516139 107057360 124023911 129453079 153096006
Tax (Current+Deffered) 146288070 164719297 181592771 257170446 367177998 419663372 486771097 422620613 511112689 597678817 617682026 733060937
Net Profit After Tax 759447753 764884789 970043543 1255848153 1165864616 1303242840 1381863093 1278186031 1522977150 1758775498 1841926468 2175763169

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This report is provided for academic purposes only. It is not, under any
circumstances, to be used or considered as an offer to sell, or a solicitation of any
offer to buy. Due care has been taken to ensure authenticity and reliability of data
and information. However, analysts make no representation or warranty as to the
accuracy or completeness of such information. All opinions and projections
expressed in this report represent our judgment as of this date and are subject to
change without prior notice.

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