Report SPL

8/6/2019 Report SPL

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Valuation Report on .

COMPANY B ACKGROUND

Square Pharmaceuticals Limited has been a household name in

Bangladesh since 1958 when it started its operations as a partnership,getting incorporated in 1964 and finally getting listed at the stockexchange in 1995. The company has been in the leading front of innovation, and continues to introduce new and better medicines in themarket every year. Today the 97% of the demands for medicine in thedomestic market is catered to by the local pharmaceuticals companyand Square Pharmaceuticals limited has captured a significant portionof this market.

The company has been growing consistently for over the years, andtheir growth has exceeded the growth of the industry growth at times.As shown below:

Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Industry

-0.89%

27.79%

22.46%

10.18%

5.90%

8.60%

17.50%

4.08%

15.80%

6.91%

SPL9.60%

29.95%

22.70%

11.70%

15.91%

13.08%

14.30%

22.94%

9.81%

18.83%

Difference10.49%

2.16%

0.24%

1.52%

10.01%

4.48%

-3.20%

18.86%

-5.99%

11.92%

Table: Industry and Company Growth

Square Pharmaceuticals Limited (SPL) entered into collaboration with Janssen Pharmaceuticals Limited in 1975, which is a subsidiary of theworld famous Johnson & Johnson International Limited. SPL also has

achieved standardized quality certification by receiving the ISO-9001certificate in 1998. The company has been a leading exporter of pharmaceuticals in the country for a long time now and in recent yearstheir exports have been increasing in leaps and bounds. The regionswhere they export their products the most are in the Asian, MiddleEastern and African region. However, as the company has secured theUK MHRA license, they shall be able to expand their exports to theEuropean region as well.

The most important issue for most pharmaceutical companies inBangladesh at present is the TRIPS agreement. This is an intellectualproperty rights agreement which restricts unwarranted copying of products patented or copyrighted products. Most BangladeshiPharmaceuticals companies have been booming by copying medicineformulas which has been created and innovated abroad. This maybe aproblem for many of them when the LDCs will be required to follow the TRIPS agreement in 2016, and thus in order to survive, innovation,research and development are key to this industry. SquarePharmaceuticals has been investing on this, and have been

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consistently introducing newer products in the market. Thegovernment, in recent times has issued various incentives toencourage export –oriented companies to explore new markets. SPLshall definitely benefit from this given that they have already charted

out plans to enter new markets in future. The company has also been reliable source of funding for its subsidiaryand associate companies, having provided them with loans forexpansions. The subsidiary and associate companies are as follows:

• Square Spinnings Limited• Square Biotechs Limited• Square Textiles Limited• Square Fashions Limited• Square Cephalosporins

Limited

• Square MultifabricsLimited

• Square Knit FabricsLimited

• Square Hospitals Limited

SECTOR OUTLOOK

The Pharmaceuticals Industry of Bangladesh is regulated under theDrug Act of 1940 and its rules form the basis of the country's druglegislation. In 1981, there were 166 licensed pharmaceuticalmanufacturers in the country, but local production was dominated byeight multinational companies (MNCs) which manufactured about 75%of the products. In 2000, there were 210 licensed allopathic drug-manufacturing units in the country; they manufactured about 5,600brands of medicines in different dosage forms. There were, however,1,495 wholesale drug license holders and about 37,700 retail druglicense holders in Bangladesh. At present, 97% of the total demand of medicinal products is met by local production. Local companies (LCs)increased their share from 25% to 70% on total annual productionbetween 1981 and 2000.

One of the major positive impacts of Drug (Control) Ordinance is therapid development of local manufacturing capability. Almost all typesof possible dosage forms include tablets, capsules, oral and externalliquids (solutions, suspensions, emulsions), ointments, creams,injections (small volume ampoules/dry fill vials/suspensions and largevolume IV fluids), and aerosol inhalers are now produced in thecountry. In recent years, the country has achieved self-sufficiency in

large volume parenterals, some quantities of which are also exportedto other countries. Exports increased from $8.2 million in 2004 to$28.3 million in 2007 and expanded further in last two of years,growing 50% on an average. The overseas destinations have now risenfrom 37, to 72 countries during the period. Bangladesh can competewith countries like India, China, Brazil and Turkey in the internationalexport market due to its quality compliance. The development of localmanufacturing capability helped contain dependence on the import of

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pharmaceutical products (raw material and finished product) aroundpre-1982 level. The pharmaceutical market of Bangladesh is oligopolistic in nature, i.e.- the market is dominated by a select handful of firms who jointly

control a significant portion of the entire market. In this case, themarket is dominated by SPL and followed by Beximco Pharmaceuticals,ACI, Incepta Pharmaceuticals and Eskayef Pharmaceuticals Limited.

Given the high competition between firms owing to price competitionand a race to distinguish their products from those of their peers, theindustry is becoming more and more efficient. Research anddevelopment is the key in any pharmaceuticals industry in thedeveloped world, given that the companies' profits depend-to anextent- on the patents they can obtain through innovation in their field.However, this usually requires a lot of investments not to mention thelack of guarantee that the investment would be productive, if at all,

deters firms from allocating too much fund to this as this may end upaffecting their profitability adversely. But most developing countriesare still reaping this benefit as they are yet to adopt the TRIPSAgreement. So they are legally permitted to reverse engineer,manufacture and sell generic versions of on-patent pharmaceuticalproducts for domestic consumption as well as for export to other LDCs.Once they are made to adopt it in 2016, they will have to allocate morefunds to their R& D efforts so as to bring forth innovation.

The market is growing extensively, with expanding local as well asforeign demand. Thereby, the sector is very important to the overall

economy considering that it has dual contribution to the overall GDP of the country.

QuantumIndex of Industrial Production1998-2008

0

100

200

300

400

500

600

700

800

1 2 3 4 5 6 7 8 9 10 11

General Index Pharmaceutical Index

The contribution of this sector to the overall export of the countrytends to fluctuate marginal, but has accounted for an average of 1.77% to the manufacturing sector export and 1.63 % of the country'stotal export from 1998-2008. However, it is safe to assume that thefigures will increase considerably in future given that most of the

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companies are venturing into new markets. The figures are shownbelow:

Years

Total ChemicalProducts

Export

TotalManufacturing

Goods Export

Total exports

($m)

Chem as % of totalmanufacturing

exports

Chem as % of

total exports

1998 108 3901 4427 2.769 2.440

1999 74 4670 5172 1.585 1.431

2000 79 4902 5324 1.612 1.484

2001 94 5283 5752 1.779 1.634

2002 97 5983 6467 1.621 1.500

2003 67 5596 5986 1.197 1.119

2004 100 6086 6548 1.643 1.527

2005 121 7050 7603 1.716 1.591

2006 206 9753 10526 2.112 1.957

2007 215 11346 12178 1.895 1.765

2008 216 13123 14111 1.646 1.531

Avg.Contribution 1.780 1.635

Table: Export Contribution From 1998-2008

The industry's backward linkage industry is slowly expanding as well.According to the "Bangladesh Pharmaceuticals and Healthcare ReportQ3 2009" report by Research and Markets, the recent findings suggestthat the Bangladesh pharmaceutical industry is actively involved in theproduction of Active Pharmaceutical Ingredients (APIs). At present, 21different companies manufacture 41 such products locally. However,as this is insufficient to meet the growing demand from the domesticmarket, the government has approved the establishment of anAPI industrial park in Munshiganj at a cost of US$30bn. Estimates

suggest that API products worth US$750mn per annum Per annumcould be exported over the next five years. At present, Bangladeshimports 80% of its pharmaceutical raw materials from abroad, whenthe API part will go into production at least 70% of the expenditure onraw material will be saved. Besides this, the packaging industry is alsoexpanding rapidly fast in mainly three categories: manufacturing of glass and plastic bottles, cardboard and printing. The pharmaceuticalindustry is fast becoming self-sufficient in packaging and meets morethan 90 percent of the need, which was previously import-dependent.Industry people said the local packaging industry is growing at a rateof 10 percent a year. Simultaneously, pharmaceutical companies are

sourcing most primary and secondary packaging from localmanufacturers. The market size of the pharmaceutical packagingindustry stands at around Tk 500 crore a year, which is 7 percent of the pharmaceuticals' total market size, according to an estimate. Thus,due to the development of such auxiliary services the industry is fastbecoming more and more integrated and self-reliant which wouldreduce their reliance on imports, and thereby translate into lower costsand greater profits in future.

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This industry has a lot of impact on the economy in future along withbeing a source of foreign revenue for the government. Thegovernment's support for the industry would amplify their returnsfurther and make them stronger and more self-reliant.

COMPETITION AND M ARKET SHARE

In Bangladesh there are currently a total of 245 pharmaceuticalcompanies out of which 200 have operations in the country. Themarket is totally dominated by the local companies as only 5 multi-nationals currently operating in land. Square Pharmaceuticals is themarket leader in terms of the number of products manufactured andmarket share, “Neoceptin”, a product of Beximco is the market leaderin terms of brands. The top two domestic manufacturers, namelySquare and Beximco Pharmaceuticals have a cumulative market share

of over 27%, while the top five have a market share of 44.5% and thetop ten domestic manufacturers contribute about 64% of the totalpharmaceutical market of Bangladesh.

The table below depicts the market share of the major players for theyear 2008:

Source: IMS fourth quarter, 2008

The market is oligopolistic in nature and is thus dominated by highlevels of entry and exit barriers, considering the first mover advantagealready achieved by the dominating firms in the form of economies of scale. Besides this, entry into this market also requires heavy capitalexpenditure which is also translated into exit barriers, in the form of high sunk cost. Additionally, government rules pertaining to the

industry to maintain standards also acts as a form of entry barriers.Even though the products of the firms are comparable in naturebecause of the absence of patent protection, the firms work very hardto create a differentiation in the minds of the consumers, so as tocapture a greater market and ensure higher consumer loyalty. Giventhis, one of the major features of such markets is the high level of price-competition that they tend to engage in, which may converselyalso lead to price-collusions in the market as well which could lead to

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CompanyShare(%)

Square Pharmaceuticals Limited 20.06

Incepta Pharmaceuticals Limited 7.53

Beximco Pharmaceuticals Limited 7.09

The Acme Laboratories Limited 5.25

Eskayef Pharmaceuticals Limited 4.64

ACI Limited 4.52Opsonin Chemical Industries Limited 4.30

Renata Limited 4.22

Aristopharma Limited 4.18

Drug International Limited 3.39

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the formulation of cartels. In the case of this particular market, thecommon products- paracetamols, cough syrups etc are competitivelypriced, while the more specialized medicines can be priced accordingto the firm's own discretion. The nature of the market tends to ensure

that the firms are price-makers rather than takers, given that theydifferentiate based on consumer perceptions. However, they tend toface a kinked-demand curve, which means that the firms face an moreelastic demand curve if they raise there prices (thus they tend to losemore than they gain given that customers switch easily to other firm'sproducts), while if they lower prices the competitors closely follow suit,which usually leads to a price war, thus dissipating a lot of the benefitsachieved by the lower price. At present, Bangladesh 20% of the localAPI requirements, rest of the requisite imported. Even though, anumber of 21 local pharmaceutical companies are producing 41 APIsfor pharmaceutical products but most of the companies find

investment in API production unattractive grant a higher bargain powerto the supplier.

Competition in the industry : Intense

Rivalry between existing firms High

Industry Growth Rate ModerateConcentration and Balance of

Competitors ModerateDegree of Differentiation and

Switching Cost Low

Scale of Economies High

The ratio of fixed cost to variableModeratelyhigh

Excess Capacity Low

Exit Barriers HighThreat of New Entry Moderate

Economies of Scale High

First Mover Advantage High

Access to Channels of Distribution Low

Access to Performed Relationships Low

Legal Barriers Moderate

Threat of Substitute Products Very High

Relative Price and Performance Very High

Customer's willingness to switch Very HighRelative bargaining power in input and output markets :

Moderate

Bargaining power of buyers ModerateDifferentiation and Switching Cost LowImportance of Product for Cost and

Quality ModerateNumber of Buyers and amount

bought by buyers High

Bargaining power of suppliers High

Table: Porter’s five forces Analysis of the Industry

However the market scenario is tending to alter, over 50 new factoriescame up in last three years, of which about two dozens took to

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aggressive marketing. API industrial park in Munshiganj will inject newimpetus in the supply-side of the industry might lower the bargainingpower of the supplier. At 2016 when the industry will be compelled toadopt TRIPS agreement will require huge investment in R&D. At this

point the industry seems profitable enough and the trend imputes itspotential to grow.

Competitive positioning

The Pharmaceutical artifact market follows a mixture of both costleadership and diversification strategy. SPL charges similar price astheir competitors for the common off-patented products. While forspecialized patented medicines they employ diversification approach. The forte of the company is the antibiotics items, these sophisticatedhigh-quality products indict high premium. The astute strategyselected by Square is successful and sustainable. SPL just needs to

concentrate in preserving the market share.

FINANCIAL PERFORMANCE ANALYSIS

Being the sovereign, Square Pharmaceutical Ltd. holds the biggestshare of the sector. With 51 years of experience this pharmaceuticalgiant proved itself as a sincere world-class player. The companydoubled its sales turnovers from 2005 to 2009, with sustainable growthof 16%. The raise in the gross profit has helped to stack the net profitas well, though the rate is comparatively less stable. Balanced

operating activity and effective cash management kept a healthy sumto flow. In the early years for larger credit sales and instantdisbursement to the creditors hindered to realize only 75% of theoperating income. In 2009 an alteration in the credit policy helpedSquare to score 91% higher profit realization, but at the cost of lingering the debtors endowment.

Up until 2005 SPL was rising in success, and then from 2006, itsperformance faltered, as the political and economic hullabaloodisrupted the corporate sector flow. Rising food inflation, led to a drop

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in disposable income, which in turn led to a drop in health-careexpenditure in the domestic market. In the international front, the sub-prime mortgage crisis pushed the global market into recession, thuspushing the country’s export down; as a result the company was in

trough from 2006 to 2008. But smart managerial skills of SPLsomewhat protected them from the adverse effects of the globaldownturn and enabled them to survive it. 2009 was a year for thecompany in which it turned around from the distress it had been goingthrough in the past years.

The oligopolistic nature of the market gives the participants scope toaccuse larger profit margin. This is one of the reason why Square wasnot that much effected by the global turmoil, even in the state of difficulty their growth and profit was slightly hampered. Tough it stillleads the market but the market share is axed because of aggressiveapproach of the new and peer companies. So it is pressing hard to

expand its market, especially in abroad, they are now exporting to 21destinations the figure has increased by 58.28%. For substantiateproduct development and introducing new ones Square Pharma notonly employ s its own font but also uses subsidiaries at time.

LIQUIDITY 2005 2006 2007 2008 2009

Current Ratio 1.66 1.78 1.44 1.26 1.46

Liquidity Ratio 1.08 1.19 0.84 0.68 0.66

Table: Financial Performance (1)

SPL’s liquidity is in the safe zone range within the industry bench mark. Though the working capital situation is better from the previous year

but overall solvency condition is inferior considering initial ratios. In2005, the current ratio was 1.61 and this figure stood at 1.46 in 2009,having revived from 1.26 in 2008, which was the lowest of the session.Piling inventory, along with lower short term loan led to a delicateinternal liquidity conditions for the company. However, though Squarealways tends to produce over its capacity, it cannot keep pace with theaccelerating demand and so ultimately they have to utilize theirinventory to meet demands; therefore it is not a problem if theinventory towers up as long as there is demand.

In order to improve the inventory position, SPL has started to presenttheir work-in-process goods as part of their inventory from 2009.

However, as work-in-process usually constitutes of unfinished-goods,there will be no real change in inventory, rather the inventory figurewill be misrepresented to an extent. The company has proved its self-sufficiency in repaying the unsecured debt without any externalsupport since its solvency ratio is the highest of the period at 75.08%and has been in the range of 66.26%-75.08% in the period underconsideration.

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TURNOVER 2004 2005 2006 2007 2008 2009

Stock/Turnover 5.93 4.66 4.54 4.86 4.07 4.68

Asset Turnover 0.80 0.67 0.65 0.72 0.65 0.74


Total Asset Turnover of SPL is within the range of 0.75 to 0.86. Thepharmaceutical industry requires large capital investment and fromthat perspective higher value of this ratio is desirable but for the timebeing the performance is satisfactory. The company has maintainedacceptable standards by utilizing their fixed assets and investment inasset to the fullest as well as maintaining a sustainable profit marginby improving employee performance which is a rise of 7% at the rateof the growth in sales. Square has already declared their plans forexpansion it appears that the company will finance it from internalfunds. Besides this, the company seems to maintain a secrecyregarding their research and development activity, perhaps not

wanting to disclose it to their competitors. However for upgrading thetechnological process, research and training they make substantialinvestment each year.

SOLVENCY 2004 2005 2006 2007 2008 2009

Total Debt 0.28 0.42 0.45 0.43 0.51 0.33

Debt Ratio 0.22 0.30 0.31 0.30 0.34 0.25

Debt-to-Equity 0.01 0.07 0.09 0.07 0.07 0.05 Times Interest EarnedRatio 5.82 11.80 8.34 5.92 3.93 4.76


A very positive practice of Square is it always try to keep its debtportfolio as minimum as possible, especially for expansion they try to

use internal financing mostly. Debt ratios show a gradual increase upto 2008, in fact there was highest debt exposure in that year as theirexpansion came into effect. Within 2009 the company managed tolower long term debt significantly (35% lower than the previous year)by paying-off some old debt and not obtaining new ones, and alsostrictly controlling their current liabilities. The gearing ratio presentsthe same scenario too, and is below the industry average rate of 81%;in 2008 the ratio rose marginally but declined in the very next fiscal.Perhaps SPL needs to be conscious about the contingent liabilities.Regular inter-party transaction and giving the subsidiaries guarantorservice might suit costly for the company.

The company has done justice to the employed fund; the effort of maximizing the value of the new of fund and assets is noticeable,especially last year when the company made significant improvementsalthough in terms of the total investment made there was scope of improvement. Shareholders return for the last five years has beenmore or less stable around 25%, with marginal fluctuations. This shows

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the steady performance of the company and the reason why it is sopopular amongst investors.

SPL has maintained consistent profit margin throughout, although, onan average, their gross profit margin was 0.41x as they have

maintained COGS at a plain 50% level of the sales. Selling andadministrative expense was little bit volatile and so was the operatingand net profit margin. Profits are highly sensitive to sales and salesvolatility was driven by the national political and world economicturmoil. As a result the overall profit margin also fluctuated quite a bitin the last 3 years. The take-home profit was highest at 24% in 2005and by 2009 the efficient debt management pushed the profit figure to19% which is a reasonable amount for a manufacturing firm. Exportused to hold an average 2% of the total sales which turned into 3% in2009 which points to higher prospect for the company and revenue forthe country.

PROFITABILITY 2004 2005 2006 2007 2008 2009

Profit Margin (Return onSales) 0.24 0.28 0.25 0.23 0.23 0.26

Gross Profit Margin 0.40 0.41 0.42 0.43 0.41 0.42

Operating Margin 0.26 0.25 0.26 0.24 0.21 0.24

Profit Margin Ratio 0.21 0.24 0.19 0.17 0.17 0.19

Return on Assets 0.20 0.19 0.16 0.16 0.15 0.20

Return on Equity 0.21 0.23 0.18 0.18 0.16 0.19

Return on Common Equity 0.48 0.61 0.61 0.65 0.64 0.77Return on Investment(ROI) 0.25 0.27 0.24 0.23 0.22 0.25

Return on capital 0.15 0.16 0.12 0.11 0.10 0.13


In 2009, SPL has ensured a good return for its investors havingconfirmed good returns for its investment and assets. The postmortemof Return on Equity shows the trial of raising equity-holders returnwithout giving raising their financial leverage and concentrating moreon enhancing their asset utilization. There is another very goodindicator which is the improvement in ROE which has been achieved byusing the equity more efficiently rather than only through profitabilitywhich indicates that the growth in ROE is safe and sustainable. In thelast 4 years (2005-2008) the debt condition has been a bit fragile asthe company’s debt exposure was soaring up. However, in 2009 bylowering their debt concentration the company managed to lower theirfinancial risk.

SPL's stable dividend payment pattern and relatively stable capitalmarket performance has made it an investment magnet for investors. The stock is less exposed to market risk as its beta is only 0.29. Thereis a decline in the EPS, but that could not effect the P/E negatively onlybecause of the growth sustainability. They retain a significant amountof profit and ensure its best and most efficient utilization in expansion.

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A brighter prospect in future can be expected based upon the past andcurrent state of operation of SBL. Their long term plans encloseforesight and vision. While other companies are busy with grabbinglarger slice of the pie, the company is securing a silk root with a clam

and conservative approach. The current expansion plans gives aninsight about the company’s understanding of business and make usreckon a 20% growth for the next five years. The strictly followedrituals helped us to make other forecasts mainly on the historical trendwith adjustment for the expansion.

STOCK V ALUATION

The valuation models project an average price of Tk. 3,372.12 forSquare Pharma stock. This share is currently trading at Tk. 2900.75 atthe DSE, the 52 week price range is Tk.2475 – Tk. 3869 for DSE. The

futuristic Discounted Cash Flow (DCF) model bestows a value of Tk.3,120.96, the other two industry focused valuation model P/E andEBITDA depict Tk. 4,261.47 and Tk. 2,733.91 respectively. Theforecasted prices show modest fluctuation from the current marketprice especially the P/E multiple valuations give a scope of highexpectation. In general the fair value implies to buy the stock in thecurrent market price.

For the industry based valuation, the market statistics of the peerpharmaceutical companies is been used. Trial to espouse judiciousassumption is made to construct the DCF model. Being the mostcrucial driver of company’s growth forecast for sales was in the focusof attention. The sales of the company is to some extant exportoriented, but being a producer of necessary good even if the exportface any distortion it can be balanced by in land demand. The grossturnover is expected to grow by 20%, the macro and micro levelscenario, historical growth, companies’ current and future productdemand and planed expansions have supported us to show suchoptimism. There is no sudden plug in for planed increase rather hasbeen spread over smoothly. The interrelation between the accountsand their suitable projection has also been confirmed. The expansionplans declared by the company is been incorporated in the PP&E

forecast along wit the regular growth. The discount rate of thevaluation encloses the current risk-free rate of 9% with the beta of thecompany, cost of debt and equity.

The market trend shows a general upraise of Square’s price currently,instigating this with the valuation result and the prospect of thecompany gives an indication to by the stock at the current marketprice and hold for a while. As its stumpy performance is reviving withbetter performance anticipation so a better capital gain can be

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expected holding other things constant. Moreover the pharmaceuticalindustry is in a detonation lately. The valuation models and forecastassumptions are presented in the appendix. Close scrutinize of all thefigures, facts and results convinced us to recommend buying the stock

for capital gain as well as dividend yield of approximately 17%.

FORECAST ASSUMPTIONS:

GROSS TURNOVER 20% Adjusting Historical Growth Rate with FuturePlanCOST OF GOODS SOLD 50.29%Based on salesSELLING & DISTRIBUTION EXPENSES 11.30% Based on salesADMINISTRATIVE EXPENSES 3.57% Based on salesFINANCIAL EXPENSES 10.65%Based on total debt

PROVISION FOR INCOME TAX 21.00%On Net Income Before Tax

PP&E- CARRYING VALUE 20% Adjusting Historical Growth Rate with FuturePlanCAPITAL WORK-IN-PROCESS 10% % of used capacityINVESTMENT-LONG TERM (AT COST) 19.64% % of total assetsSHORT TERM LOAN 2.99% % of salesSTOCK DIVIDEND 25.00% Historical AverageCASH DIVIDEND 40 Historical Average

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Appendix: I

SQUARE PHARMACETICALS LTD.

INCOME STATEMENT

Fiscal Year Ending 31/3/2009

Values Expressed In Milion

GROSS TURNOVER

LESS:VALUE ADDED TAX

NET TURNOVER

COST OF GOODS SOLD

GROSS PROFIT

OPERATING EXPENSES:


APPENDIX

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Appendix: II

SQUARE PHARMACETICALS LTD.BALANCE SHEET


Values Expressed In Milion

ASSETSNON-CURRENT ASSETS

PP&E- CARRYING VALUE

CAPITAL WORK-IN-PROCESS

INVESTMENT-LONG TERM (AT COST)

TOTAL NON-CURRENT ASSETSCURRENT ASSETS

INVENTORIES

TRADE DEBTORS

ADVANCES, DEPOSITES & PREPAYMENTS

INVESTMENT IN MARKETABLE SECURITIES (AT

SHORT TERM LOAN


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Appendix: III


INCOME STATEMENT

F sca Year En ng 31/3/2009

GROSS TURNOVER

LESS:VALUE ADDED TAX

NET TURNOVER

COST OF GOODS SOLD

GROSS PROFIT

OPERATING EXPENSES:

SELLING & DISTRIBUTION EXPENSES

ADMINISTRATIVE EXPENSESPROFIT FROM OPERATIONS

OTHER INCOME

FINANCIAL EXPENSES

NET PROFIT BEFORE WPPF

ALLOCATION FOR WPPF

NET PROFIT BEFORE TAX

PROVISION FOR INCOME TAX


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Appendix: IV

FINANCIAL PERFORMANCE ANALYSIS

2005

LIQUIDITY

Current Ratio 1.66

Liquidity Ratio 1.08

Cash Ratio 0.21

Stock Financing Ratio 1.42

Cash Debt Coverage Ratio 0.35

SOLVENCY

Solvency Ratio 70.42

Collection Period 18.06

Creditor Days 5.66

Debt Ratio 0.30



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A p p e n d ix : IV

2005

MARKET

Earnings per share 290.71

Payout ratio 0.26

Retention Ratio 0.74

Dividend cover 3.78

P/E ratio 12.96Dividend yield 0.02



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Appe ndix: V


DISCOUNTED CASHFLOW ANALYSIS

F sca Year En ng 31/3/2010

Values Expressed In M ilion

Valuation Assumptions

Valuation Date 31Discount Rate

Terminal Value

EBITDA Exit Multiple

Terminal Growth Rate

Tax Rate 2


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Appendix: V

SQUARE PHARMACETICA

DISCOUNTED CASHFLO


VALUATION BASED ON E

ENTERPRISE VALUEEBITDARESULTING ENTERP


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Report SPL

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