Macroeconomic Performance and Fundamental Analysis of Bangladesh Textile Industry
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The document provides an analysis of the macroeconomic performance and fundamental ratios of Apex Spinning & Knitting Mills Limited in Bangladesh. Some key points: 1) Bangladesh has seen upward trends in GDP, GNP and declining unemployment over recent years, while inflation, currency depreciation and budget deficits are also trending upward. 2) The textile industry contributes significantly to GDP and exports but is facing challenges from competitors like China and Vietnam. 3) Apex Spinning has seen increasing revenues, capital expenditures and cost efficiencies over 5 years. Most financial ratios show improving trends except for return on equity. 4) Analysis of Apex's ratios show inventory turnover and assets turnover improving, while
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Macroeconomic Performance and Fundamental Analysis of Bangladesh Textile Industry
- 1. FUNDAMENTAL ANALYSIS Rizwana Haque Midury-171011047 FatemaTuz Zohora -171011150 Jahid Khan Rahat -171011211 Mahmuda Hossain Ishita -171011007 Sahiba Rojone-171011154
- 3. GDP Express In % âGDP is following upward trendââ ⢠Interest rate decrease ⢠Export amount increase ⢠SLR & CRR decrease S o u r c e : W o r l d B a n k D a t a 8 t h S e p t e m b e r , 2 0 2 0 ⢠Government can spend more money ⢠Number of investor increase ⢠Money circulation acceleration Reason behind GDP Growth Result of GDP growth 8.92% -0.92% 20.85% 23.10% 38.60% -5.00% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% 2015 2016 2017 2018 2019 REAL GDP GROWTH RATE
- 4. GNP Express in Billion ($) âGNP is constantly following upward trend ââ ⢠Export more product to overseas ⢠Domesticity firms produce efficiently ⢠Flexible fiscal policy S o u r c e : B a n g l a d e s h B a n k ⢠Country production capacity increase ⢠Import dependency is decline ⢠Discoursing foreign investor ⢠Create debt trap ⢠Foreign dependency Reason behind GNP Growth Result of creating employment 0 50 100 150 200 250 300 350 2015 2016 2017 2018 2019 Billion($) Year GNP
- 5. CPI Express in Price Change Index âCPI is constantly following upward trend ââ ⢠Increase production cost ⢠Higher inflation ⢠Increasing interest rate S o u r c e : B a n g l a d e s h B u r e a u o f S t a t i s t i c s ⢠Product cost rise ⢠Fixed income decrease Reason behind CPI Growth Result of CPI growth 219.31 233.29 247.17 246.55 261.72 190 200 210 220 230 240 250 260 270 2015 2016 2017 2018 2019 Axis Title AxisTitle CPI
- 6. 84.9 84.5 83.9 83.73 82.7 80.59 78.7 78.4 74 76 78 80 82 84 86 DEC-19 JUN-19 DEC-18 JUN-18 DEC-17 JUN-17 DEC-16 JUN-16 BDT YEAR Exchange Rate USD to Taka ââTaka value is deprecating over the period of timeââ ⢠Interest rate increase ⢠Political instability ⢠Risk aversion among investors. S o u r c e : D a i l y I n d u s t r y J u l y 8 , 2 0 2 0 ⢠Row material import at high price ⢠International product cost high price ⢠Loss domestic Currency value Reason behind deprecation Result of deprecation
- 7. Unemployment Rate Express In Percentages (%) âUnemployment rate is fluctuating but following downward trend ââ ⢠Establishment of new industry ⢠Low interest rate ⢠Flexible monetary policy S o u r c e : W o r l d B a n k D a t a t h ⢠Economy is booming position ⢠Inflation increase ⢠Countyâs outputs is increase Reason behind Unemployment rate is decline Result of creating employment 4.38% 4.35% 4.37% 4.28% 4.19% 4.05% 4.10% 4.15% 4.20% 4.25% 4.30% 4.35% 4.40% 2015 2016 2017 2018 2019 Year Unemployment rate
- 8. Real Interest Rate Express In Percentages (%) âReal Interest rate is fluctuatingââ ⢠Adjustment of inflation rate ⢠Conservative monetary policy S o u r c e : W o r l d B a n k D a t a t h ⢠Investor loss interest of investment ⢠Fluctuate disposable income ⢠Lender charge high interest rate when it is fluctuating Reason behind real interest flatulate Result of Real interest rate fluctuate 5.51% 3.45% 3.07% 3.84% 4.88% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 2015 2016 2017 2018 2019 Year Real Interest Rate
- 9. Budget Deficit Express in Million ($) âBudget deficits is constantly following upward trend ââ ⢠Higher inflation ⢠Hardening interest rate ⢠Borrowing form commercial banks not inflationary ⢠Browning from central bank is inflationary S o u r c e : B a n g l a d e s h B u r e a u o f S t a t i s t i c s ( B B S ) Reason behind Budget Deficit -7726 -7403 -8186 -12497 -17307 -20000 -18000 -16000 -14000 -12000 -10000 -8000 -6000 -4000 -2000 0 2015 2016 2017 2018 2019 Million($) Axis Title Budget Deficit Result of creating employment ⢠Discoursing foreign investor ⢠Create debt trap ⢠Foreign dependency
- 10. Balance of Payment Express in Million ($) âBalance of payment is constantly following downward trend ââ ⢠More import goods, service and capital than export. ⢠Government borrowing from others country is high. ⢠Cyclic fluctuation of exchange and interest rate S o u r c e : B a n g l a d e s h B u r e a u o f S t a t i s t i c s ( B B S ) Reason behind Budget Deficit Result of creating employment ⢠In short-term economic growth ⢠In long-run to pay debt for consumption $(14,460.50) $(10,306.58) $(13,064.34) $(23,685.13) $(18,495.59) 2015 2016 2017 2018 2019 BALANCE OF PAYMENT
- 12. Industry Life Cycle Consolidation stage ⢠Factories are emerging ⢠More stable market ⢠Growing faster than other industries Start Up Consolidation Maturity Decline
- 13. Industry Classification Cyclicals Sales and profit expand or contract along with the business cycle Stalwarts Slow Growers Fast Growers Cyclicals Asset Plays Turnarounds
- 14. âContribution to GDP shows declining trendâ ⢠Lack of product diversification ⢠Sluggish private investment ⢠Lack of new investment ⢠Price cut by the global brands and retailers 14.17% 13.06% 12.69% 11.27% 11.17% 2013-14 2014-15 2015-16 2016-17 2017-18 Contribution to GDP in % Source: BGMEA Reason behind Decline
- 15. Export relations 84.21% of contribution to total export by RMG industry in 2018-19 fiscal year 25.49 28.09 28.14 30.61 34.13 31.2 32.25 34.65 36.66 40.53 81.68 82.01 81.23 83.49 84.21 0 10 20 30 40 50 60 70 80 90 2014-15 2015-16 2016-17 2017-18 2018-2019 Total Rmg Export Total Export % of contribution to total export Source: BGMEA
- 16. âTHE PERFORMANCE OFTEXTILE INDUSTRY IS LAGGING BEHIND IN RELATION TO OVERALL ECONOMIC GROWTHâ
- 18. Market Share Opportunity to penetrate Chinaâs share of market if the key challenges are solved in BD there is possibility to grab a bigger portion 41 6.4 3.5 1.2 1.2 46 0 10 20 30 40 50 China Bangladesh India Pakistan Srilanka Others Source: BGMEA
- 19. âTEXTILE INDUSTRY IS A PROFITABLE SECTORTO INVEST IN OUR COUNTRY BECAUSE OF LOW COST LABOR AND NO SUBSTITUTES ARE AVAILABLEâ
- 20. COMPETITIVE RIVALARY Huge Competition from Vietnam and China who have better infrastructure, Technology and capital THREATS OF NEW ENTRANTS: High In 2018-19 FY, 61 new factories came into this industry ENTRANTS Threat of substitutes: Low As Textile cannot be replaced by other products. BARGAINING POWER OF BUYERS: HIGH ďˇ High demand among the buyers ďˇ Numbers of factories increasing the bargain power BUYERS BARGAINING POWER OF SUPPLIERS: LOW ďˇ High availability of cotton ďˇ Low cost of labor ďˇ Supplier from China, India do not have monopolistic control ďˇ Availability of substitute product- Wool, Polyester SUPPLIERS Porterâs 5 forces
- 21. COMPANY ANALYSIS
- 22. Revenue Composition Over the past 5 years, COGS is decreasing in relation to Sales Revenue. Which means they have increasing their capability in managing their cost efficiently. $2,989,845,894.00 $4,319,334,564.00 $3,205,556,644.00 $3,633,663,481.00 $3,537,789,856.00 $2,746,705,811.00 $3,980,715,107.00 $2,950,838,207.00 $3,344,121,021.00 $3,251,510,653.00 2015 2016 2017 2018 2019 Sales Revenue Cost of goods sold
- 23. Capital Expenditure Capital expenditure is growing over the past 5 years which indicates that the company is investing more and growing by capturing new market. $947,607,070.00 $1,031,036,480.00 $1,092,762,090.00 $1,140,407,990.00 $1,163,078,086.00 2015 2016 2017 2018 2019
- 24. STRONG BACKWARD LINKAGE ⢠Govt. Policy and bank facilitates for raw material purchase ⢠Around 1430 textile mills in operation ⢠85% of knitted fabrics demand met locally (TextileToday)
- 25. ACCORDING TO RESULTS DERIVED, COMPANY WILL GROW HIGHER THAN THE INDUSTRY GROWTH BECAUSE OF THEIR COST EFFICIENCY AND HIGHER INVESTMENTS
- 27. APEX SPINNING & KNITTING MILLS LIMITED
- 28. Major Clients Major Strengths ⢠5,995+ Total Employee. ⢠52+ Total Lines. ⢠3.0 M+ Total Capacity(/month) ⢠85%+ Mobile Payment.
- 29. âAcid Test ratio is now following upward trend ââ From 2015 to 2017 the ratio is fluctuated but from 2017 the ratio increase. This ratio is not in better position for this company. ⢠The company's current assets are highly dependent on inventory. Reason 0.925 0.974 0.910 0.911 0.940 0.870 0.880 0.890 0.900 0.910 0.920 0.930 0.940 0.950 0.960 0.970 0.980 2015 2016 2017 2018 2019 Acid Test Ratio
- 30. âInventory Turnover Ratio is now following downward trend ââ Every time this ratio is fluctuated. In 2019 is decrease which is better for this company. ⢠In 2019 and 2018 ratio is 16.61 and 17.04 respectively that indicates selling inventory quickly. Reason 14.41 20.61 15.16 17.04 16.61 0.00 5.00 10.00 15.00 20.00 25.00 2015 2016 2017 2018 2019 Inventory Turnover Ratio
- 31. âDays Sales Outstanding Ratio is now following downward trend ââ In 2015 and 2018, the ratio is high but other years itâs comparatively better. ⢠Company take more time to collect money from accounts receivables which means the company may have not sufficient amount of working capital to easily pay its debt. Reason 72 36 43 59 52 0 10 20 30 40 50 60 70 80 2015 2016 2017 2018 2019 Days Sales Outstandings
- 32. âTotal Assets Turnover is now following upward trend ââ The ratio is much better. In 2019, the ratio increase from 2018 and 2017. ⢠The ratio is better so it can be said that Apex Spinning & Knitting Mills Ltd. is managing its all asset effectively to generate sales. Reason 4.35 5.91 4.84 4.97 5.11 - 1.00 2.00 3.00 4.00 5.00 6.00 7.00 2015 2016 2017 2018 2019 Total Assets Turnover Ratio
- 33. âDebt Ratio is now following downward trend ââ This ratio is fluctuated over the year. In 2019 is decrease which is better for this company. ⢠The ratio indicates that 66.56% of the companyâs assets are financed by the creditors in 2019 that means in 2019 creditors investing decreased. Reason 69.45% 70.30% 66.55% 68.54% 66.56% 64.00% 65.00% 66.00% 67.00% 68.00% 69.00% 70.00% 71.00% 2015 2016 2017 2018 2019 Debt Ratio
- 34. âReturn on Assets is now following upward trend ââ The ratio of Apex Spinning & Knitting Mills Ltd is higher in 2019 compared to previous years of the company. ⢠In 2019, Apex Spinning & Knitting Mills Ltd Company is using its total asset effectively to generate net income. Reason 3.38% 3.94% 3.50% 3.29% 3.56% 2.80% 3.00% 3.20% 3.40% 3.60% 3.80% 4.00% 2015 2016 2017 2018 2019 Return on Assets (ROA)
- 35. âReturn on Equity is now following downward trend ââ The ROE ratio of this company is not good and in 2017 and 2019 it decreased from the previous year. ⢠Apex doesnât use shareholder investments properly to generate profit. Reason 5.52% 6.85% 5.34% 5.42% 5.35% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 2015 2016 2017 2018 2019 Return on Equity (ROE)
- 36. âDividend Pay-out Ratio is now following downward trend ââ In 2015, 2017 2018 and 2019, Apex paid more dividends from theirs earnings to their shareholders. ⢠Those years the companyâs earnings are more to pay dividends to shareholders. Reason 72.40% 64.33% 72.46% 69.94% 68.26% 60.00% 62.00% 64.00% 66.00% 68.00% 70.00% 72.00% 74.00% 2015 2016 2017 2018 2019 Dividend Payout Ratio
- 37. âEarning Per Share is now following upward trend ââ The companies EPS is little better. In 2016 and 2019, they make better money for each of the shares of their stocks. ⢠Investors pay more for a company's shares, because they think the company has higher profits relative to its share price. Thatâs why the ratio this little better. Reason 2.76 3.42 2.76 2.86 2.93 0 0.5 1 1.5 2 2.5 3 3.5 4 2015 2016 2017 2018 2019 Earning per Share (EPS)
- 38. âPrice-to-Earning Ratio is now following downward trend ââ In 2018, Apex Spinning & Knitting Mills Ltd. had a higher P/E which is 60.61 because that year stock's price of this company was high relative to earnings and possibly overvalued but in 2019 is decrease. ⢠The stock price of that company is better because the company earn high. Reason 25.04 27.12 40.55 60.61 47.88 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 2015 2016 2017 2018 2019 Price-to-Earning Ratio (P/E)
- 39. âGross Profit Margin Ratio is following upward trend ââ This ratio increase over the years. ⢠In 2019, Apex Spinning & Knitting Mills Ltd Company was selling less and making a better Gross Profit. Reason 8.13% 7.84% 7.95% 7.97% 8.09% 7.65% 7.70% 7.75% 7.80% 7.85% 7.90% 7.95% 8.00% 8.05% 8.10% 8.15% 8.20% 2015 2016 2017 2018 2019 Gross Prfit Margin Ratio
- 40. âNet Profit Margin Ratio is now following upward trend ââ Every time this ratio is fluctuated. In 2019 is increase which is better for this company. ⢠In 2016 and 2018 Net Profit percentage fall down because Apex could not control their operating expenses correctly. Reason 7.76% 6.66% 7.23% 6.61% 6.96% 0.60% 0.65% 0.70% 0.75% 0.80% 2015 2016 2017 2018 2019 Net Profit Margin Ratio
- 41. âOperating Margin Ratio is now following downward trend ââ This ratio decrease over the years. ⢠Apex Spinning & Knitting Mills Ltd. is not making much profit after paying all the operating expenses in 2019. Reason 1.81% 1.46% 1.35% 1.47% 0.88% 0.00% 0.05% 0.10% 0.15% 0.20% 2015 2016 2017 2018 2019 Operating Margin Ratio
- 42. VALUATION
- 43. RISK FREE RATE= 4.75% Risk Free Rate= 4.75% Stock Beta= 1.13 Market Risk Premium= 10.52% CAPM= Risk Free Rate+( Stock Beta Ă Market Risk Premium) = 4.75%+(1.13Ă 10.52%) =18.53%
- 44. . Year 2015 2016 2017 2018 2019 Dividend Payout Ratio 72.40% 64.33% 72.46% 69.94% 68.26% 0.00724 0.006433 0.007246 0.006994 0.006826 Year 2015 2016 2017 2018 2019 Return on Equity (ROE) 5.52% 6.85% 5.34% 5.42% 5.35% 0.000552 0.000685 0.000534 0.000542 0.000535 Average Dividend Payout Ratio = 0.006948 Average ROE = 0.0005696 Sustainable growth rate = Average ROE Ă (1- Average Dividend Payout Ratio) = 0.0005696 Ă (1- 0.006948) =0.06%
- 45. Value Per Share 32 BDT 9.824339 265.690491 46.462317 13.530757 50.214856 0 50 100 150 200 250 300 2015 2016 2017 2018 2019 Millions Year FCFE
- 47. âMARKET PRICE OF SHARE IS 130.7TK AND THE VALUE PER SHARE IS 32TKâ RECOMMENDATION THE SHARE IS OVERVALUED SO SHORT POSITION RECOMMENDED
- 48. THANKYOU!