- International Leasing Securities Limited

AFC AGRO BIOTECH LIMITED
Company Overview
AFC Agro Biotech Limited (AFCABL) was incorporated on 31
August, 2010 and started its commercial operation on 7
October, 2012. The principal activity of AFCABL is to
manufacture antibiotics, proteins, vaccines, enzymes etc. from
agricultural ingredients like molasses, glucose, potato starch &
other nutrients and to sell those products to local markets. The
Production facility of the Company is situated at Batiaghata,
Khulna on 3 acres of land.
The company is producing industrial raw materials from its
Biological Assets. The Company’s products are Macrolide
Protein (Raw materials of Eryhtromycin), Acetic Acid, L-Lysine,
Mono Soium Glumate and Methonione. Pharmaceutical
industries, Poultry feed manufacturers, Fish/Cattle feed
manufacturers, Textiles and various food manufacturing
industries are the major customers of the firm’s products. In
particular, the Company’s product is used as raw materials for
Active Pharmaceutical Ingredient (API).
The Company currently uses 20 items as raw materials which
are mostly sourced from the local market. Moreover, raw
materials i.e., molasses, glucose, potato starch etc., are
generally available throughout the year as most of these are
agricultural products.
DSE: AFCAGRO
BLOOMBERG: AFCAB:BD
Meanwhile, construction of 200-acre API Park is in progress. A
total of 42 industries would be set up under the project;
expected total cost is BDT 331.86 crore. Once the park is up and
running (extended deadline is June 2015) the raw material
imports for pharmaceuticals industry is expected to come down
to 30%.
Company Fundamentals
2,447.5
0.1%
55.0
60.1%
550.0
5.9
-6.9%
44.5
37.8-61.2
22.8
Market Cap (BDT mn)
Market weight
No. of Share Outstanding (in mn)
Free-float Shares
Paid-up Capital (BDT mn)
3-month Average Turnover (BDT mn)
3-month Return
Current Price (BDT)
52-week price range (BDT)
Sector Forward P/E
2011++
Financial Information (BDT mn):
Sales
2014
2012*
2013
45.1
359.8
466.2
(9m Ann)
Operating Profit
-
11.8
79.1
162.8
Profit After Tax
-
11.6
77.2
144.1
Assets
-
402.2
7,157.3
818.1
Long Term Debt
-
-
-
-
The company enlisted in the DSE and the CSE on 11 February,
2014. Around 39.85% shares of the company are held by the
Sponsors whereas 56.87% and 3.28% are held by General and
Institutional Investors respectively.
Equity
-
391.6
468.8
691.6
Dividend (C/B)%
-
N/A
-/10
-/-
Margin:
Gross Profit
-
34.1%
31.2%
40.1%
Industry Overview
Operating Profit
-
26.3%
22.0%
34.9%
Pretax Profit
-
26.2%
22.4%
31.5%
Pharmaceutical Industry in Bangladesh, currently valued at BDT
150 billion, primarily produces generics drugs of around 8,000
different brands which can furnish up to 98% of the domestic
demand. Besides that, the Country has been exporting
medicines to 110 countries around the world. However, supply
side of this industry mostly depends on import. Around 90% of
required raw materials are imported from China and India
whereas some local companies – Beximco Pharmaceuticals Ltd.,
Square Pharmaceuticals Ltd., Opsonin Chemicals Ltd. etc. –
produce certain APIs on smaller scale for mainly in-house use.
Net Profit
-
25.7%
21.5%
30.9%
Growth:
Sales
-
N/A
698.3%
29.6%
Gross Profit
-
N/A
632.2%
66.1%
Operating Profit
-
N/A
567.5%
105.9%
Net Profit
-
N/A
565.2%
86.7%
ROA
-
3.7%
2.0%
3.6%
ROE
-
3.8%
17.9%
24.8%
All the required factors for producing API and laboratory
reagents are locally available. Hence local producers are more
likely to compete successfully against their international
competitors as Bangladesh has significant competitive
advantage in terms of cheap human resource and lower energy
cost. The Country’s estimated market size for biotech products
are around BDT 50 billion.
Debt Ratio
-
0.0%
1.3%
11.3%
Debt-Equity
-
0.0%
-
19.8%
11.1
13.4%
11.2
Price/Earnings
-
N/A
N/A
16.9
Price/BV
-
N/A
N/A
3.5
EPS (BDT)
-
0.2
1.4
2.6
NAVPS (BDT)
-
10.2
10.7
12.6
Active Fine Chemicals Ltd. is the holding company of AFCABL
and a major buyer of Macrolide Protein. In 2013 around 13% of
revenue is generated from Active Fine Chemicals Ltd.
Profitability:
Leverage:
Int. Coverage
Valuation:
++ The Company has started its operation on 7 October, 2012. * 3 Month’s Data
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23 April, 2015
Investment Positives



Investment Negatives


70
60
50
40
30
Feb-14
Apr-14
Jun-14
Restated EPS (BDT)
2.62
1.40
0.21
2013
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Source: DSE Website & ILSL Research
Pricing Based on Relative Valuation:
Sector Forward P/E
The Company has only around 2.5 years of operational
track record. Therefore, more time is needed to find out
whether its performance is sustainable or not.
Currently, the Company is producing on a small scale
which is insignificant in comparison with the Country’s
total demand for biotech products.
2012
Price (BDT) Movement Since Listing
80
At present, AFCABL is the Country’s lone manufacturer of
biotech products. Since the demand for these import
substitute biotech products are increasing at different
industries, the Company will enjoy sustainable growth in
its revenue stream in the upcoming years.
The company is enjoying Tax Holiday Benefit for 7 years up
to 10 October, 2019. Particularly, for the year 2014 and
2015, the Company will enjoy 100% tax benefit.
According to the Company’s strategic plan for expanding
its product range, it has signed an agreement with
Department of Microbiology, University of Dhaka on
February 12, 2015 for commercial production of Industrial
Enzymes.
Market Forward P/E
Sector P/B
Multiple
Value (BDT)
22.8
15.3
3.5
59.8
40.1
44.0
Concluding Remark
AFC Agro Biotech Limited is the Country’s only manufacturer of
biotech products. It collected BDT 120 million from capital
market on October 2013 to make capital investment. As on 30
September 2014, the company reported around 53% increase
in its Plant, Property & Equipment compared to that of 31
December 2013. So far, 9 (nine) months performance showed
that, the Company has registered 33% and 97% growth in sales
and operating profit respectively compared to the same period
of the last year. Drop of COGS as a percentage of sales from
71.2% (Jan-Sep ’13) to 59.9% (Jan-Sep ’14) mainly constituted
the growth of operating profit.
2014 (9M Ann)
Source: Annual Reports and ILSL Research
Source: Annual Report, Prospectus, the Financial Express, the Daily Star & ILSL Research
ILSL Research Team:
Name
Rezwana Nasreen
Md. Tanvir Islam
Towhidul Islam
Mohammad Asrarul Haque
Designation
Head of Research
Sr. Research Analyst
Research Analyst
Jr. Research Analyst
For any Queries: [email protected]
Disclaimer: This document has been prepared by International Leasing Securities Limited (ILSL) for information only of its clients on the basis of the publicly available information in the market and own research. This
document has been prepared for information purpose only and does not solicit any action based on the material contained herein and should not be construed as an offer or solicitation to buy or sell or subscribe to any
security. Neither ILSL nor any of its directors, shareholders, member of the management or employee represents or warrants expressly or impliedly that the information or data of the sources used in the documents are
genuine, accurate, complete, authentic and correct. However all reasonable care has been taken to ensure the accuracy of the contents of this document. ILSL will not take any responsibility for any decisions made by
investors based on the information herein.
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