Equity Valuation Report on Olympic Industries Ltd.

Equity Valuation 1

on
Olympic
Industries Ltd.
01
BACKGROUND
Important events
1996
There were significant
opportunities in the biscuit and
confectionery industries and 2017
imported our first lines. Commencement of ninth
1984 biscuit & cookie line
production
Listing on Dhaka
Stock Exchange
1979 Limited
Founded in June as
Bengal Carbide Limited,
a battery manufacturer

2015
NBR Award for highest VAT in
production sector for 2013-2014
Today, Olympic is the largest manufacturer of biscuits in
Bangladesh and biscuits and confectionery products
represent

95%+ ANNUAL REVENUE

 12
02
INVESTMENT
RECOMMANDATION
 BUY
16

ACTION

Return Potential: 31%

Current Price: BDT 180

Target: BDT 235.6

 20
03
MACRO
ECONOMIC
ANALYSIS
 Macroeconomic Analysis: Key Indicators

(Figures in %) Targets for FY 20 Actual in FY 20 Targets for Dec 20 Targets for Jun 21
GDP Growth Rate 8.2% 5.2% 8.2% 8.2%
Inflation 5.5% 5.65% 5.04-5.93% 5.04-5.93%
CRR 5.5% 4% 4% 4%
Repo Rate 6% 5.25% 4.75% 4.75%
Reverse Repo Rate 4.75% 4.75% 4% 4%
Bank Rate NA 5% 4% 4%
Broad Money Growth Rate 13% 12.7% 14% 15.6%
Domestic Credit Growth Rate 17.4% 13.7% 15% 19.3%

Private Sector Credit Growth 14.8% 8.6% 11.5% 14.8%

Public Sector Credit Growth 37.7% 53.3% 35.6% 44.4%

 Macroeconomic Analysis: Key Monetary Variables
Interest Rate Spread
6.00%
Banks Aug '20 July '20 June '20 May'20
5.00%
Spread of all Banks 2.87% 2.77% 2.89% 2.94%
4.00%
Spread of SoC Banks 2.15% 2.24% 2.33% 2.23%
3.00%

2.00%
Spread of PC Banks 2.93% 2.77% 2.88% 2.97%

1.00% Spread of FCB Banks 5.37% 5.29% 5.30% 5.39%

0.00% Spread of Specialized Banks 2.03% 2.08% 2.10% 2.03%

Aug '20 July '20 June '20 May'20
Spread of all Banks Spread of SoCBs Spread of PCBs
Spread of FCBs Spread of SBs

Breakdown of Inflation 2H FY2020

Breakdown of
Actual Inflation (%) Trend
Inflation
General Inflation 5.65 Stable
Food Inflation 5.52 Stable
Non Food Inflation 5.85 Stable
Core Inflation^ 5.76 Stable
 Macroeconomic Forecasts

Reviving the
Long Term Growth
Economy: Post
Prospects.
COVID19 Projections.

Inflation and Country Outlook

Interest Rates Remains Bright
 22
04
INDUSTRY
ANALYSIS
 Biscuit Industry in Bangladesh

BDT 6,000 13.62% 15.79%

Crore CAGR CAGR

Industry Size Industry Growth Next 5 Years’

Growth
Major Players of Biscuit Industry

Market Share

Olympic
22%

Others
47% Nabisco
8%

Pran RFL
Al Amin8%
Danish Haque 5%
5% 5%
 11
11 MAC population

Consumption of biscuits by
22 different income groups

KEY GROWTH Increased supplementary

DRIVERS OF BISCUIT 33 duty for imported biscuits
INDUSTRY
Non-branded biscuit
44
manufactures

Stable prices and import

55
of the raw materials
Major Risk Factors of Biscuit Industry

Demands for high quality products

A at a cheaper price

B Backward Linkage

C Research and development

 27
05
COMPANY
ANALYSIS
 LIQUIDITY RATIO
Quick ratio
Current ratio 0.28
2.21 2.22 0.26
0.21
0.19

1.99 1.98 0.12

1.94

CASH RATIO
0.23

0.19

0.15
0.13

0.07
 SOLVENCY RATIO
Long-term debt to equity ratio Debt to equity ratio
Total debt ratio Financial leverage ratio
1.7 1.69 1.68
1.55 1.52

0.7 0.69 0.68

0.55 0.52
0.41 0.41 0.41
0.36 0.34

0.12 0.08 0.08

0.06 0.06

2 0 1 4 -2 0 1 5 2015-2016 2016-2017 2017-2018 2018-2019

 Profitability ratios
Gross Profit Margin Net profit margin
33.66% 33.37% 14.81% 14.55%
33.12% 13.85% 13.63%
32.65%
12.16%

29.55%

Pre-tax margin Operating profit margin

20.09%
19.69%
19.30% 19.07% 18.52% 18.27%
18.56% 18.58% 15.91%

17.18%
 Efficiency ratios
Working capital turnover
Receivables turnover Days of sales outstanding (DSO)
5 3.66
5 70.51 5 5.11
4 3.71
4 75.64 4 4.76
3 5.32
3 3.66
3 67.67
2 4.56 2 4.68
2 78.91
1 142.98 1 2.52 1 5.87
0 1 2 3 4 5 6 0 1 2 3 4 5 6 7
0 20 40 60 80 100 120 140 160

Fixed asset turnover Total asset turnover

5 3.88 1.32

4 3.66 1.37

3 5.22 1.35

2 5.66 1.64
1 4.76 0.29
0 1 2 3 4 5 6
Business Possibilities & Strategies

DESPITE OF COVID-19

INCREASE OF 14% SALES! 4%

Share of Olympic
Current Market
MARKET
BDT SHARE
30.79 AND SIZE

96%
 27
06
DISCOUNTE
D CASH
FLOW
VALUATION
 DCF / FREE CASH FLOW TO FIRM (FCFF) MODEL
Year 2019 2020 2021 2022 2023 2024
EBIT 2,875,565,509 3,048,695,580 3,045,445,472 3,370,658,704 3,236,720,400 3,772,575,559
EBIT After Tax 1,871,821,560 2,060,905,735 2,028,922,324 2,248,768,187 2,108,039,370 2,473,724,580
Depreciation &
333,347,656 346,681,562 396,349,691 414,145,792 493,021,741 538,636,112
Amortization
Less: Capital
443,541,606 757,148,471 543,420,072 1,065,991,707 869,987,624
Expenditure
Less: Change in
720,594,006 656,227,112 886,938,195 502,770,904 724,762,920
Working Capital
FCFF 1,243,451,685 1,011,896,432 1,232,555,712 1,032,298,500 1,417,610,148
Terminal Value 65,451,946,490
FCFF 1,243,451,685 1,011,896,432 1,232,555,712 1,032,298,500 66,869,556,637
Value of Firm 48,624,043,370
Debt 415,266,729
Value of Equity 48,208,776,641

Value Per (Intrinsic

Value) Share BDT 241.12          
 DIVIDEND DISCOUNT VALUATION MODEL
Year 2019 2020 2021 2022 2023 2024

Aggregate Dividend Per

1,199,650,438 1,339,588,728 1,176,774,948 1,349,260,912 1,264,823,622 1,607,920,977
Year

Terminal Value 74,238,716,426

Total Divdend per year 1,339,588,728 1,176,774,948 1,349,260,912 1,264,823,622 75,846,637,403

Equity Value 56,019,267,080

Equity Value Per Share BDT 280.18

 RESIDUAL INCOME VALUATION MODEL

Year 2019 2020 2021 2022 2023 2024

Book Value of the

7,216,308,626 7,937,625,633 8,789,773,010 9,689,280,284 10,532,496,032 11,398,299,635
firm
Net Income After
1,871,821,560 2,060,905,735 2,028,922,324 2,248,768,187 2,108,039,370 2,473,724,580
Tax

Required Earnings 572,974,905 630,247,475 697,907,977 769,328,855 836,280,185

Residual Income 1,487,930,830 1,398,674,849 1,550,860,210 1,338,710,516 1,637,444,395

Terminal Value 31,111,443,511

Total Residual
1,487,930,830 1,398,674,849 1,550,860,210 1,338,710,516 32,748,887,906
Income

Equity Value 34,364,976,998

Equity Value Per

Share BDT 171.88
 27
07
MULTIPLE
BASED
VALUATION
 Market Multiples Analysis
33.7
13.4
Price using P/E ratio
163.52
21247%

8.2
13.1
Forward P/E
22.4
2270%

0.76
0.03
Price to book value ratio
6.5
62%

4.58
19.4
Price to cash flow ratio
5.41
1708%

0.86
1.47
Price to sales ratio
0.53
262%
0 50 100 150 200 250

Olympic AMCL Pran Fuwang food Ghail

 31
06
OUR
TAKEAWAYS
 Models Value Per share Weights Value*Weight

DCF 241.1175615 0.5 120.56

DDM 280.1819506 0.25 70.05

RIV 171.8774056 0.2 34.38

Relative Valuation 212.472 0.05 10.62

Intrinsic Value 235.60

**The weighted average intrinsic value per share of Olympic is

BDT 235.60
We can conclude that the share of Olympic is undervalued now.
 34

THAN
K
YOU!