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AFC Agro Biotech
AFC Agro Biotech
AFC Agro Biotech
AFC Agro Biotech (AFCABL) was incorporated on August 31st, 2010 as a publlic limited company. The
core business of the company is to manufacture antibiotics, proteins, vaccines, enzymes etc. from
agricultural ingredients like molasses, glucose, potato starch, and other nutrients. At present, AFCABL is
producing Biological Assets; e.g., Macrolide Protein, Acetic Acid, L-Lysine, Mono Sodium Glutamate and
Methonione. The Company has set up a multi-purpose chemeicals manufacturing facility at Uttar
Shoilmary, Koiya Bazar, Batiaghata, and Khulna. The plant is established on the 3.0 acre land. It started
its commercial production on 7th October, 2012. The Company has got listed on DSE & CSE on 3 rd
February 2014.
The Companys sales remain concentrated to local market. The raw materials are procured mostly from
local suppliers. AFCL has an associate company AFCABL performs as backward linkage of its parent
company, Active Fine Chemical (AFCL), in order to reduce import dependency from China and India. The
main product of AFCABL is used as raw materials in the API and Laboratory Reagent manufacturing
process of AFCL. Moreover, other main customer groups of AFCABL include poultry feed manufacturer;
fish/cattle feed manufacturers and textile and various food manufacturing industries. AFCABL is
producing these materials by using locally available raw materials. The Company has already raised
BDT 120.0 mn (net amount after IPO expense BDT 109.0mn) to make further capital investment to
expand the current business.
The parent company, AFCL which is the large customer of AFCABL has set up a multipurpose bulk drugs
and fine chemicals manufacturing facility at Munshiganj, 20 km away from the capital city, Dhaka to
enlarge current market share. Annual production capacity of the plant is 480 kilo liters. AFCL is in the
process of investing into forward linked supply system to signify its presence in the health care and fine
chemical sector of Bangladesh. The management of AFCL is expecting to launch the new
Cephalosporin plant which will produce some important antibiotics. The Company is also exploring its
export opportunities in Asia. In November, 2013 AFCL announced the decision to inject fresh fund to
expand operating capacity by using strategic investment subject to the approval of BSEC. However, the
expansion plan has not been disclosed yet.
Bio tech Market is estimated to BDT 50bn, served to pharmaceuticals, food, textile companies.
Total market size of pharmaceuticals is BDT 122 bn as of June 2013 growing at 17% during the
last five years
The key driving force of AFCABL is the opportunity to serve a fast growing pharmaceutical sector
of Bangladesh which is heavily import dependent for its raw materials.
Captive Demand:
Pharmaceutical companies need constant supplies of APIs to run their production. As AFCLs products
are import substitutes, cost saving & high quality, there is captive demand for AFCABLs outputs.
As a backward linked company AFCABL produce API raw materials using local materials. This will reduce
import dependency, supply chain management problems, save foreign currency and promote local
sources & employment. As the agricultural sector of Bangladesh is immensely subsidized, the costing of
these raw materials will be cheaper as well comparing with our neighboring country. These agricultural
products are vastly produced in our country and available throughout the year. The climate of our
country also supports in producing these materials. So we have great competitive advantage in getting
the raw materials which are cheap as well as abundantly available.
Bangladesh is totally dependent on outside world to import APIs, hence a great amount of foreign
currency is being required. As AFCL increases its production capacity further, a great extent of demand
will be fulfilled by AFCABL
Cost effectiveness.
Taking all the comparative advantage we have, i.e. cheap labor cost, savings of import duty, vastly
subsidized raw materials, the Company would be a cost effective and profitable one.
SWOC Analysis:
Strengths
Weaknesses
Low R&D investments
Low healthcare expenditure of people
Lack of technical and knowledgeable people to work in the arena
Opportunities
Incredible export potential as well as huge demand and supply mismatch in the country
Increasing health consciousness
New innovative products will come up the coming days
Good drug delivery system management
Increased income and buying power of the people
Production of generic drugs
Drug molecules
Cheap labor and raw materials
Challenges
AFCABL pro-forma
AFCABL is experiencing a boost in revenue with a growth rate more than 600.0% in 2013. EBITDA
growth of the company was more than 550% in the last year. Gross profit margin declined in 2013
due to increase in depreciation charge, R&D expense, and biological asset written off charges. In
2013, GM decreased by 2.8%. The reduction in gross margin and increase in opex leads to the
decrease in EBITDA and net profit margin also to 30% and 21.5% respectively.
Return Analysis
Industry Highlight
The Pharmaceutical sector is one of the fastest growing
sectors in Bangladesh with an annual average growth rate Size: BDT 122.0 bn as of June 30,
2013
of 17.2%. Bangladeshi pharmaceutical firms produce both
terms of market share. And 9 out of 10 top products in terms of sales volume are produce by local
companies, only Mixtard-30 is produced by a MNC Novo Nordisk. According to Directorate General
of Drug Administration (DGDA) there are 529 registered drug manufacturers in Bangladesh. However
the total drug manufacturing companies operated in Bangladesh are as follows.
Domestic firms dominate the industry with them producing 98% of local demand with the balance
being imported. The industry is highly concentrated - according to IMS in 2012 the top 3
pharmaceutical, Square, Incepta and Beximco, account for 38.2% of the market share, while the top
five have a market share of 48.9% and the top ten domestic manufacturers contribute about 69.5%
of the total pharmaceutical market of Bangladesh. According to IMS, Bangladeshi companies have
registered about 5,300 brands with c9500 dosage forms and strengths, covering all major
therapeutic classes.
Composition of Local Market
Source: IMS
The table below lists the top ten pharmaceutical manufacturers in Bangladesh in terms of market
share and top ten pharmaceutical Products in Bangladesh in terms of sales value.
Source: IMS
Source: IMS
Bangladeshi pharma companies import 80% of the required raw material, mainly from India and
China to meet their raw material consumption. Select high quality few are imported from
Europe and USA. Approximately about more than BDT 35.0bn / USD 437.5mn worth of APIs and
fine chemicals are being imported.
Few leading local manufacturers focus any APIs, focusing mainly on antibiotics, to meet internal
consumptions. Pharma Co is a first of its kind
commercial API manufacturer in Bangladesh.
Drug manufacturers in Bangladesh
There is huge demand for these products in
Bangladesh.
A list of the API manufacturing companies and the
APIs already manufactured in Bangladesh are
shown in the table below:
API Portfolio Produced Locally
Active Fine Chemicals Ltd.
Azithromycin Dihydrate, Erythromycin
Source:Ethyl
DGDA Succinate,
Erythromycin
Stearate,
Metformin
Hydrochloride,