Current Price (BDT): 1,129.60

Transcription

1 Company Fundamentals Market Cap (BDT mn) 15,453 Market weight 0.42% Paid-up Capital 1,368 No. of Share Outstanding (in mn) 1,36.8 Free-float Shares (Inst.+For.+Public) 30% 3 Months Avg. Daily Turnover(BDT mn) Months Avg. Daily Volume 1,905 3 Months Return 1.7% 52-week price range (BDT) Sector Forward P/E 25.2 BATASHOE Forward P/E Financial Information (BDT mn): 2016 (An) 2017 (Q1, An) Net Sales 8,077 8,523 10,687 7,974 Gross Profit 3,132 3,428 4,299 3,311 EBITDA 1,176 1,370 1,681 1,100 Operating Profit 1,056 1,241 1, Profit After Tax , Total Assets 4,900 5,237 6,163 7,001 Total Debt Total Equity 2,571 2,965 3,174 3,728 Cash Dividend (C/B)% 280/- 320/- 330/- - Margin: Gross Profit 38.8% 40.2% 40.2% 41.5% EBITDA 14.6% 16.1% 15.7% 13.8% Operating Profit 13.1% 14.6% 14.6% 12.4% Pretax Profit 12.6% 14.2% 14.2% 11.9% Net Profit 8.7% 9.8% 9.8% 8.6% Growth Sales 2.5% 5.5% 25.4% -11.1% Gross Profit 3.7% 9.5% 25.4% -10.5% Operating Profit % 25.4% -23.9% Net Profit % 25.4% -21.4% Profitability ROA 14.7% 16.4% 18.3% 10.4% ROE 29.0% 30.0% 34.0% 19.9% Payout Ratio 54.7% 52.6% 45.9% - Leverage Altman Z-Score N/A Valuation EPS (BDT) NAVPS (BDT) Year End P/E (x) Year End P/NAV EV/EBITDA EV/Sales Annualizing the financial data of FY 2017 based on Q1 has resulted in negative performance due to seasonality impact. It is expected that the actual performance will be better. ** Financial Data of FY 2016 has been derived through back calculation method based on declared EPS of FY 2016 Company Overview Company Profile Bata Shoe Company (Bangladesh) Limited (Bata) is one of the leading footwear manufacturer in Bangladesh. The company is also one of the operating companies of worldwide Bata Shoe Organization (BSO). The company was incorporated in 1972 in Bangladesh and became listed with DSE and CSE on 1985 and 2004 respectively. Shareholding Pattern: Sponsor/ Gov.t Institute Foreign Public Director Apr 30, % 0.00% 16.02% 3.82% 10.16% Dec 29, % 0.00% 15.01% 5.30% 9.69% Dec 31, % 0.00% 10.74% 9.84% 9.42% Business Profile Nature of Business: the company is manufacturer and retailer of quality footwear as well as other leather, rubber, plastic, hosiery and accessories items. The Company has two manufacturing facilities one in Tongi and the other one in Dhamrai. Major Brands: Some of the internationally renowned brands like Bata Comfit, Marie Claire, Hush Puppies, Scholl, Nike, Skechers, Power, North Star, Bubblegummers, Ben10, Sandak, Weinbrenner and B.first etc. are marketed in Bangladesh. Revenue Generation: During the Q1, 2017 period, 94.6% of the company s revenue was contributed by shoes while 4.9% revenue was contributed by Hosiery & accessories and rest 0.5% revenue was contributed by export sales. Production Capacity and Utilization: In 2015, the total production capacity of the Company was mn of which around million pairs of shoes were produced registering 73% capacity utilization. Last 5 years ( ) average capacity utilization was 79%. The production capacity and its utilization rates for the last four years are given below (Figures in '000) Production capacity (in pairs) 32, ,441 Actual production 28,084 29,917 26,802 26,675 Capacity utilization 85% 83% 74% 73% Source: Annual Reports and EBL SL Research Raw Materials: The Company had to procure around 40% of its raw materials from foreign sources in 2010 and But the company has gradually decreased it to 27% in The costs of goods sold (COGS) in percentage of sales was 60.0% over the last 5 years but it is in decreasing trend during the last three years. Cost of materials consumed Local purchased 61% 68% 68% 71% 73% Imported 39% 32% 32% 29% 27% Source: Annual Reports and EBL SL Research Industry Overview Leather sector combining leather and leather products is the 2nd largest exporting sector of Bangladesh after Ready-Made Garments. Tanneries, small and medium leather industries and large firms are involved in this sector. Footwear industry is also one of the most promising industries for export from Bangladesh. This sector includes leather footwear and shoes, sports footwear and synthetic footwear. Per capita consumption of footwear, including leather, is three pairs (it was 1.7 pairs five years back). The footwear industry is still in its initial stage. 1 EBL Securities Limited Research

2 Demography: Up to May 2017, total population of Bangladesh is more than 164 million from which middle-class people holds around 20% and upper middle class people holds around 7%. It is expected that middle class people will hold 33% of total population by On the other hand, upper middle class people will be around 17% of total population by 2021 and 25% of total population by Market Size: There are 200 tanneries, 3,500 MSMEs (Micro Small & Medium Enterprises) and 110 large firms related to leather tanning, leather goods and footwear sub-sectors in the country. The current market size is BDT 70 billion to BDT 80 billion. The annual growth of local Footwear market is the annual footwear consumption of Bangladesh is around BDT 300 million. (Source: The Daily Star Bangladesh) Export. Main exporting countries are Hong Kong, Italy, Korea, Japan, China, Vietnam, Spain, UK, Germany, France, USA, Saudi Arabia, etc. However, few large companies control more than 90% of the export market. Leather and Footwear market generates around USD 1 billion export earnings each year (Source: Export Promotion Bureau). Bangladesh currently holds 1% share of global market and it is expected that it will increase 5% by 2020 (Source: CIFA Report 2016, LFMEAB). Export Item: More than 400 mn square feet of raw hides and skins are processed and exported by tanneries each year in the recent times.. Industry Relocation: A project has started, on 200 acres of land with CETP facilities costing BDT bn, to relocate tanneries from Hazaribagh to Savar Tannery Estate. According to the Bangladesh Ministry of Environment, the tanneries discharge nearly 22,000 cubic liters of untreated and highly toxic chemical, including cancer-causing chromium, into the river Buriganga every day. It also produces 100 tons of solid waste every day in the form of trimmings of finished leathers, shaving dust, hairs, trimmed animal flesh skins/ hides to contaminate the soil and the water. Govt. has paid BDT 2.5 billion to tannery owners for relocation. Only 43 tannery factories have been shifted to Savar and 112 factories are yet to be shifted there. High court has fined BDT million to 154 factories for the failure to meet the deadline on February 28, Tannery owners are seeking time till June-July for relocation though High Court has rejected the request and has given new deadline up to April 30, Investment Insight Company Positive Major festivals i.e., Eid-ul-Fitar, Eid-ul-Azha, Durga Puja etc. stimulates the product demand. Therefore, the firm will enjoy higher earnings in the 2 nd and 3 rd quarter of this year (May-October). According to the new policy, the company has closed down the non-performing retail outlets and has opened large and well facilitated outlets in major cities in FY2015. This policy has enabled the company to reduce its cost of sales and other operational expense. It is contributing to revenue growth as well. BATA displayed commendable performance over the years. 5 year CAGR (Compound Annual Growth Rate) of revenue and net profit after tax of the company was 8.52% and 8.92%. The company has been able to decrease its cost of sales and maintain stability in operating expense over years. 65% 64% 63% 62% 61% 60% 59% 58% 57% Both production facilities of the firm has been upgraded with various high-tech machineries and equipment which eventually help to increase revenue. The Company offers handsome cash dividend to the investors. BATA has established a new business channel under Bata Industrials in 2014, focusing the industrial group such as petrochemicals, food industries, machineries, automobile parts, electrical equipment etc. Bata Bangladesh Received 2015 Best Footwear Brand Award from Bangladesh Brand Forum (BBF). Investment Concern The Company is exposed to foreign exchange risk as it imports around 27% of its raw materials from abroad. Low-cost Chinese shoes that have already flooded the market, poses a threat to domestic investment in the footwear sector. Any change in duty and terrify will affect the profitability of the company. Financial Highlights Revenue: Bata shoe has posted 1.34% YoY topline growth in its latest First quarterly financial results. Revenue of the company has been growing at a compounding average rate (CAGR) of 8.52% over the last 5 years. In Q3 of 2016, the company has posted 2.33% YoY topline growth. Estimable brand image and several marketing initiatives and good distribution network has enabled the company to enjoy growth in its turnover. Profitability: 64% 64% Operating profit of the company grew by 6.11% on YoY basis while net profit after tax grew by 8.12% on YoY basis according to the latest First quarterly financial results for the FY Year average compounding growth rate (CAGR) in the net profit of the company was 8.92% up to FY2015. All the profitability margins of the company depicted an improving trend over the years % 61% 60% Year 2011 Year 2012 Year 2013 Year 2014 Year Cost of Sales as % of sales Five Year EPS (BDT) (Q1, An.) 2 EBL Securities Limited Research

3 Close Price Volume Equity Note on Bata Shoe Company (Bangladesh) Limited Date: 25 th April, % 40% 30% 20% Profitability Margin Trend of BATASHOE 1,600 1,400 1,200 1,000 Historical Price-Volume Movement VOLUME CLOSEP* 40,000 32,000 24,000 16,000 10% 800 8,000 0% , Q3 An. 2017, Q1 An. 600 May-15 Oct-15 Mar-16 Aug-16 Jan-17 0 Gross Profit Operating Profit Pre Tax Profit Net Profit Quarterly EPS Trend Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Concluding Remarks: BATA is one of the leading manufacturer and marketer in the country s leather and footwear industry. The company displayed growth in its business performance consistently over the years. It has seasonal effect on its business performance. During the major festive session for the last few years this is Q3 the Company reported substantially higher earnings. This year, it is expected that the company will enjoy substantially higher growth in Q2 and Q3. Source: Annual Reports, DSE Website, Company website, the Financial Express, the Daily Star and EBLSL Research 5 Year Income Statement Particulars Year 2013 Year 2014 Year 2015 Year 2016 Year 2017,An Net Turnover 7,878,975,170 8,076,995,037 8,522,801,619 10,687,137,839 7,974,240,148 Cost of Sales 4,857,762,141 4,945,486,549 5,094,404,901 6,388,111,541 4,663,390,148 GROSS PROFIT 3,021,213,029 3,131,508,488 3,428,396,718 4,299,026,298 3,310,850,000 Other Operating Income 18,424,860 20,221,586 8,259,742 10,357,275-1,534,512 Total Operating Income 3,039,637,889 3,151,730,074 3,436,656,460 4,309,383,573 3,309,315,488 Operating Expenses: 1,837,320,706 2,096,017,729 2,195,830,942 2,753,454,673 2,318,270,524 Admin., Selling and Dist. Expenses 1,837,320,706 2,096,017,729 2,195,830,942 2,753,454,673 2,318,270,524 PROFIT FROM OPERATIONS 1,202,317,183 1,055,712,345 1,240,825,518 1,555,928, ,044,964 Financial Expenses 6,047,801 4,951,020 4,309,610 5,404,021 4,800,000 Financial Income 13,361,966 13,846,600 28,842,956 36,167,526 19,876,312 Exchange gain/(loss) 4,351,351 6,886,918 5,239,590 6,570,166-4,312,504 PROFIT BEFORE WPPF 1,213,982,699 1,071,494,843 1,270,598,454 1,593,262,571 1,001,808,772 Allocation for WPPF 60,699,135 53,574,742 63,529,923 79,663,129 50,090,440 PROFIT BEFORE TAX 1,153,283,564 1,017,920,101 1,207,068,531 1,513,599, ,718,332 Provision for Income Tax 338,000, ,000, ,324, ,636, ,200,000 Provision for Deferred Income Tax 2,200,000-13,750,000 PROFIT AFTER TAX FOR THE YEAR 813,083, ,670, ,744,531 1,042,963, ,518,332 EPS *Financial data of FY 2016 has been derived through back calculation method based on declared EPS due to unavailability of annual financial statement of FY **Annualizing the financial data of FY 2017 based on Q1 has resulted in negative performance due to seasonality impact. It is expected that the actual performance will be better. 3 EBL Securities Limited Research

4 5 Year Balance Sheet Particulars Year 2013 Year 2014 Year 2015 Year 2016, An Year 2017, An ASSETS: Non-Current Assets: 1,046,509,605 1,194,384,559 1,157,347,608 1,173,838,296 1,150,104,753 PPE 932,544, ,104,774 1,049,379, ,239, ,138,604 Capital Work-in-Progress 59,367,881 Deferred Tax Asset 1,600,000 47,000,000 54,500,000 Prepayment of rent 113,965, ,911, ,368, ,598, ,466,149 Current Assets: 3,563,927,850 3,705,836,464 4,079,245,977 5,380,383, ,048,4561 Inventories 2,167,843,253 2,159,099,409 2,266,352,009 2,778,668,413 3,252,738,589 Accounts Receivable 435,657, ,472, ,907,928 1,017,812,972 1,452,448,887 Advances, Deposits and Prepayments 702,987, ,868, ,607, ,646, ,922,664 Cash and Cash Equivalents 257,439, ,396, ,378, ,256, ,374,421 TOTAL ASSETS 4,610,437,455 4,900,221,023 5,236,593,585 6,554,222,082 7,000,589,314 SHAREHOLDERS' EQUITY AND LIABILITIES: Shareholders' Equity: 2,256,684,143 2,571,023,893 2,965,008,424 3,556,586,430 3,728,216,013 Share Capital 136,800, ,800, ,800, ,800, ,800,000 Reserves & Surplus 2,119,884,143 2,434,223,893 2,828,208,424 3,419,786,430 3,591,416,013 Non-Current Liabilities: 149,006, ,093, ,589, ,582, ,524,389 Deferred Tax Liability 14,500, ,000 Deferred liability 134,506, ,343, ,589, ,582, ,524,389 Current Liabilities: 2,204,746,568 2,166,104,130 2,093,996,161 2,717,053,022 2,982,848,912 Creditors for goods 460,953, ,075, ,751, ,815,692 1,235,259,987 Current tax liabilities 586,559, ,559, ,115, ,531, ,171,739 Creditors for Expenses 443,624, ,800, ,139, ,205, ,201,105 Creditors for other Finance 273,340, ,185, ,235, ,452,941 35,4474,983 Unclaimed Dividend 64,347,270 68,717,138 75,879,187 80,837,261 76,644,401 Accrued expenses 375,921, ,765, ,874, ,210, ,096,697 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 4,610,437,455 4,900,221,023 5,236,593,585 6,554,222,082 7,000,589,314

5 5 Year Ratio Analysis Particulars Year 2013 Year 2014 Year 2015 Year 2016 Year 2017 Liquidity Ratios: Current Ratio Quick Ratio Cash Ratio Operating Efficiency Ratios Inventory Turnover Ratio Receivable Turnover Ratio A/C Payable Turnover Ratio Total Asset Turnover % % % % % Operating Profitability Ratios Gross Profit Margin (GPM) 38.35% 38.77% 40.23% 40.23% 41.52% Operating Profit Margin (OPM) 15.26% 13.07% 14.56% 14.56% 12.43% Pre Tax Profit Margin 14.64% 12.60% 14.16% 14.16% 11.93% Net Profit Margin (NPM) 10.32% 8.67% 9.76% 9.76% 8.61% Coverage Ratios Times Interest Earned (TIE) Valuation Ratios P/B (price to book) Ratio Book Value Per Share Dividend Payout Ratio Retention Rate P/E Ratio EV/EBITDA EV/Sales Growth Rates EPS Growth Rate 21.01% % 18.71% 25.39% % Sales Growth Rate 6.70% 2.51% 5.52% 25.39% % Gross Profit Growth Rate 13.32% 3.65% 9.48% 25.39% % EBIT Growth Rate 19.07% % 17.53% 25.39% % Net Income Growth Rate 21.01% % 18.71% 25.39% % PEG Ratio Other Data Stock price (Current) 1, , , , , DUPONT ANALYSIS Net Profit AT/Sales 10.32% 8.67% 9.76% 9.76% 8.61% Sales/Total Assets % % % % % ROA 18.93% 14.73% 16.41% 18.30% 10.43% Net Profit AT/Total Assets 18.93% 14.73% 16.41% 18.30% 10.43% Total Assets/Stockholders. Equity ROE 39.56% 29.03% 30.05% 33.98% 19.89% *Financial data of FY 2016 has been derived through back calculation method based on declared EPS due to unavailability of annual financial statement of FY **Annualizing the financial data of FY 2017 based on Q1 has resulted in negative performance due to seasonality impact. It is expected that the actual performance will be better.

6 DISCLAIMER This document has been prepared by the Research Team of EBL Securities Limited (EBLSL) for information only of its clients residing both in Bangladesh and abroad, 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 taken as an offer or solicitation to buy or sell or subscribe to any security. Neither EBLSL 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. EBLSL will not take any responsibility for any decisions made by investors based on the information herein. ANALYST DISCLAIMER The person or persons named as the author(s) of this report hereby certify that the views expressed in the research report accurately reflect their personal views about the subject matters discussed. No part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the research report. The views of the author(s) do not necessarily reflect the views of the EBL Securities Limited (EBLSL) and are subject to change without any notice. All reasonable care has been taken to ensure the accuracy of the contents of this document and the author(s) will not take any responsibility for any decisions made by investors based on the information herein. ABOUT EBL SECURITIES LTD. EBL Securities Ltd. (EBLSL) is one of the fastest growing full-service brokerage companies in Bangladesh and a fully owned subsidiary of Eastern Bank Limited. EBLSL is also one of the top ten leading stock brokerage houses of the country. EBL Securities Limited is the TREC-holder of both exchanges of the country; DSE (TREC# 026) and CSE (TREC# 021). EBLSL takes pride in its strong commitment towards excellent client services and the development of the Bangladesh capital markets. EBLSL has developed a disciplined approach towards providing capital market services, including securities trading, margin loan facilities, depository services, online trading facilities, panel brokerage services, trading through NITA for foreign investors & NRBs etc. EBLSL KEY MANAGEMENT Md. Sayadur Rahman Managing Director sayadur@eblsecurities.com Md. Humayan Kabir SVP & Chief Operating Officer (COO) humayan@eblsecurities.com EBLSL RESEARCH TEAM M. Shahryar Faiz FAVP & Head of Research shahryar@eblsecurities.com Md. Asrarul Haque Senior Officer-Research asrarul@eblsecurities.com Mohammad Rehan Kabir Officer-Research kabir@eblsecurities.com Tajkera Rahman Officer-Research tajkera@eblsecurities.com Md. Nazmus Sakib Officer-Research sakib@eblsecurities.com Md. Mosavvir Al Ashick Officer-Research mosavvir@eblsecurities.com Farzana Hossain Laizu Assistant Officer- Research farzana@eblsecurities.com For any queries regarding this report: research@eblsecurities.com EBLSL BRANCHES Head office: Motijheel, Dhaka Modhumita Building HO Extension Dhanmondi Branch Chittagong Branch 59, Motijheel C/A (1st Floor) Dhaka , ; FAX: info@eblsecurities.com 160 Motijheel C/A (2nd Floor) Dhaka , , FAX: info@eblsecurities.com Sima Blossom (4th Floor) House # 390 (Old), 3 (New), Road # 27 (Old), 16 (New), Dhanmondi R/A, Dhaka , Suraiya Mansion (2nd Floor); 30, Agrabad C/A Chittagong