Parvez M Chowdhury
Analyst: Pharmaceuticals and Consumer Goods
parvez@bracepl.com
Rating: OUTPERFORM
February 24, 2010
Square Pharmaceuticals
DSE: SQURPHARMA
Bloomberg: SQUARE:BD
52-week Price Range (BDT)
Current Price
12-month Target Price
Cash Dividend BDT
Total Return
Number of Shares MM
Free Float
Average daily volume MM BDT
2,841 - 4,362
3,092
3,850
42
26%
20
46%
184.1
BDT mn
2010A 2011E 2012E
Net Sales
12,971 15,663 19,141
Margins
3,326
2,497
3,858
3,358
4,764
4,251
2010A 2011E 2012E
Gross Margin
51%
51%
51%
Operating Margin
Net Margin
22%
17%
21%
18%
21%
19%
Growth
10%
21%
22%
Operating Profit Growth
Net Profit Growth
14%
21%
16%
34%
23%
27%
2010A 2011E 2012E
EPS
127
171
217
Dividend
Book Value/Share
35
660
42
831
53
1047
Cashflow BDT mn
2010A 2011E 2012E
NC Working Capital
4,024
4,867
5,621
Capex
Dividend
1,493
483
1,471
528
1,923
827
Valuation
2010A 2011E 2012E
P/E
24.3x
18.1x
14.3x
P/B
ROE
4.7x
19%
3.7x
21%
3.0x
21%
Miscellaneous BDT mn

Square Pharmaceutical Limited (SPL) is the largest pharmaceutical
company in Bangladesh, with the largest domestic market share of
19.3%, in what is a highly competitive pharmaceuticals market.

Return on equity has been improving, gradually moving up to 19% for
the last couple of years.

Margins have been improving steadily. SPL currently boasts one of the
highest gross margins (51%) in the industry.

Massive expansion
significantly.

SPL has been gearing up to transform itself into a big exporting
company focusing on attaining certifications from regulators of
developed markets.

SPL has been one of the most resilient stocks in the face of severe
market correction among all the stocks in BRAC EPL coverage
universe.
plan,
which
will
increase
current
capacity
2010A 2011E 2012E
Revenue Growth
Per Share BDT
Investment positives
We maintain an OUTPERFORM rating for Square Pharmaceuticals. We
also set a 12-month fair value of BDT 3,850. Our recommendation
considers the sound business model of the company, future outlook,
good corporate governance, and the stock’s resilience despite extreme
volatility in the market. Our recommendation is based on an estimated
2012 EPS of BDT 217 and a conservative estimated P/E multiple of 18x.
With an estimated dividend yield of 1% in 2011, this target price implies
an estimated total return of 26%.
Square Pharmaceuticals - Last 12 Months
2010A 2011E 2012E
Total Debt
2,524
1,815
1,427
Cash
Debt/Equity
270
23%
608
14%
1,797
9%
Billions
Ops Income
Net Income
Leading the Bangladesh Pharmaceutical Industry
85
80
75
70
65
60
55
50
45
40
Mcap (Bn BDT)
Square Pharmaceuticals
(DSE: SQURPHARMA; Bloomberg: SQUARE:BD)
Company Profile
Part of the Square group of
industries, Square Pharmaceuticals,
is the largest pharmaceutical
company in Bangladesh
The flagship company of the Square group of industries, Square
Pharmaceuticals Limited (SPL) is the largest pharmaceuticals company in
Bangladesh. Founded in 1958 and headquartered in Dhaka, Bangladesh,
SPL develops, manufactures and markets drugs for humans and the animal
world. The company owns and operates modern pharmaceutical factories
mainly in Bangladesh and also has a separate division to operate a modern
chemical factory which produces and sells basic chemical products. It also
has divisions to produce and sell agrovet and pesticide products. It exports
its products to Europe, Asia, Africa and South America.
SPL offers a range of pharmaceutical products, which include alimentary
preparations, anesthetics, antiallergy preparations, antidiabetic
preparations, antihaemorrhagic, antiparasite preparations, aromatase
inhibitor, bone calcium regulator, cardiovascular preparations, CNS
preparations, drugs for urinary incontinence, eye and ear preparations,
haematinics, and lipid modifying preparations. The company also provides
local anesthetics, other antibacterials, beta-lactam antibiotics, penicillins
and cephalosporins, NSAIDs and antigout preparations, quinolone
antibiotics, respiratory tract preparations, systemic antifungal, antiviral and
antiprotozoal agents, systemic hormone, systemic sex hormone, thyroid
therapy, topical preparations, vitamins and minerals, and water purification
products. In addition, its animal health products consist of livestock, poultry,
and aqua products. Further, the company offers agro chemical products
comprising insecticides, nematicides, fungicides, herbicides and public
health insecticides, as well as active pharmaceutical ingredients.
Industry and Competition
The market is expected to reach
BDT 100 billion in 2011
The pharmaceutical sector, which is widely regarded as a “hi-tech” industry,
is the most developed among the manufacturing industries in Bangladesh.
Roughly 250 companies are operating in the market. According to IMS, a
US-based market research firm, the retail market size is estimated to be
around BDT 55 billion, which grew by 16.8% in 2009. The market size in
2008 was BDT 47 billion with a growth of 6.9%. The actual size of the
market may vary slightly since IMS does not include the rural market in
their survey. The retail market is about 90% of the total market. In that
respect, the total market size is more than BDT 60 billion. The market is
expected to reach BDT 100 billion in 2011.
One of the fastest growing sectors, Bangladesh’s pharmaceutical industry
is the third largest tax paying industry in the country. Bangladeshi
pharmaceutical firms focus primarily on branded generic final formulations
using imported APIs. Branded generics are a category of drugs including
prescription products that are either novel dosage forms of off-patent
products produced by a manufacturer that is not the originator of the
molecule, or a molecule copy of an off-patent product with a trade name.
About 80% of the drugs sold in Bangladesh are generics and 20% are
patented drugs. The country manufactures about 450 generic drugs for
5,300 registered brands which have 8,300 different forms of dosages and
strengths. These include a wide range of products from anti-ulcerants,
flouroquinolones, anti-rheumatic non-steroid drugs, non-narcotic
analgesics, antihistamines, and oral anti-diabetic drugs. Some larger firms
are also starting to produce anti-cancer and anti-retroviral drugs.
2
Square Pharmaceuticals
(DSE: SQURPHARMA; Bloomberg: SQUARE:BD)
Figure 1: Market share
Others
20%
MNCs
13%
Top Ten
67%
Local companies and MNCs based in Bangladesh produce 95%-97% of the
drugs and the rest are imported. Although about 250 pharmaceutical
companies are registered in Bangladesh, less than 100 actively produce
drugs.
The domestic market is highly concentrated and competitive. However, the
local manufacturers dominate the industry as they enjoy approximately
87% of market share. Another notable feature of this sector is the
concentration of sales among a very small number of top companies. The
top 10 players control around two-thirds of the market while the top 15
companies cover 77% of the market.
Square Pharmaceuticals is the stand out market leader with a market share
of 19.3% and domestic revenues of BDT 11.2 billion in the four quarters
from April 2009 to March 2010. Square’s nearest competitors are Incepta
Source: BAPI and BRAC EPL Research,
February 2011
Table 1: Domestic retail market share of companies
Top Companies
Square Pharmaceuticals
Incepta Pharmaceuticals
Beximco Pharmaceuticals
Opsonin Pharmaceuticals
Eskayef Pharmaceuticals
Acme Laboratories
Renata Limited
ACI Limited
Aristopharma
Drug International
Sanofi-Aventis
GlaxoSmithKline
Novo Nordisk
Sandoz
Novartis
Others
Total
Revenue April
09 - March 10
(MM BDT)
11,158
4,919
4,415
2,817
2,788
2,717
2,623
2,466
2,355
2,283
1,700
1,266
1,005
936
675
13,691
57,815
Market
Share
19.3%
8.5%
7.6%
4.9%
4.8%
4.7%
4.5%
4.3%
4.1%
3.9%
2.9%
2.2%
1.7%
1.6%
1.2%
23.7%
100.0%
Revenue 2009
(MM BDT)
10,701
4,524
4,239
2,614
2,520
2,640
2,495
2,460
2,240
2,132
1,634
1,229
878
908
558
13,158
54,929
Market
Share
19.5%
8.2%
7.7%
4.8%
4.6%
4.8%
4.5%
4.5%
4.1%
3.9%
3.0%
2.2%
1.6%
1.7%
1.0%
24.0%
100.0%
Source: IMS, BAPI and BRAC EPL Research, February 2011
Square Pharmaceuticals has 19.3%
market share in the local market
Pharmaceuticals and Beximco Pharmaceuticals with market shares of 8.5%
and 7.6% respectively. Incepta and Beximco had BDT 4.9 billion and BDT
4.4 billion in domestic sales for the last four quarters. Although a number of
MNCs are operational in Bangladesh, no MNC is among the top ten in
terms of domestic sales.
The most important therapeutic group in the Bangladeshi market is
Systemic Antibiotics. These account for almost 30% of the market. The
second therapeutic group, Anti-acids, is much less relevant in terms of
market share, as well as from a public health perspective. Vitamins,
Analgesics, Mineral supplements, Cough and Cold preparations and
muscle relaxants also figure prominently. It is to be noted that typical
developed-market therapeutic groups like those addressing diabetes,
cardiovascular diseases, allergies or psychological disorders also are
among the most important in Bangladesh, whereas HIV/AIDS and Antimalarial drugs are not.
Because Bangladesh API capacity is insignificant, pharmaceutical
companies import approximately 80% of their APIs. Coupled with the
necessity to import machines, it is one of the main disadvantages in terms
of cost when compared to India. The leading manufacturers are therefore
3
Square Pharmaceuticals
(DSE: SQURPHARMA; Bloomberg: SQUARE:BD)
going into API manufacturing, focusing mainly on Antibiotics, but also other
drugs, such as anti-cancer drugs. For many APIs, the domestic market is
too small to justify an API manufacturing plant. This stresses the fact that
whereas several Bangladeshi manufacturers have the know-how to
manufacture APIs, the initial investment and the production scale required
are high. This means that in order to establish API manufacturing e.g. for
Antiretroviral APIs in Bangladesh, the manufacturers would need to be sure
of their access to several export markets.
Performance so far this year
Performance in the first half has
been very consistent
Square’s performance in 1H11 has been very consistent. The
performances in both the quarters have been nearly identical. Net sales for
1H11 grew 24% YoY, while those for 2Q11 grew 6% QoQ. Operating profit
for 1H11 grew 15% YoY while it again grew 6% QoQ in 2Q11. Net profit
after tax actually increased by 30% YoY, thanks to 292% growth in profit
from associate undertakings. Net profit after tax remained virtually
unchanged QoQ. Without the extraordinary profit from associate
companies, profit after tax increased by 21% YoY while it dropped 1%
QoQ.
Table 2: Comparative performance in 1H11
BDT Mn
Net Sales
COGS
Gross Profit
Operating Expenses
Profit from Operations
Other Income
Allocation for WPPF
EBIT
Financial Expenses
PBT
Income Tax
PAT
P/L from Associate Undertaking
Minority Interest
NPAT
EPS
1H11
8,042
4,448
3,595
1,411
2,183
161
109
2,235
114
2,121
495
1,627
185
1
1,810
92.3
1H10
YoY
6,476 24%
3,427 30%
3,049 18%
1,153 22%
1,896 15%
107 50%
90 21%
1,913 17%
160 -29%
1,753 21%
409 21%
1,344 21%
47 292%
1 59%
1,391 30%
70.9
2Q11 2Q10
YoY
4,136 3,302 25%
2,270 1,741 30%
1,866 1,561 20%
742
573 29%
1,124
988 14%
68
55 23%
56
48 17%
1,136
995 14%
74
86 -14%
1,062
909 17%
253
212 19%
809
697 16%
95
25 287%
0
0 78%
904
721 25%
46.1
36.7
1Q11 1Q10
YoY
3,906 3,174 23%
2,177 1,686 29%
1,729 1,488 16%
670
580 15%
1,059
908 17%
93
52 78%
53
42 25%
1,100
918 20%
40
74 -45%
1,059
844 25%
241
196 23%
818
648 26%
89
23 297%
0
0 42%
907
670 35%
46.2
34.2
2Q11
4,136
2,270
1,866
742
1,124
68
56
1,136
74
1,062
253
809
95
0
904
1Q11
3,906
2,177
1,729
670
1,059
93
53
1,100
40
1,059
241
818
89
0
907
46.1
46.2
QoQ
6%
4%
8%
11%
6%
-27%
6%
3%
84%
0%
5%
-1%
7%
9%
0%
Source: Company Reports and BRAC EPL Research, February 2011
Sales and Margin
Because of its dominating presence throughout the country, SPL has
enjoyed steady growth in sales volume. Cost of sales as percentage of
sales has also been declining gradually over the year, improving gross
margin. However, operating expense as a percentage of sales have been
Table 3: Sales and margins
Gross Sales (BDT Mn)
Cost of Sales/Sales
Operating Costs/Sales
Net Margin
2006 2007
2008
2009
2010
2011
2012
2013
8,252 9,958 12,024 13,585 15,034 18,155 22,187 27,898
55% 54%
54%
52%
49%
49%
49%
49%
12% 14%
15%
14%
15%
16%
16%
16%
16% 15%
13%
15%
17%
18%
19%
19%
Source: Company Reports and BRAC EPL Research, February 2011
4
Square Pharmaceuticals
(DSE: SQURPHARMA; Bloomberg: SQUARE:BD)
creeping up slightly in the last few years because of the intense competition
in the industry. We expect this trend to stabilize in the near future. Because
of the ever growing contribution from its associate companies, net margin is
increasing, which we expect to stabilize after a while.
Majority Investments
SPL previously spun off profitable
subsidiaries to monetize investment
It may be noted that SPL’s management has not only maintained
profitability in its core pharmaceuticals business, but has also sprouted a
number of other businesses in-house. After profitable commercial
operations of its businesses commenced, SPL spun off subsidiary
businesses, such as Square Textiles, to monetize the investments. The
company has a number of such businesses in the pipeline.
Table 4: Subsidiaries and Associates of Square Pharmaceuticals
Name
Square Pharmaceuticals
Square Cephalosporins
Square Biotechs
Square Multi Fabrics
Square Textiles
Square Hospitals Ltd.
Square Knit Fabrics Ltd.
Square Fashions Ltd.
NHFIL
CDBL
United Hospitals
Pioneer Insurance
% Owned by SPL
100.00%
99.48%
99.25%
99.50%
46.45%
49.56%
48.84%
48.46%
5.22%
2.89%
0.86%
10.00%
Market Value (BDT Mn)
53,754
7,365
66
249
6,085
3,882
1,628
2,095
230
10
12
219
Source: Company Reports and BRAC EPL Research, February 2011
There are currently three companies in which SPL has made a majority
investment.

Square Cephalosporins: SPL holds 99.48% of Square
Cephalosporins Ltd. (SCL). SPL also has BDT 400 million as share
money deposit in SCL on top of the BDT 95,000,000 equity holding.
The subsidiary has become profitable very quickly after it went into
operation in 2007. SCL owns a modern pharmaceuticals factory and
produces and sells pharmaceuticals, drugs and medicines.

Square Biotechs: SPL holds 99.25% of Square Biotechs Ltd. (SBL).
SBL was established to carry on the business of inter alia
manufacturing, sales and distribution of all kinds of biotechnological
medicines or drugs. The company has not yet become profitable.

Square Multi Fabrics: SPL holds 99.50% of Square Multi Fabrics Ltd.
(SMFL). Besides the equity holding of BDT 9,900,000 SPL also has
BDT 150,000,000 as share money deposit in the company. SMFL was
established to carry on the business of manufacturing and marketing all
types of knit fabrics, yarn, garments for gents, ladies and children. This
company also has not become profitable yet.
5
Square Pharmaceuticals
(DSE: SQURPHARMA; Bloomberg: SQUARE:BD)
Minority Investments

Square Textiles

Square Knit Fabrics

Square Fashions

Square Hospitals

United Hospitals

National Housing and Finance

Pioneer Insurance

Central Depository Bangladesh Limited (CDBL)

Square Informatix
Investment in Marketable Securities
The currently holds marketable securities amounting to BDT 221 million
with an unrealized gain of BDT 167 million.
Expansion Program
Ambitious expansion program will
increase capacity significantly. But
revenue contribution may come
after 2012.
In order to meet increasing demand in the domestic as well as foreign
markets, SPL has undertaken an ambitious expansion program to be
completed in two phases. The first phase, which is already under way, is
expected to be completed by 2012 at a total cost of BDT 3.6 billion. We
anticipate a 25% cost overrun for a final cost of BDT 4.5 billion. The first
phase is expected to nearly double the current capacity. The second phase
will start in 2014, completing in 2017 for a total cost of BDT 2.0 billion
(including an estimated cost overrun of 25%).
We expect the expansion programs contributing to revenue growth after
2012. We made an assumption that the new plants will operate with an
85% efficiency and after the year of completion, 25% of the capacity will
come on line in each of the following four years. Second phase will also do
the same.
Table 5: Local sales vs export
Local Sales
Export Sales
Total Sales
Local Sales Growth
Export Growth
Total Sales Growth
2008
9,353
212
9,566
2009
11,030
336
11,367
2010
12,915
365
13,279
2011
15,239
547
15,786
2012
18,287
820
19,107
2013
22,859
1,189
24,048
10%
10%
10%
18%
58%
19%
14%
60%
17%
18%
50%
19%
20%
50%
21%
25%
45%
26%
Source: Company Reports and BRAC EPL Research, February 2011
International Market
Square is one of the leading exporters of pharmaceutical products from
Bangladesh. However, the contribution of export to the total sales is still
6
Square Pharmaceuticals
(DSE: SQURPHARMA; Bloomberg: SQUARE:BD)
UK MHRA certification renewed for
three years recently
very small. The company exported BDT 364.5 million worth of
pharmaceutical products in FY10 compared to BDT 336.3 million in FY09.
The exports are expected to rise in the coming years. Current export
destinations include Myanmar, Nepal, Kenya, Libya, Mauritius, Papua New
Guinea, Somalia, Sri Lanka, Vietnam, Yemen, Bhutan, Cambodia,
Afghanistan, Tanzania, North Korea, Belize, Hong Kong, Mauritania,
Philippines, Eritrea, Ghana, Malawi, Malaysia, Surinam, Tajikistan and the
UK. In March 2010, the MHRA of UK renewed SPL’s MHRA GMP (Good
Manufacturing Practice) certification for three more years.
Liquidity
SPL has a free float of 46%. The stock is quite liquid and traded regularly.
Average daily trade for the last 12 months was slightly over 55,000 shares with
average daily turnover of BDT 184 million.
Stock Price Resilience
SPL has been one of the most resilient stocks among all the stocks in BRAC
EPL coverage universe in the face of severe market correction. The stock price
retraced 21% since the start of the market correction in December 6, 2010. The
benchmark index DGEN has dropped 35% during the same period.
Outlook
Competition may reduce margins for
most players in the long run
The company has done very well to maintain its margins. However, we
anticipate an ever-competitive market where pharmaceutical companies
lower prices and give up margins to retain market share. This could affect
bottom lines of all pharmaceutical companies in Bangladesh. However,
given Square’s market share, it seems to be in a better position than most
other companies.
In Bangladesh, the pharmaceutical companies have no power to set prices
for “essential drugs”, a list of lifesaving drugs decided by the government.
Only the government has the power to decide prices of these drugs and
price revisions by the government are few and far between. Therefore,
pharmaceutical companies make marginal profits from these drugs.
However, the companies are free to set prices on products outside of this
list. So, the companies make the bulk of their profits from these “nonessential” drugs. Even then, they cannot set prices too high as the
purchasing power of the population is low. Hence, they are forced to be
content with prices lower than they would expect.
Export market could significant boost
sales volume
We believe if SPL focuses more on the international market, it could
overcome some of the problems above. The same drugs that SPL sells for
Tk. 10, for example, could be sold at prices several times higher in
Australia, the UK or even the USA because of the enhanced purchasing
power of consumers in those markets. As a result, we think its sales
volume could grow significantly over the years.
On the other hand, because of the strict quality controls and regulations in
the developed market such as Europe and the USA, SPL will need to
continuously maintain and renovate its manufacturing plants. This means it
is expected to have a large outflow in capital expenditure each year. SPL
7
Square Pharmaceuticals
(DSE: SQURPHARMA; Bloomberg: SQUARE:BD)
already has a certification from the UK MHRA, which is essential to enter
the UK and European markets. The company will gradually seek more
certification from other regulators in developed markets.
The two expansion programs, which we discussed earlier are expected to
double the production capacity in 2014. Capital expenditure for the projects
is expected to be financed internally by the company’s solid cash
generation. The company accumulates a large amount of cash at the end
of our horizon.
Among the three subsidiaries, Square Cephalosporins is the only one
which is fully operational and profitable. Square Biotechs and Square Multi
Fabrics are yet to be in full blown production. Although the company
guidance was for production to start before 2010, it has been delayed. We
expect these two to start production properly in 2011 and add to
consolidated revenue.
Existing subsidiaries may present
excellent capital gain opportunity
SPL management seems to be hoping that it will eventually be able to list
its subsidiaries. Square Square Textiles, an associate of Square Pharma
and a former subsidiary, is now a listed company. Investment in Square
Textiles was BDT 183 million on a cost basis and current market value of
this investment is more than BDT 12 billion. SPL expects that in time it will
be able to list its current subsidiaries in the capital market, allowing it to
monetize its investment.
The company’s operating cash flow is higher than its total capital
expenditure, which includes expansion and maintenance. Therefore we
assume major portion of investing activity to be financed internally. This
results in a very low debt to equity ratio.
8
Square Pharmaceuticals
(DSE: SQURPHARMA; Bloomberg: SQUARE:BD)
Valuation
Since Square Pharmaceuticals is involved in a number of subsidiaries and associate companies, a Sum-of-the-Parts (SOTP) valuation appears to be more
relevant. We derive value per share for each of these companies using various
valuation methodologies depending on the type of business and its relationship
with the parent company. We use DCF valuation for Square Pharmaceutical’s
standalone business as well as Square Cephalosporins. We also take the market value of associate companies that are publicly listed. Normalized values are
used for privately held companies within the Square group. Two other privately
held companies are taken at cost.
From our SOTP valuation, we arrive at a fair price of BDT 3,738. Since a few of
the companies are yet to become fully operational or profitable, we believe this
value is likely to rise once these companies start to make profits. In any case,
the value has considerable upside on the current market price of BDT 3,092.
We have also used four other leading pharmaceutical companies trading in the
DSE for comparison purposes. The average P/E of these companies is 26.4x
based on their latest published audited report. At a trailing P/E multiple of 24.3x,
SPL is trading at a slight discount to these companies. Using a P/E multiple of
18.0x on estimated 2012 EPS of BDT 217, we arrive at a 12-month fair value of
BDT 3,901.
Based on both of our valuations, we arrive at a fair value of BDT 3,850.
With an estimated dividend yield of 1%, our fair price would provide a 12month total return of 26%.
Table 6: Sum of the Parts Valuation
Name
Square Pharmaceuticals
Square Cephalosporins
Square Biotechs
Square Multi Fabrics
Square Textiles
Square Hospitals Ltd.
Square Knit Fabrics Ltd.
Square Fashions Ltd.
NHFIL
CDBL
United Hospitals
Pioneer Insurance
% Owned
100.00%
99.48%
99.25%
99.50%
46.45%
49.56%
48.84%
48.46%
5.22%
2.89%
0.86%
10.00%
Valuation Methodology
DCF
DCF
1x 2010 P/B
1x 2010 P/B
Market Value
Normalized Valuation
Normalized Valuation
Normalized Valuation
Market Value
At cost
At cost
Market Value
Market Value
53,754
7,365
66
249
5,874
3,882
1,628
2,095
223
10
12
207
Value/Share
2,740
375
3
13
299
198
83
107
11
1
1
11
Net Cash
Non-Operating Assets
(2,255)
221
(115)
11
Total Value
No. of Shares
Value/Share
73,332
20
3,738
3,738
Source: Company Data, BRAC EPL Research, February 2011
Table 7: Comparative Valuation*
Other Pharmaceuticals
Beximco Pharmaceuticals
Renata Limited
ACI Limited
GlaxoSmithKline
Price
110
11,037
265
795
EPS
2.98
365.21
30.64
26.88
Average
Square Pharmaceuticals
P/E
37.0x
30.2x
8.7x
29.6x
Square Pharmaceuticals
2012 Estimates
Multiples
Value/Share
Fair Value
Current Price
Dividend Yield
24.3x Total Return
26.4x
3,092
127.29
EPS
217
18.0x
3,901
3,850
3,092
1%
26%
* All EPS and BVPS figures are from audited reports of latest fiscal year of the respective
Source: Company Data, DSE, BRAC EPL Research, February 2011
9
Square Pharmaceuticals
(DSE: SQURPHARMA; Bloomberg: SQUARE:BD)
Table 8: Income Statement
MM BDT
Net Sales
COGS
Gross Profit
Operating Expenses
Profit from Operations
Other Income
Allocation for WPPF
EBIT
Financial Expenses
PBT
Income Tax
PAT
P/L from Associate Undertaking
Minority Interest
NPAT
2008
2009
2010
2011E
2012E
2013E
10,554
(6,546)
4,008
(1,759)
2,249
346
(104)
2,490
(443)
2,047
(506)
1,541
(12)
(3)
1,526
11,826
(7,013)
4,813
(1,884)
2,929
409
(138)
3,200
(455)
2,746
(630)
2,116
(55)
(2)
2,058
12,971
(7,352)
5,618
(2,293)
3,326
258
(158)
3,426
(320)
3,106
(737)
2,368
130
(2)
2,497
15,663
(8,876)
6,787
(2,930)
3,858
734
(199)
4,392
(277)
4,116
(1,019)
3,097
264
(3)
3,358
19,141
(10,809)
8,332
(3,568)
4,764
899
(246)
5,417
(215)
5,202
(1,288)
3,915
341
(4)
4,251
24,067
(13,592)
10,476
(4,485)
5,991
1,132
(310)
6,813
(171)
6,642
(1,644)
4,998
420
(5)
5,412
Source: Company Data, BRAC EPL Research, February 2011
Table 9: Cash Flow Statement
MM BDT
Cash Flow from Operating Activities
Cash Flow from Investing Activities
Cash Flow from Financing Activities
Net Cash Flow
Opening Cash Balance
Closing Cash Balance
2008
2009
2010
2011E
2012E
2013E
1,593
(2,132)
608
69
157
226
2,758
(1,846)
(824)
88
226
314
2,783
(1,493)
(1,335)
(45)
314
270
3,046
(1,471)
(1,237)
338
270
608
4,328
(1,923)
(1,215)
1,189
608
1,797
5,409
(2,168)
(1,328)
1,913
1,797
3,709
Source: Company Data, BRAC EPL Research, February 2011
Table 10: Balance Sheet
MM BDT
2008
2009
2010
2011E
2012E
2013E
Inventories
2,630
2,406
2,575
3,068
3,733
4,642
Trade Debtors
Advances, Deposits & Prepayments
Investment in Marketable Securities
Short Term Loan
Cash and cash equivalents
Current Assets
891
330
33
1,397
226
5,506
478
304
20
609
314
4,131
512
371
221
1,056
270
5,005
958
500
221
1,296
608
6,651
1,188
610
221
1,296
1,797
8,847
1,492
757
221
1,296
3,709
12,118
Property, Plant & Equipment
Capital WIP
Investment- Long Term (At cost)
Investment-Associate Undertakings
Pre-operating/Preliminary Expenses
Non-Current Assets
5,217
1,148
145
3,039
3
9,552
5,462
1,201
145
3,959
7
10,774
6,681
634
185
3,900
0
11,401
7,348
1,175
185
4,164
0
12,872
8,798
1,307
185
4,505
0
14,796
10,396
1,458
185
4,924
0
16,964
15,058
14,905
16,406
19,523
23,642
29,082
Short Term Bank Loans
Long Term Loans- Current Portion
Trade Creditors
3,174
446
233
1,712
431
128
880
502
103
783
310
395
705
217
478
634
152
541
Liabilities for Expenses
Liabilities for Other Finance
Current Liabilities
236
443
4,533
94
615
2,979
61
547
2,093
77
705
2,269
94
856
2,350
119
1,077
2,523
Long Term Loans- Secured
Deferred Tax Liability
Non-Current Liabilities
778
225
1,003
786
211
998
1,143
226
1,368
723
226
949
506
226
732
354
226
580
Equity
Minority Interest
9,507
16
10,926
2
12,940
4
16,298
7
20,549
12
25,961
17
15,058
14,905
16,406
19,523
23,642
29,082
Total Assets
Total Liabilities and Equity
Source: Company Data, BRAC EPL Research, February 2011
10
Square Pharmaceuticals
(DSE: SQURPHARMA; Bloomberg: SQUARE:BD)
Table 11: Indicators and Ratios
2008A
2009A
2010A
2011E
2012E
2013E
358
23%
483
23%
528
21%
827
25%
1,041
24%
1,332
25%
15
78
24
485
15
105
32
557
15
127
35
660
20
171
42
831
20
217
53
1047
20
276
68
1323
Total Debt (BDT mn)
Debt/Total Assets
Debt/Total Equity
4398
0.29
0.53
2929
0.20
0.31
2524
0.15
0.23
1815
0.09
0.14
1427
0.06
0.09
1140
0.04
0.06
Sales Growth
Earning Growth
Dividend Growth
Dividend Yield
21%
5%
20%
1%
13%
35%
35%
1%
11%
21%
9%
1%
21%
34%
57%
1%
22%
27%
26%
2%
26%
27%
28%
2%
Duty and VAT/Gross Turnover
12%
13%
14%
14%
14%
14%
Cost of Sales/Sales
Gross Profit Margin
54%
46%
52%
48%
49%
51%
49%
51%
49%
51%
49%
51%
Operating Costs/Sales
Operating Margin
15%
19%
14%
22%
15%
22%
16%
21%
16%
21%
16%
21%
Net Margin
13%
15%
17%
18%
19%
19%
Return on Equity
Return on Assets
16%
10%
19%
14%
19%
15%
21%
17%
21%
18%
21%
19%
Effective Tax Rate
25%
23%
24%
25%
25%
25%
NC Working Capital (BDT mn)
Increase in NC Working Capital (BDT mn)
4,367
926
2,981
-1,387
4,024
1,043
4,867
843
5,621
755
6,671
1,050
P/E
P/B
39.8x
6.4x
29.5x
5.6x
24.3x
4.7x
18.1x
3.7x
14.3x
3.0x
11.2x
2.3x
Dividend (BDT mn)
Payout ratio
Number of shares (mn)
Diluted Earning Per Share (BDT)
Dividend per share (BDT)
Diluted Book Value Per Share (BDT)
Source: Company Data, BRAC EPL Research, February 2011
11
Square Pharmaceuticals
(DSE: SQURPHARMA; Bloomberg: SQUARE:BD)
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