equity research - EBL Securities Ltd.

EQUITY RESEARCH March 24, 2022

Equity Note on SQUARE PHARMACEUTICALS LTD. Sector: Pharmaceuticals & Chemicals DSE: SQURPHARMA

Current Market Price: BDT 219.70

of 6 This research report is a property of EBL Securities Ltd. | Bangladesh Equities | 24 March 2022

N.B.: Disclaimer of the EBL Securities Ltd, the author(s) certification and rating definition have been provided at the end of the report.

2018-19 2019-20 2020-21 2021-22 (6m, An)

Financial Information (BDT mn):

Net Sales 44,034 45,876 50,703 58,144

Gross Profit 21,942 23,340 25,903 30,399

Operating Profit 14,143 14,731 16,122 19,829

Profit After Tax 11,721 12,768 14,656 17,372

Assets 72,146 81,819 95,452 106,602

Debt** 0 0 103.7 1,461.0 Equity 67,881 77,365 90,895 95,166

Retained Earning 55,493 64,981 78,749 83,071

Cash & Cash Equivalents

27,004 32,564 43,364 51,826

Dividend (Cash/Bonus)%

36/7 42/7 47/5 60/0

Margin:

Gross Profit 49.8% 50.9% 51.1% 52.3%

Operating Profit 32.1% 32.1% 31.8% 34.1%

Pretax Profit 35.6% 37.1% 36.8% 38.2%

Net Profit 28.7% 29.1% 31.5% 33.2%

Growth (YoY):

Sales 10.9% 4.5% 10.2% 16.0%

Gross Profit 12.2% 6.4% 11.0% 17.4%

Operating Profit 10.7% 4.2% 9.5% 23.0%

Net Profit 9.1% 5.6% 19.4% 20.9%

Profitability:

Return on Average Asset (ROAA)

19.0% 17.4% 18.0% 19.1%

Return on Average Equity (ROAE)

20.1% 18.4% 19.0% 20.7%

Leverage:

Debt Ratio 0.0% 0.0% 0.1% 1.4%

Valuation:

Restated Earnings Per Share- EPS (BDT)

14.3 15.1 18.0 21.8

Net Asset Value per share- NAVPS (BDT)

86.0 91.6 102.5 107.4

Price/Earnings (P/E) 18.5 11.5 12.0 9.9

Price/NAV 3.07 1.88 2.10 2.00

Dividend per share 3.6 4.2 4.7 6.0

*Financial data of FY 2021-22 has been annualized based on Q2 FY 2021-22 data ** SQURPHARMA’s rental agreements are not considered finance lease as per exemptions in IFRS-16. So there is no lease obligations in debt.

Price-Volume Movement of SQURPHARMA

Company Profile

Square Pharmaceuticals Ltd (SQURPHARMA) manufactures and markets generic pharmaceuticals products, basic chemical products, animal health products. Additionally, the company is engaged in marketing of pesticide products.

Incorporation: SQURPHARMA was incorporated as a private limited company in Bangladesh on November 10, 1964.

Management: Samuel S Chowdhury (Chairman), Ratna Patra (Vice Chairman) and Tapan Chowdhury (Managing Director).

Listing: SQURPHARMA was listed with both Dhaka Stock Exchange and Chittagong Stock Exchange in December, 1994.

Shareholding Pattern: Feb 28,

2022 Jan 31, 2022

Jan 31, 2021

Jan 31, 2020

Sponsor/Director 34.57% 34.57% 34.57% 34.43%

Govt. 0.00% 0.00% 0.00% 0.00%

Institute 14.56% 14.34% 12.41% 10.39%

Foreign 14.27% 14.19% 17.10% 19.38%

Public 36.60% 36.90% 35.92% 35.80%

Business Profile Key products: SQURPHARMA has 641 Pharmaceuticals Products, 22 Basic Chemicals & Pellet Products, 82 (Locally Produced) AgroVet Products & 63 (Imported) AgroVet Products, 35 Corp Care Products and 39 Herbal & Nutraceuticals Products. SECLO, CEF-3, NEOTACK, ZIMAX, CIPROCIN, CALBO-D, ANGILOCK, ENTACYD PLUS are top company brands.

Plant Location: The company has 2 production units. One is in Square Road, Salgaria, Pabna and another is in Kaliakoir, Gazipur.

Subsidiaries: i) Square Pharmaceuticals Kenya EPZ Ltd. (Athi River

EPZ, Ketengala, Machakoas County, Nairobi): Manufacturing and marketing of generic pharmaceutical products in Kenya and the East African Community (EAC).

ii) Square Lifesciences Ltd. (Patikabari, Hemayetpur, Pabna Sadar, Pabna): Manufacturing and marketing of generic pharmaceuticals products.

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Volume(Qty) Closing Price

Company Fundamentals Market Cap (BDT mn) 195,019.2

No. of Share Outstanding (mn) 886.5

Paid-up Capital (BDT mn) 8,864.5

Free-float Shares (Inst.+For.+Public) (mn) 580.0

3 Months Average Turnover (BDT mn) 83.1

3 Months Return 2.6%

52-week price range (BDT) 190.0 - 251.9

Sector Forward P/E 16.6




Contract Manufacturing Facilities: SQURPHARMA has approved agreements with M/s NAAFCO Pharma Ltd., M/s Sharif Pharmaceuticals Ltd., M/s Renata Oncology Ltd. and M/s Apex Pharma Ltd. for contract manufacturing of some products on behalf of the Company.

Performance of SQURPHARMA’s competitors listed in DSE*:

Companies Sales (in bn BDT)

Paid-up capital (in mn BDT)

EPS P/E

SQURPHARMA 58.4 8,864.5 18.0 13.0

BXPHARMA 29.5 4,461.1 11.5 15.4

ACMELAB 20.8 2,116.0 7.4 12.4

RENATA 30.9 1,071.9 51.9 25.4 *Financial data based on FY 2020-21 figures

Capacity Utilization:

Name of Category Unit Production

Capacity (‘000)

Capacity Utilization (%)

2020-21 2019-20

Tablet Pcs 7,343,555 65% 72%

Capsule Pic 1,767,430 52% 47%

Liquid Bottle 121,958 53% 38%

Injectable (Vial & Ampoule)

Pic 40,573 63% 45%

Infusion (LVPO) Bag 3,471 29% 20%

ENT & Opthal Preparation

Phial 29,011 82% 65%

Cream, Ointment, Spray, Gel, & Others

Phial 147,610 55% 58%

Powder for Suspension

Bottle 21,224 70% 46%

Powder Phial 22,613 38% 43%

Suppository Pic 64,057 69% 31%

Inhaler Can 44,949 30% 33%

Insulin & Insulin Cartridge

Pic 1,808 13% 16%

Basic Chemical & Pellet

Kg 723

84% 74%

Industry Overview

The domestic pharmaceutical market in 2021 amounted to BDT 276.59 bn or around USD 3.22 bn. Although the industry suffered a slower growth rate of 4.28% in FY 2019-20 during the pandemic, growth quickly rebounded to 18.66% in FY 2020-21 suggesting the industry’s high growth potential. It is estimated that the pharmaceutical industry of Bangladesh will reach USD 5.8 bn by 2050. (SQURPHARMA Annual Report 2020-21)

Export of Pharmaceutical product has experienced an upward trend over the last couple of years. In FY 2020-21, the pharmaceutical industry fetched USD 169 million in exports- a year-on-year growth of 25%, which was boosted by the sale of anti-viral COVID-19 drugs as well as cash incentives by the government.

Pharmaceuticals Export Trend (in USD mn)

Source: Export Promotion Bureau website

The Bangladeshi drug market is dominated by production of branded generic drugs, which account for almost 80% of the drugs produced locally, while patented drugs make up the remaining. Currently, there are 271 Allopathic, 205 Ayurvedic, 271 Unani, 32 Herbal and 79 Homeopathic drug producing companies in the country.

The domestic pharmaceuticals market is dominated by the large firms. Top 10 companies hold approximately 71% of the total market share. Square Pharmaceutical is the market leader having around 17% market share followed by Incepta, Beximco, Healthcare, and Opsonin. The following pie chart shows the current market share held by leading pharmaceutical companies.

Domestic Pharmaceutical Market Share (in percentage) 2020

Source: The Financial Express

The biggest threat to the industry remains Bangladesh will lose its exemption from TRIPS compliance by 2026 as it graduates from Least Developed Country (LDC) status. Exemption from TRIPS regulations have allowed pharmaceutical companies to manufacture and sell generic versions of patented drugs both home and abroad. LDCs received exemption from TRIPS regulation till 2033 but Bangladesh’s graduation from LDC status mean that its pharmaceutical industry will need to comply with the regulations by the end of 2026. The exemption from TRIPS allowed Bangladesh to manufacture and export patented anti-viral drugs such as remdesivir and molnupiravir during the COVID-19 pandemic, which helped raise exports. In the post TRIPS exemption era, such benefits will cease to exist. However, since 85% to 95% of the generic drugs produced in Bangladesh are off-patent, the lifting of TRIPS exemption will have less likely impact on the industry. Moreover, exports contribute only 8 percent of the revenues of pharmaceutical

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Square

Incepta

Beximco

Healthcare

Opsonin

Others




companies that are involved in exports.1 So reduction in exports due to TRIPS compliance may not affect the industry much.

There are concerns as well on how import costs for APIs and raw materials may increase due to payment of intellectual property fees in post TRIPS exemption era. Since Bangladesh pharmaceutical industry still needs to import 90% of its raw material, costs are further going to rise. The completion of API Park, expected to be finished by 2022, may help alleviate this challenge.

Investment Insight

Company Positive

With 17.21% market share, SQURPHARMA retains its spot as the market leader in the Bangladesh pharmaceutical industry, a position it has held since 1985. Among the publicly listed pharma companies, SQURPHARMA’s sales is almost double than that of its next competitor. It also has the highest operating profit margin (OPM) and net profit margin (NPM) among its peers.

SQURPHARMA’s consolidated net profit increased 21.02% Y-o-Y from BDT 3.83 bn in Q2 FY 2020-21 to BDT 4.64 bn in Q2 FY 2021-22. The increase in net profit can be attributed to an increase in revenue (from BDT 12.37 bn in Q2 FY 2020-21 to BDT 14.20 bn in FY 2021-22- an increase of 14.79%), a constant cost ratio (COGS remained 46.56% of sales in both the quarters), and a reduction in administrative expenses (from 2.45% of sales to 2.38% in the same time period). EPS also increased from BDT 4.02 in Q2 FY 2020-21 to BDT 4.64 in Q2 FY 2021-22.

The company has been consistently successful in reducing expenses from historical highs. Cost of goods sold as a percentage of sales have fallen from 60.1% in FY 2010-11 to 48.9% in FY 2020-21 while administrative expenses have decreased from 3.6% to 2.1% in the same decade. The reduction in costs has enabled the company to improve its margins over time (Gross Profit Margin increased from 39.85% in FY 2010-11 to 51.09% in FY 2020-21 and Net Profit Margin increased from 18.28% to 31.45% in the same time period) while also providing it with huge cost savings.

Despite an increase in intake of loans totaling BDT 1.44 bn for two of its subsidiaries in Q2 FY 2021-22, SQURPHARMA’s debt-to-asset ratio remains extremely

1 Centre for Policy Dialogue (CPD). (2018). WTO Decision on TRIPS

and Public Health A Window of Opportunity for Bangladesh’s Pharmaceutical Industry. Dhaka. Retrieved from https://cpd.org.bd/wp-content/uploads/2018/08/Research-Report-2-Rahman-and-Farin-2018_WTO-Decision-on-TRIPS-and-Public-Health.pdf

2 International Finance Corporation. (2020). Kenya Pharmaceutical Industry: Diagnostic Report 2020. Retrieved from https://www.ifc.org/wps/wcm/connect/2b7f0aa8-348a-48f5-8367-66176a32450b/2020-Kenya-pharmaceutical-sector-diagnostic-summary.pdf?MOD=AJPERES&CVID=nY88JCs

low (from 0.1% in FY 2020-21 to 1.4% in FY 2021-22 annualized). SQURPHARMA’s credit rating still stands at ST-1 in the short term and AAA in the long term along with a stable outlook.

In October 2021, the board of SQURPHARMA approved BDT 30 bn for BMRE (Balancing, Modernization, Rehabilitation, and Expansion), Capital Machineries, and land for future expansion. The approval of this fund for such expansion is the highest till date and suggests the company remains bullish on future opportunities.

Construction work on the first phase of Square Pharmaceuticals Kenya (SPL Kenya)’s USD 75 m plant has been completed last year and SQURPHARMA expects to begin commercial production within this year. Once commercial production start, SQURPHARMA will be able to cater more to the USD 1 bn Kenyan pharmaceutical market as well as the larger USD 13.6 bn African market.2

Early February of this year, Bangladesh Bank gave SQURPHARMA approval to invest USD 1 mn for its second foreign plant in the Philippines. The pharma giant plans to open a subsidiary under the name Square Pharmaceuticals Limited Philippines. The market value of the Philippines pharmaceutical market is USD 6 bn and is import dependent. 3 SQURPHARMA’s foray into the Philippines will thus enable the company to grab a share in this highly untapped market.

In January of this year, SQURPHAMRA in collaboration with Ascensia Diabetes Care, launched a medical equipment called "Contour Plus ONE" to make blood glucose diagnosis easier and more accurate.4 The medical equipment market in Bangladesh is valued at BDT 200 billion and has been growing at 20 percent over the past few years.5 SQURPHARMA’s introduction of medical equipment enables the company to venture into a potential growing domestic market.

Investment Concern

SQURPHARMA has cash and cash equivalents worth around BDT 43.36 bn in FY 2020-21, which is more than double the replacement cost of its property, plant, and equipment (PPE). Instead of utilizing this huge cash balance on projects (for example, it took loan of BDT 125 mn for its Square Lifesciences Ltd. plant), a huge portion of it is invested in FDRs. This unutilized cash balance is also not returned to shareholders as dividends as well. This situation puts SQURPHARMA in contrast to other peer

3 The Business Standard. (2022). Four firms get nod to invest abroad. Retrieved from https://www.tbsnews.net/economy/four-firms-get-nod-invest-abroad-365731 4 The Business Standard. (2022). Square brings smart glucometer 'Contour Plus ONE’ to market. Retrieved from https://www.tbsnews.net/economy/corporates/square-brings-smart-glucometer-contour-plus-one-market-359797 5 Bangladesh Investment Development Authority. (2021). Healthcare & Medical Device Industries. Dhaka. Retrieved from https://bida.gov.bd/storage/app/uploads/public/616/6c3/2de/6166c32dec22c700971227.pdf

https://cpd.org.bd/wp-content/uploads/2018/08/Research-Report-2-Rahman-and-Farin-2018_WTO-Decision-on-TRIPS-and-Public-Health.pdf



https://www.ifc.org/wps/wcm/connect/2b7f0aa8-348a-48f5-8367-66176a32450b/2020-Kenya-pharmaceutical-sector-diagnostic-summary.pdf?MOD=AJPERES&CVID=nY88JCs



https://www.tbsnews.net/economy/four-firms-get-nod-invest-abroad-365731

https://www.tbsnews.net/economy/four-firms-get-nod-invest-abroad-365731

https://www.tbsnews.net/economy/corporates/square-brings-smart-glucometer-contour-plus-one-market-359797

https://www.tbsnews.net/economy/corporates/square-brings-smart-glucometer-contour-plus-one-market-359797

https://bida.gov.bd/storage/app/uploads/public/616/6c3/2de/6166c32dec22c700971227.pdf

https://bida.gov.bd/storage/app/uploads/public/616/6c3/2de/6166c32dec22c700971227.pdf




companies. RENATA, for example, had cash and cash equivalents of only BDT 1.41 bn in FY 2020-21. Yet it paid out BDT 14.50 per share cash dividends during the same year while still having capital expenditure of around BDT 4 bn. On the other hand, SQURPHARMA paid out cash dividends of only BDT 4.7 per share having capital expenditure of around BDT 3.9 bn. The comparatively lower capital expenditure, lower dividend payout, but higher cash balance implies SQURPHARMA has an idle cash problem.

Although the pharmaceutical market is oligopolistic in nature with SQURPHARMA in the leadership position, competition in the space is intensifying. SQURPHARMA’s share in the industry has fallen from 18.00% in FY 2019-20 to 17.21% in FY 2020-2021. It’s highly popular product, Seclo, which has been the most sold drug in Bangladesh for a long time, has lost its position to Sergel of Healthcare Pharmaceuticals in early 2021. In 2020, Sergel made sales of BDT 6.2 billion whereas Seclo did sales of only BDT 3.8 billion.6 Although the generic names are different for Seclo (Omeprazole) and Sergel (Esomeprazole), both drugs used for esophagitis, acid reflux, and ulcer.

Top sold drugs in Bangladesh with 2020 annual sale (in BDT bn)

*Source: IQVIA, Financial Express

93.93% of SQURPHARMA’s raw materials need to be imported. Although the company has an API plant in its Gazipur plant, the factory produces a limited number of APIs, the main raw material for pharmaceutical industry. Due to dependence on imports, SQURPHARMA is subjected to global supply chain, inflationary, and exchange rate risks. As all these risks are evident currently, SQURPHARMA may see an increase in raw material costs that will impact profit margins in the future.

Liquidity ratios of SQURPHARMA has decreased considerably after taking loans in this current fiscal year: Current ratio has decreased from 17.33 in FY 2020-21 to 7.05 in FY 2021-22 (Q2 annualized). Quick ratio has decreased from 15.05 to 6.32 while cash ratio has decreased from 13.64 to 5.89 during the same time interval. The increase in loan will also increase financial expense for the company that might affect company’s pre-tax profit and net profit margins in the coming days.

6 The Financial Express. (2021). Anti-ulcerant drugs dominate sales chart. Retrieved from https://www.thefinancialexpress.com.bd/trade/anti-ulcerant-drugs-dominate-sales-chart-1610250086

Five years’ EPS (in BDT)

*Financial data of 2021-22 has been annualized based on Q2 data.

Quarterly EPS Trend (in BDT)

Profitability Margins of SQURPHARMA

*Financial data of 2021-22 has been annualized based on Q2 data.

Concluding Remarks:

SQURPHARMA continues to expand its operations, enter new markets, as well as diversify its offerings. Although the company will face more competition and rising costs in the future, the aforementioned factors will also help the company combat future risks. Moreover, if management decides to utilize the company’s huge cash balance, it can engage in growth opportunities that will drive value for shareholders. Plus, having sales and profit that exceeds those of its competitors, SQURPHARMA will be able to maintain its leadership position for some amount of time.

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2017-18 2018-19 2019-20 2020-21 2021-22

3.59 3.68 3.823.30

4.21 4.02 3.96 4.365.16 4.64

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2019-20 2020-21 2021-22

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2017-18 2018-19 2019-20 2020-21 2021-22

Gross Profit Operating Profit Pre-tax Profit Net Profit

https://www.thefinancialexpress.com.bd/trade/anti-ulcerant-drugs-dominate-sales-chart-1610250086

https://www.thefinancialexpress.com.bd/trade/anti-ulcerant-drugs-dominate-sales-chart-1610250086




Statement of Consolidated Income

Particulars 2017-18 2018-19 2019-20 2020-21 2021-22 (Q2 Ann)

Gross Turnover 45,886,959,303 50,866,867,352 52,926,218,655 58,346,258,281 67,699,684,202

Less: Value Added Tax 6,233,127,665 6,833,233,083 7,049,769,814 7,643,229,379 9,555,208,570 Net Turnover 39,653,831,638 44,033,634,269 45,876,448,841 50,703,028,902 58,144,475,632

Cost of Goods Sold 20,089,819,913 22,091,384,351 22,536,669,960 24,800,035,555 27,745,492,744 Gross profit 19,564,011,725 21,942,249,918 23,339,778,881 25,902,993,347 30,398,982,888

Selling and Distribution Expenses 5,751,408,276 6,603,747,456 7,382,790,764 8,564,472,484 9,440,860,174

Administrative Expenses 1,031,567,251 1,195,968,389 1,227,233,831 1,216,931,589 1,205,802,036 Profit from operations 12,781,036,198 14,142,534,073 14,729,754,286 16,121,589,274 19,829,162,742

Financial Expenses 93,599 84,716 107,090 13,443 45,818 Other Non-Operating Income 1,768,094,011 2,310,360,094 3,126,430,063 3,485,127,743 3,469,985,372

PROFIT BEFORE WPPF 14,549,036,610 16,452,809,451 17,856,077,259 19,606,703,574 23,299,102,296

Allocation for WPPF 701,097,850 791,921,561 859,269,098 937,796,627 1,110,556,346 PROFIT BEFORE TAX 13,847,938,760 15,660,887,890 16,996,808,161 18,668,906,947 22,188,545,950 Provision for Income Tax 3,255,148,172 3,876,979,330 4,251,005,177 4,187,481,946 4,871,475,558

Provision for Deferred Income Tax 101,899,306 63,213,721 (21,596,852) (174,814,014) (55,380,364)

PROFIT AFTER TAX 10,490,891,282 11,720,694,839 12,767,399,836 14,656,239,015 17,372,450,756

EPS 13.08 14.27 15.06 17.99 21.75


ASSETS

Non-Current Assets: 32,831,465,294 33,734,410,538 34,435,064,244 40,375,882,875 44,542,751,923 Property, Plant and Equipment-Carrying Value 20,545,437,633 20,853,956,270 20,873,698,301 22,884,103,636 25,649,651,644

Investment - Long Term (at Cost) 940,754,391 655,408,674 2,792,000,884 3,590,200,311 4,407,024,465 Investment in Marketable Securities 2,891,208,537 3,013,439,734 2,691,892,867 4,624,331,706 4,254,054,088 Investment in Associates Companies 8,454,064,733 9,211,605,860 8,077,472,192 9,277,247,222 10,232,021,726

Current Assets: 28,441,536,241 38,411,642,036 47,384,303,113 55,076,379,705 62,059,740,179 Inventories 4,432,935,118 4,596,512,673 5,687,406,329 7,245,396,928 6,471,856,667 Accounts Receivable 1,615,544,248 1,561,818,167 1,520,300,337 1,636,136,514 2,784,606,771 Advanced, Deposits and Prepayments 2,280,668,747 2,312,201,184 2,727,928,252 2,830,807,259 977,676,481 Short Term Investment 3,131,975,363 2,937,071,066 4,884,338,757 Cash and Cash Equivalents 16,980,412,765 27,004,038,946 32,564,329,438 43,364,039,004 51,825,600,260

TOTAL ASSETS 61,273,001,535 72,146,052,574 81,819,367,357 95,452,262,580 106,602,492,102 SHAREHOLDERS' EQUITY AND LIABILITIES: Shareholders' Equity: 57,841,467,891 67,880,617,172 77,364,890,773 90,895,143,168 95,166,286,417

Share Capital 7,373,910,900 7,890,084,660 8,442,390,580 8,864,510,100 8,864,510,100 Share Premium 2,035,465,000 2,035,465,000 2,035,465,000 2,035,465,000 2,035,465,000

General Reserve 105,878,200 105,878,200 105,878,200 105,878,200 105,878,200 Revaluation Reserve (392,805,723) 1,139,626,144 1,123,688,621 Tax Holiday Reserve 1,949,557,722 2,211,743,936 2,211,743,936 Retained Earnings 46,159,482,757 55,492,799,165 64,980,297,214 78,749,448,779 83,071,746,745 Gain on Marketable Securities (Unrealized) 192,272,252 145,585,283 (35,498,105) Cumulative Translation Adjustment (939,072) (18,078,434) (285,055) Non-Controlling Interest 24,901,060 500,000 495,856

Non-Current Liabilities: 1,231,133,152 1,294,346,873 1,212,928,798 1,378,560,486 2,634,707,025 Current Liabilities: 2,200,400,492 2,971,088,529 3,241,547,786 3,178,558,926 8,801,498,660

Long Term Loans - Current Portion 21,409,635 Creditors and Other Payables 524,676,136 716,988,428 553,785,496 681,546,399 7,487,573,902 Liabilities for Other Finances 1,586,059,264 2,014,186,770 2,558,763,846 2,313,963,448 1,184,672,740

Liabilities for Expenses 89,665,092 239,913,331 128,998,444 183,049,079 107,842,383 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 61,273,001,535 72,146,052,574 81,819,367,357 95,452,262,580 106,602,492,102

Statement of Financial Information





Liquidity Ratios Current Ratio 12.93 12.93 14.62 17.33 7.05 Quick Ratio 10.91 11.38 12.86 15.05 6.32 Cash Ratio 9.14 10.08 11.55 13.64 5.89 Operating Efficiency Ratios Inventory Turnover Ratio 4.92 4.89 4.38 3.84 4.05 Receivable Turnover Ratio 20.76 27.72 29.77 32.13 26.31

Average Collection Period (Days) 17.34 12.99 12.09 11.21 13.69 Inventory Conversion Period(Days) 73.15 73.57 82.14 93.87 88.99

Operating Cycle (Days) 90.48 86.56 94.23 105.07 102.68 A/C Payable Turnover Ratio 29.36 35.58 35.47 40.15 37.74 Payables Payment Period (Days) 12.26 10.12 10.15 8.97 9.54

Cash Conversion Cycle (Days) 78.22 76.44 84.08 96.11 93.14 Total Asset Turnover 0.70 0.66 0.60 0.57 0.58 Fixed Asset Turnover (%) 1.99 2.13 2.20 2.32 2.40

Operating Profitability Ratios Gross Profit Margin (GPM) 49.34% 49.83% 50.88% 51.09% 52.28% Operating Profit Margin (OPM) 32.23% 32.12% 32.11% 31.80% 34.10%

EBITDA 37.27% 36.72% 36.40% 35.51% 38.88% Pre Tax Profit Margin 34.92% 35.57% 37.05% 36.82% 38.16%

Net Profit Margin (NPM) 29.24% 28.72% 29.11% 31.45% 33.16% Return on Total Assets (ROA) 20.38% 18.96% 17.35% 17.99% 19.09% Return on Equity (ROE) 21.69% 20.12% 18.39% 18.96% 20.73%

Leverage Ratios Total Debt to Equity 0.00% 0.00% 0.00% 0.11% 1.54% Debt to Total Assets 0.00% 0.00% 0.00% 0.11% 1.37% Coverage Ratios Times Interest Earned (TIE) 136,551 166,941 137,546 1,199,255 432,781 Valuation Ratios

Book Value Per Share 78.44 86.03 91.64 102.54 107.36 EPS (Basic) 15.72 16.03 15.82 17.99 21.75 Growth Rates

Sales Growth Rate 8.52% 10.85% 4.05% 10.24% 16.03% Gross Profit Growth Rate 7.09% 12.16% 6.37% 10.98% 17.36% Operating Profit Growth Rate 3.94% 10.65% 4.15% 9.45% 23.00%

Net Income Growth Rate 8.99% 9.07% 5.60% 19.42% 20.91% DUPONT ANALYSIS

Net Profit AT/Sales 29.24% 28.72% 29.11% 31.45% 33.16% Sales/Total Assets 69.69% 66.01% 59.59% 57.20% 57.55% ROA 20.38% 18.96% 17.35% 17.99% 19.09%

Net Profit AT/Total Assets 20.38% 18.96% 17.35% 17.99% 19.09% Total Assets/Stockholders’ Equity 106.48% 106.12% 106.00% 105.36% 108.60%

ROE 21.69% 20.12% 18.39% 18.96% 20.73% Extended DUPONT ANALYSIS Net Profit/Pretax Profit 83.72% 80.75% 78.57% 85.42% 86.90% Pretax Profit/EBIT 108.35% 110.74% 115.39% 115.80% 111.90%

EBIT/Sales 32.23% 32.12% 32.11% 31.80% 34.10% Sales/Assets 69.69% 66.01% 59.59% 57.20% 57.55% Assets/Equity 106.48% 106.12% 106.00% 105.36% 108.60%

ROE 21.69% 20.12% 18.39% 18.96% 20.73%

Key Ratios

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