FIN 440.

7 Group 07 Spring 2010 ID #:072 172 030, 072 209 030

Date of Submission: 11/04/2010 072 210 030, 081 065 030
Group Final Report: Cement Industry Analysis
HeidelbergCement Bangladesh Ltd.
Company overview
HeidelbergCement Bangladesh Ltd (HCBL) is a sister concern of Heidelberg Cement Group.
Through acquisition of Chittagong Cement Clinker Grinding Company Ltd., it has brought
together regional manufacturing whose history stretches back to the very beginning of
commercial cement production in Bangladesh. HCBL is also a listed company since 1989
and its shares are being traded at both DSE and CSE.
Leverage Analysis:
Year 2006 2007 2008
Heidelberg Industry Heidelberg Industry Heidelberg Industry
DOL 1.34 1.18 1.28 1.16 1.26 0.47
DFL 0.17 0.73 0.08 0.45 0.10 1.51
DCL 0.23 0.86 0.11 0.51 0.12 0.71
The HCBL has a larger amount of operating risk than the industry throughout the three
years & in 2008 it becomes larger than previous several years because DOL follows that the
higher the fixed operating costs. It looks bad than others though their revenue also rises
during this period. The DFL of HCBL went down because they don’t have any new long term
debt. The company had all positive EBIT, which lead to positive DFL indicating that the
company earned more on the assets, purchased with the funds, than fixed cost of their use.
HCBL had to keep the DFL lower because it has higher average than the industry in DOL &
the management is efficient and effective enough to maintain lower DFL. As the DOL of the
company fluctuated over time, the DCL also fluctuated over the times. However the HCBL’s
Degree of risk is lower than the industry.
Market Share:

Items Heidelberg Industry Market Share

Sales Tk 7,321,282,759 Tk 12,580,842,550 58.19%
Total Assets Tk 5,870,541,000 Tk 10,595,109,552 55.40%
As a market leader, the company has shown dominance in the cement industry compared to
its competitors and has managed to capture majority of the market share. Therefore it can
be considered as the corporate leader of the industry.
Ratio Analysis:

Liquidity Ratios(Items) Heidelberg Industry Comparison with industry

Current Ratio 1.061 0.95 Better
Quick Ratio 0.610.61 0.72 Almost Same
Cash Liquidity Ratio 31.97 33.53 Lower
Cash Conversion Cycle (days) 5.46 16.74 Better
The HCBL had enough current assets to meet their current liabilities and the position is very
tight in terms of liquidity though it is slightly higher than the industry. Their quick ratio
became lower then the industry. The company had much more inventory in this period
because their selling went down because of political unrest, worldwide economic recession
etc that affect various construction and real estate company’s business who are the major
client of the company. Hopefully, the company had much lower CCC than the average

1
FIN 440.7 Group 07 Spring 2010 ID #:072 172 030, 072 209 030
Date of Submission: 11/04/2010 072 210 030, 081 065 030
Group Final Report: Cement Industry Analysis
industry that shows supplier’s trustworthiness to them that arises because of their goodwill
in the industry.

Comparison with
Efficiency Ratios(Items) Heidelberg Industry industry
Inventory Turnover Ratio 5.47 17.60 Less efficient
Receivable Turnover Ratio 10.09 33.77 Less efficient
Daily Credit Sales (taka) 15,736,298.00 7,328,249.75 High
Days Sales Outstanding (days) 35.69 26.30 Less efficient
Fixed Asset Turnover Ratio 2.00 2.07 Almost Same
Total Asset Turnover Ratio 1.13 1.12 Almost Same
In the efficiency analysis, HCBL has shown diversity in playing role among various parts of
the market. Though it had lower CCC than industry the DSO is much higher than the
industry. Hopefully, PDP is higher so HCBL can come up to lower from industry. Therefore,
the company used the NWC in efficient and effective way. Overall efficiency ratio shows that
management should be aware about inventory management, collect receivables as early as
possible and increase the FATO & TATO through generating huge amount of sales by
utilizing assets.

Debt Mgt Ratios(Items) Heidelberg Industry Comparison with industry

Debt Ratio 0.44 0.65 Lower
Long Term Debt Ratio 0.04 0.11 Better
Debt to Equity Ratio 0.78 8.62 Lower
TIE Ratio 10.38 4.24 Higher
Cash Coverage Ratio 10.21 6.14 Better
HCBL now is in almost optimum debt equity position, so it creates larger wealth than the
industry within very short term. Again the company is much more equity financed then the
debt, so there is a chance to incur more opportunity cost of the company. Besides that, HCBL
had less LTD that leads to less interest payment then industry. As a result, their TIE ratio
goes up that leads the company to the favorable situation in the market.
Profitability Ratio(Items) Heidelberg Industry Comparison with industry
Profit Margin Ratio 0.13 0.06 Better
Basic Earning Power 0.17 0.10 Better
Return On Asset 0.14 0.07 Better
Return Of Equity 0.21 0.20 Better
Pay Out Ratio 0.14 0.23 Lower
Plough Back Ratio 0.90 1.20 Better
Growth Rate 0.19 0.24 Lower
The profitability ratio shows how HCBL become market leader in cement industry. Their
profit margin, earning power and return is higher and better than the industry but they
emphasize more on internal fund for investing or expanding projects. Though this does not
make the investors happy, the value addition may result a large amount of capital gain. In
Bangladesh perspective, capital gain from publicly held company is nontaxable but dividend

2
FIN 440.7 Group 07 Spring 2010 ID #:072 172 030, 072 209 030
Date of Submission: 11/04/2010 072 210 030, 081 065 030
Group Final Report: Cement Industry Analysis
is taxable. As a result some investors can feel wealthy because the retention ratio is high
enough but not more than industry.
Market Value Ratio(Item) Heidelberg Industry Comparison with industry
EPS (taka) 102.44 38.57 Higher than competitors
Book Value Per Share (taka) 500.66 285.57 Higher than competitors
Market To Book Value Ratio 1.20 1.39 Wealth maximization seen
P/E Ratio 4.88 15.62 Lower than competitors
Dividend Yield 20% 30% Lower than competitors
EPS of the company is much higher than the industry. Though M/B ratio is lower than
industry, market value > Book value. Price earning ratio is lower than the industry dividend
yield is lower also because the company emphasize on retaining the income. So value
addition higher and new investors, creditors willingly invest in the company.
Risk Analysis:
 HCBL is financing more with the non-interest bearing current liabilities from 2002. So
the firm value of the Company was much higher than the invested capital from till our
analysis of 2008.
 Z-score of HCBL is 3.70, which is higher than 3.0, where industry average is 2.38; it is in
favor of HCBL that is helpful to reduce the P (bankruptcy). So, higher rate is expected.
 HCBL has a Beta (β) of 0.85 which indicate that their stock is as volatile as the overall
market almost. If the overall market risk increases by 1 unit the company’s risk will rise
by 0.85 units. Again, the Standard Deviation of HCBL is 3.38% which is risky for the
investors compare to market SD of 1.23%. If stock price decline they will severely suffer.
 The Economic value added for the company was positive in 2006-2008. The net
operating profits were higher than the product of WACC & previous years invested
capital for 2006-08. In other words, NOPAT of HCBL is covering the investments. It is
minimizing its risk.
 WACC of HCBL gradually decreased & average WACC of HCBL is 9.05% whereas the
WACC of Industry average is 10.425%. Therefore, the cost of capital is lower than the
competitors. HCBL is reducing its debt financing by using less costly capital that’s why
high retention ratio.
 The average market return is 0.08% where the HCBL has 0.18%.
Stock Price Evaluation: HCBL’s firm value in 2008 was BDT 10,108,845,285. Value of Debt
was BDT 209,883,106. Value of Equity was 5,766,750,043 and number of Shares
outstanding 5650000. So the Intrinsic Price/ share is taka 1020.66. The stock price at the 31
December 2008 was BDT 1214. Therefore, this is undervalued stock in terms of my analysis
not market determinants.
Dividend Policy: In the market the HCBL is in leadership position & its EPS & Cash flow
shows it will be growing largely in the near future, so the investor can get capital gain and
huge amount of cash dividend. As a result, there is lots of investors are here to invest into
the company. So, the company may choose “Residual Dividend Policy” so that it can
internally finance new project or expanding project.
Forecasted IS & BS: From forecasted IS & BS we notice that the forecasted Net income and
forecasted Total Asset will increase at their positive constant growth rate until 2011 when
the constant operating income will increase to maintain the daily needs of NWC. Therefore
we can say that it is a growing firm, so any investors can invest in HeidelbergCement
Bangladesh LTD. with managing proper diversification process.

3
FIN 440.7 Group 07 Spring 2010 ID #:072 172 030, 072 209 030
Date of Submission: 11/04/2010 072 210 030, 081 065 030
Group Final Report: Cement Industry Analysis
Aramit Cement Limited
Company Overview:
Aramit cement limited was incorporated on 19th august 1995 as a public company limited
by shares and was established with technical collaboration of a Chiness company for
producing ordinary Portland cement form the very beginning of its commercial production
that started on the 10th November 1999. The company has been maintain the quality of the
product for which it has won the confidence of the customers. Company’s product carrying
brand name Camel has already become highly popular among the consumers.
Leverage analysis:
Year 2006 2007 2008
Aramit Industry Aramit Industry Aramit Industry
DOL 1 1.18 1 1.16 1 .47
DFL 1.41 .73 .9 .45 3.38 1.51
DCL 1.41 .77 .9 .48 3.38 1.98
The DOL is same over the year the last three year. That means 1% increase in sales will
result in a 1% increase in EBIT. In 2006 & 2007 it is lower than industry but in 2008 it was
double. So over all DOL is quite acceptable.The DFL of 2006, 2007 & 2008 is better than the
industry. In 2008 it was 3.38 that means if 1% increase in operating income will lead to
3.38% increase in Earning Per Share.The DCL is same as DFL but the industry was
fluctuated overtime.
Market share:

Items Aramit Industry Market Share

Sales 1,921,215,880 12,580,842,550 15%

Total Assets 1,637,776,815 10,595,109,552 15%
If we look at the industry we find that Aramit cement capture only 15% of the share. It is
not the good sign for aramit cement. In a competitive market, in the long run aramit might
be lose the market share.
Ratio Analysis:
Liquidity ratio Aramit Industry Comarison with industry
.48 .95 poor
Current Ratio
.34 .72 Not good
Quick Ratio
(2.81) 8.57 Very Poor
Net WCT Ratio
28.59 55.52 Poor
Time To Ruin (days)
5.37 33.53 Very Poor
Cash Liquidity Ratio
Cash Conversion Cycle 19.66 16.34 Average
(days)
The Aramit cement did not have enough current asset to meet their Current liabilities. Their
Net WCT ratio is negative 2.81 that means if they fail to meet their Current laibilites over

4
 FIN 440.7 Group 07 Spring 2010 ID #:072 172 030, 072 209 030
Date of Submission: 11/04/2010 072 210 030, 081 065 030
Group Final Report: Cement Industry Analysis
time & time, they might go for bankruptcy. Obviously it is a huge threat for Aramit cement.
If we compare the industry their liquidity ratio is not good.
Efficiency Ratios
Items Aramit Industry Comparison with industry
Inventory Turnover Ratio 10.22 17.60 More efficient
Inventory Turnover Period (days) 39.25 41.01 AVERAGE
Receivable Turnover Ratio 10.23 33.77 Less efficient
Daily Credit Sales (taka) 1778903.33 7328249.75 LOW
Days Sales Outstanding (days) 35.35 26.30 Less efficient
Payable Deferral Ratio 6.72 11.49 More efficient
Payables Deferral Period (days) 54.94 52.65 Average
Fixed Asset Turnover Ratio 1.95 2.07 More efficient
Fixed Asset Turnover Period (days) 185.99 177.45 Better
Total Asset Turnover Ratio 1.18 1.12 More efficient
Total Asset Turnover Period (days) 306.55 324.97 Good
In the efficiency position, Aramit Cement was slightly riskier than industry. Their receivable
turnover ratio is very poor compare to industry. In a competitive market it is big problem
for the company. Their other ratios were almost same as industry. So currently, they are in a
risky position in terms of efficiency.

Debt Ratios
Items Aramit Industry Comparison with industry
Debt Ratio .96 0.65 Higher
Long Term Debt Ratio .16 0.11 Higher
Debt to Equity Ratio 29.28 8.62 Higher
TIE Ratio 1.71 4.24 Lower
Cash Coverage Ratio 9.19 6.14 Better

Aramit cement debt ratio is quit high that means they have huge long term debt against
their long term asset. Their debt is high that means interest also high. As a result TIE ratio
goes down. They have huge debt that means they also get the tax benefit.
Profitability Ratio
Items Aramit Industry Comparison with industry
Profit Margin Ratio .01 0.06 Poor
Basic Earning Power .08 0.10 Not good
Return On Asset .01 0.07 poor
Return Of Equity .35 0.20 Better
Pay Out Ratio .14 0.23 Lower
Plough Back Ratio 1.14 1.20 good
Growth Rate .41 0.24 Higher
If we look at the profitability ratio that aramit cement performance is very poor. Their profit
margin , basic earning , return on asset , pay out ratio all of them are poor compare to

5
FIN 440.7 Group 07 Spring 2010 ID #:072 172 030, 072 209 030
Date of Submission: 11/04/2010 072 210 030, 081 065 030
Group Final Report: Cement Industry Analysis
industry. As a result in the long run the company face lot of problem, which is not good for
the company.
Market Value Ratio
Item Aramit Industry Comparison with industry
EPS (taka) 5.57 38.57 Lower
Book Value Per Share (taka) 40.19 285.57 Lower
Market To Book Value Ratio 4.67 1.39 Wealth maximization seen
P/E Ratio 4.26 15.62 Lower
Dividend Yield 7% 30% Lower
EPS of the company is not so good compare to the industry. Though M/B ratio is lower than
industry, market value > Book value. Price earning ratio is lower than the industry dividend
yield is lower also because the company emphasize on retaining the income. So value
addition higher and new investors, creditors are willingly invest in the company.
Risk Analysis:
 Aramit cement net working capital ratio is negative that means they can not meet
their current liabilities with the current asset. If they do not meet the current
liabilities , they might be face bankruptcy.
 Z-score of the Aramit cement is .65 which is lower than 3 where industry average is
2.38; it is in against of Aramit that is lead to bankruptcy
 Aramit has a beta of .24 which is indicate that their stock is less volatile as the
overall market . If the overall market risk increases by 1 unit the company’s risk will
rise by 0.24 units. Again, the Standard Deviation of Aramit cement is 4.27% which is
risky for the investors compare to market SD of 1.23%. If stock price decline they
will severely suffer.
 The Economic value added for the company was positive in 2006-2008. The net
operating profits were higher than the product of WACC & previous years invested
capital for 2006-08. In other words, NOPAT of Aramit is covering the investments. It
is maximizing its risk.
 Average WACC of Aramit is 3.70% whereas the WACC of Industry average is
10.425%. Therefore, the cost of capital is lower than the competitors. Aramit is
reducing its debt financing by using less costly capital that’s why high retention
ratio.
 The average market return is 8% where the Aramit is (2%).
Forcasted IS & BS:
If look at the forcasted IS & BS we find that Net income and forecasted Total Asset will
increase at their positive constant growth rate until 2011 , but net working capital will be
negative . So it is problem for the company.
Stock Price Evaluation: Aramit’s firm value in 2008 was BDT 14,281,328,578. Value of
Debt was BDT 1,056,991,364. Value of Equity was 13,224,337,214 and number of Shares
outstanding 1,400,000. So the Intrinsic Price/ share is taka 9445.95. The stock price at the
31 December 2008 was BDT 177. Therefore, this is overvalued stock in terms of my analysis
not market determinants.

6
FIN 440.7 Group 07 Spring 2010 ID #:072 172 030, 072 209 030
Date of Submission: 11/04/2010 072 210 030, 081 065 030
Group Final Report: Cement Industry Analysis
Confidence Cement Ltd.
Company overview
Confidence Cement Limited (CCL) is the first private sector cement manufacturing
company in Bangladesh established in early 90's with having 4,80,000 M/T annual
production capacity at Chittagong, 16 K.M away from Chittagong port, besides Dhaka
Chittagong highway. CCL is the first ISO-9002 certified cement manufacturing in
Bangladesh. The shares of the company are both traded in DSE and CSE.

Leverage Analysis:
Year 2006 2007 2008
Confidence Industry Confidence Industry Confidence Industry
DOL 1.37 1.18 1.35 1.16 -1.38 0.47
DFL 0.29 0.73 0.26 0.45 -0.66 1.51
DCL 0.40 0.77 0.35 0.48 1.19 1.98
The CCL has a larger amount of operating risk than the industry throughout the three years
& in 2008 it becomes larger than previous several years because DOL follows that the
higher the fixed operating costs; the higher the company’s operating leverage and its
operating risk It looks bad than others though their revenue also rises during this period.
The DFL of CCL went down because they don’t have any new long term debt. The company
had a negative EBIT in 2008, which lead to Negative DFL indicating that the company
earned less on the assets, purchased with the funds, than fixed cost of their use. CCL had to
keep the DFL lower because it has higher average than the industry in DOL & the
management is efficient and effective enough to maintain lower DFL because of higher DOL.
As the DOL of the company fluctuated over time, the DCL also fluctuated over the times.
However the CCL’s Degree of risk is lower than the industry.
Market Share:

Items Heidelberg Industry Market Share

Sales Tk 1,229,887,420 Tk 12,580,842,550 9.78%
Total Assets Tk 1,154,131,746 Tk 10,595,109,552 10.89%
The company have much lower market shares in the cement industry compared to its
competitors and have not been able to capture majority of the market share. Therefore it
can be considered as the follower of the industry.
Ratio Analysis:
Liquidity Ratios
Items Confidence Industry Comparison with industry
Current Ratio 1.091 0.95 Higher
Quick Ratio 0.99.61 0.72 Higher
Cash Liquidity Ratio 46.65 33.53 Higher
Cash Conversion Cycle (days) 21.20 16.74 Higher
The CCL had enough current assets to meet their current liabilities and the position is very
tight in terms of liquidity though it is slightly higher than the industry. Their quick ratio
became higher than the industry. The company had more sales than previous period but
cost of inventories was high because of political unrest, worldwide economic recession etc
that affect various construction and real estate company’s business who are the major client

7
 FIN 440.7 Group 07 Spring 2010 ID #:072 172 030, 072 209 030
Date of Submission: 11/04/2010 072 210 030, 081 065 030
Group Final Report: Cement Industry Analysis
of the company. The company had much higher CCC than the average industry that shows
supplier’s lack of trustworthiness to them in the industry.

Efficiency Ratios
Items Confidence Industry Comparison with industry
Inventory Turnover Ratio 7.10 17.60 Less efficient
Receivable Turnover Ratio 102.88 33.77 Highly efficient
Daily Credit Sales (taka) 3,039,635.00 7,328,249.75 Low
Days Sales Outstanding (days) 3.56 26.30 Highly efficient
Fixed Asset Turnover Ratio 1.89 2.07 Almost Same
Total Asset Turnover Ratio 1.01 1.12 Almost Same
In the efficiency analysis, CCL has shown diversity in playing role among various parts of
the market. The company had both higher CCC and DSO than the industry. Therefore, the
company used the NWC in efficient and effective way. Overall efficiency ratio shows that
management should be aware about inventory management, collect receivables as early as
possible and increase the FATO & TATO through generating huge amount of sales by
utilizing assets.
Debt Mgt Ratios
Items Heidelberg Industry Comparison with industry
Debt Ratio 0.39 0.65 Lower
Long Term Debt Ratio 0.00 0.11 Better
Debt to Equity Ratio 0.66 8.62 Lower
TIE Ratio 2.86 4.24 Lower
Cash Coverage Ratio 2.86 6.14 Lower
CCL now is in almost optimum debt equity position, so it creates larger wealth than the
industry within very short term. Again the company is much more equity financed then the
debt, so there is a chance to incur more opportunity cost of the company. Besides that, CCL
had no LTD in 2008 that leads to less interest payment then industry but their TIE ratio
didn’t go up that much it was expected.
Profitability Ratio
Items Confidence Industry Comparison with industry
Profit Margin Ratio 0.06 0.06 Same
Basic Earning Power 0.05 0.10 Lower
Return On Asset 0.06 0.07 Lower
Return Of Equity 0.09 0.20 Lower
Pay Out Ratio 0.00 0.23 Lower
Plough Back Ratio 1.00 1.20 Better
Growth Rate 0.09 0.24 Lower
The profitability ratio shows CCL just maintaining their position in cement industry. Their
profit margin is same as industry rate but BEP, ROA , ROE are lower than industry average.
Payout ratio is zero is because no dividend was declared in 2008. They emphasize more on
internal fund for investing or expanding projects. Though this does not make the investors
happy, the value addition may result a large amount of capital gain. In Bangladesh
perspective, capital gain from publicly held company is nontaxable but dividend is taxable.

8
FIN 440.7 Group 07 Spring 2010 ID #:072 172 030, 072 209 030
Date of Submission: 11/04/2010 072 210 030, 081 065 030
Group Final Report: Cement Industry Analysis
As a result some investors can feel wealthy because the retention ratio is high enough but
not more than industry.
Market Value Ratio
Item Confidence Industry Comparison with industry
EPS (taka) 5.33 38.57 Lower than competitors
Book Value Per Share (taka) 346.42 285.57 Higher than competitors
Market To Book Value Ratio 0.29 1.39 Wealth minimization seen
P/E Ratio 53.33 15.62 Higher than competitors
Dividend Yield 21% 30% Lower than competitors
EPS of the company is much lower than the industry. Though M/B ratio is lower than
industry, market value > Book value. Price earning ratio is higher than the industry,
dividend yield is lower al because the company emphasize on retaining the income. So value
addition higher and new investors, creditors are willingly to invest in the company.
Risk Analysis:
 CCL is financing more with the non-interest bearing current liabilities from 2002.
 Z-score of CCL is 3.87, which is higher than 3.0, where industry average is 2.38; it is in
favor of CCL that is helpful to reduce the P( bankruptcy). So, higher rate is expected.
 CCL has a Beta (β) of -0.01 which indicate that their stock is negatively related as the
overall market almost. It also shows the company has sufficient and efficient
management running the business when the overall market goes down. If the overall
market risk increases by 1 unit the company’s risk will rise by 0.85 units. Again, the
Standard Deviation of CCL is 4.45% which is risky for the investors compare to market
SD of 1.23%. If stock price decline they will severely suffer.
 The Economic value added for the company was negative in 2006-2008.
 WACC of CCL gradually decreased & average WACC of CCL is 26.23% whereas the WACC
of Industry average is 10.425%. Therefore, the cost of capital is lower than the
competitors. CCL is reducing its debt financing by using less costly capital
 The average market return is 0.08% where the CCL has 0.22%.
Stock Price Evaluation:
CCL’s firm value in 2008 was BDT 1,763,102,639 & Value of Equity was 10,911,619,680 and
number of Shares outstanding 1,900,000. So the Intrinsic Price/ share is taka 5742.957726.
The intrinsic stock price 5742.90 at the 31 December 2008 & market value was BDT 2,795.
Therefore, this is overvalued stock in terms of my perspective.
Forecasted IS & BS:
From forecasted IS & BS we notice that the forecasted Net income is negative but Total
Asset will increase at their positive constant growth rate until 2011 when the constant
operating income will increase to maintain the daily needs of NWC. Therefore we can say
that it is a growing firm, so any investors can invest with following proper diversification
process.

9
FIN 440.7 Group 07 Spring 2010 ID #:072 172 030, 072 209 030
Date of Submission: 11/04/2010 072 210 030, 081 065 030
Group Final Report: Cement Industry Analysis

Meghna Cement Bangladesh Ltd.

Company overview
Meghna Cement Bangladesh Ltd is a sister concern of Bashundhara Group. It has brought
regional manufacturing whose history stretches back to the very beginning of commercial
cement production in Bangladesh. MEGHNA is also a listed company since 1989 and its
shares are being traded at both DSE and CSE.
Leverage Analysis:
2006 2007 2008
Year
Meghna Industry Meghna Industry Meghna Industry
DOL 1.00 1.18 1.00 1.16 1.00 0.47
DFL 1.03 0.73 0.59 0.45 1.10 1.51
DCL 1.03 0.77 0.59 0.48 1.10 1.98
DOL depends on that is logically follows that the higher the fixed operating costs, the
higher the company’s operating leverage and its operating risk. The MEGHNA has a larger
amount of operating risk than the industry throughout the three years. It looks bad than
others though their revenue also rises during this period. The DFL of Meghna Cements went
down because they don’t have any new long term debt. Meghna Cements have all positive
EBIT, which lead to positive DFL indicating that the company earned more on the assets,
purchased with the funds, than fixed cost of their use. As the DOL of the company fluctuated
over time, the DCL also fluctuated over the times. However the Meghna Cements Degree of
risk is lower than the industry.
Market Share:

Items Meghna Cement’s Industry Market Share

Tk 3,367,396,868
Sales Tk 12,580,842,550 26.76%
Tk 2,380,021,002
Total Assets Tk 10,595,109,552 22.46%
The company has shown less dominance in the cement industry compared to its
competitors and has managed to capture majority of the market share. Therefore it can be
considered as the corporate leader of the industry.

Ratio Analysis:
Liquidity Ratios
Items Meghna Cement’s Industry Comparison with industry
Current Ratio 1.16 .95 Not good
Quick Ratio 0.93 0.72 better
Net WCT Ratio 9.00 8.57 better
Time To Ruin (days) 54.23 55.52 Lower
Cash Liquidity Ratio 50.13 33.53 better
Cash Conversion Cycle (days) 20.63 16.74 better

The Meghna Cement have enough current assets to meet their current liabilities
and the position is very healthy in terms of liquidity. They have to depend on their fixed

10
 FIN 440.7 Group 07 Spring 2010 ID #:072 172 030, 072 209 030
Date of Submission: 11/04/2010 072 210 030, 081 065 030
Group Final Report: Cement Industry Analysis
assets and higher sales to meet CL. Their position in terms to other liquidity ratio is almost
same as the industry.

Efficiency Ratios
Items Meghna Cement’s Industry Comparison with industry
Inventory Turnover Ratio 47.63 17.60 More efficient
Inventory Turnover Period (days) 08.40 41.01 More efficient
Receivable Turnover Ratio 11.86 33.77 Less efficient
Daily Credit Sales (taka) 8758162.67 7328249.75 High
Days Sales Outstanding (days) 30.60 26.30 Less efficient
Payable Deferral Ratio 18.56 11.49 More efficient
Payables Deferral Period (days) 20.94 52.65 Less efficient
Fixed Asset Turnover Ratio 2.42 2.07 More efficient
Fixed Asset Turnover Period (days) 149.85 177.45 Less efficient
Total Asset Turnover Ratio 1.17 1.12 More efficient
Total Asset Turnover Period (days) 314.77 324.97 Better
In the efficiency position, Meghna Cements position is in a fairly riskier position
compared to the average industry. The company has a lower inventory turnover & higher
A/R turnover. Their Average collection period is high compare to their Payable deferral
period. So currently, they are in a risky position in terms of efficiency.

Debt Ratios
Items Meghna Cement’s Industry Comparison with industry
Debt Ratio 0.79 0.65 Almost the same
Long Term Debt Ratio 0.26 0.11 Lower
Debt to Equity Ratio 3.78 8.62
TIE Ratio 2.02 4.24 Better
Cash Coverage Ratio 2.32 6.14 Lower
The Meghna Cement’s Debt portion is Lower than the average industry. They are
financing more with the debt. It may be the reason for their high debt to equity ratio. If we
look at their LTD ratio, which is quite higher than the others. They are financing their debt
portion with the more costly long term debt. Previously in the liquidity part we noticed in
current ratio that their CL is high. The reason is they have no new LTD at this moment.

Profitability Ratio
Items Meghna Cement’s Industry Comparison with industry
Profit Margin Ratio 0.03 0.06 Better
Basic Earning Power 0.08 0.10 Lower
Return On Asset 0.07 0.07 Same as Industry
Return Of Equity 0.16 0.20 Better
Pay Out Ratio 0.64 0.23 Better
Plough Back Ratio 1.75 1.20 Lower
Growth Rate 0.27 0.24 Better

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FIN 440.7 Group 07 Spring 2010 ID #:072 172 030, 072 209 030
Date of Submission: 11/04/2010 072 210 030, 081 065 030
Group Final Report: Cement Industry Analysis
Meghna Cement’s has better profitability. Their operating income, net income & BEP
are lower than the industry. However, they are paying a higher portion of dividend to the
shareholders which is good to keep investors happy.

Market Value Ratio Meghna

Item Cement’s Industry Comparison with industry
EPS (taka) 40.88 38.57 Higher than competitors
Book Value Per Share (taka) 255.08 285.57 Lower than competitors
Market To Book Value Ratio 0.39 1.39 Wealth minimization seen
P/E Ratio .02 15.62 Lower than competitors
Dividend Yield 60% 30% Better than competitors
Their market value is quite low compared to BV. Apparently, when we focus on P/E
ratio & Dividend yield, the company seems to be moving towards a risky future, which may
insist investors on reducing their investment in the company.
Risk Analysis:
 As the Z-score of Meghna Cement is 1.29, which is lower than 2.38, it has actually no
chance to go for bankruptcy.
 The WACC of Meghna Cement’s gradually decreased & average WACC of Meghna
Cement’s is 32.87% whereas the WACC of Industry average is 8.37%. Therefore, the cost
of capital is lower than the competitors. Meghna Cements is reducing its debt financing
by using less costly capital.
 Every year Meghna Cement’s has positive EVA. The net operating profits were higher
than the product of WACC & previous years invested capital. In other words, NOPAT of
Meghna Cement’s actually covered the investments. Therefore, it minimized their risk to
some extent.
 As Meghna Cement’s is financing more with the short-term debt and non-interest
bearing current liabilities from 2006. So the firm value of the Company was much higher
than the invested capital from 2006 to 2008.
 The Meghna Cement’s has a Beta (β) of 0.09 which indicate that their stock is less
volatile than the overall market. If the overall market risk increases by 1 unit the
company’s risk will rise by 0.09 units. Again, the Standard Deviation of Meghna
Cement’s is 5.02% which may be risky for the investors because if stock price decline
they will severely suffer.
 The average market return is 15% where the Meghna Cement’s has -0.07%.

Forecasted IS & BS:

From the forecasted IS & BS we see that the Meghna Cements’s profitability is going to
increase whereas the total asset will decrease. In future their Estimated Free flow will grow
at a constant rate.
Stock Price Evaluation: Meghna’s firm value in 2008 was BDT 3, 524, 565, 1597. Value of
Debt was BDT 26,817,618,944. Value of Equity was 8,428,032,653and number of Shares
outstanding 5650000. So the Intrinsic Price/ share is taka 1491. The stock price at the 31
December 2008 was BDT 386. Therefore, this is overvalued stock in terms of my analysis
not market determinants.

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