Aftab Automobiles Ltd assembles Toyota and Hino vehicles in Bangladesh. It has extensive R&D and IT departments. In 2011, its profit margin was 30.02% and return on equity was 22.54%. A DuPont analysis shows profit margin and asset turnover contributed to ROE. The company's weighted average cost of capital is 15.53%, calculated using a risk-free rate of 7.25%, beta of 1.38, and costs of equity and debt.

3. SL
NO.
NAME ID
1 Tasfia Tanjim Snigdha 16-029
2 Bijoy Nondini Roy 16-073
3 Maha Nashita 16-137
4 Taslima Tahrim 16-183
5 Samina Akter Sumi 16-252
6 Deboshri Tripura 16-254
Group List

4. Maha Nashita
16-137
You are With…….

5. Company Profile: Aftab Automobiles Ltd.
• Aftab Automobiles Ltd was incorporated in Bangladesh in 1967 as a Private
Limited Company.
• In 1981 the company registered itself as a Public Limited Company which is one
of the largest automobile assembling plants in the private sectors. The company
is, a sister concern of NAVANA Group mainly a vehicle assembling and small
parts manufacturing company.
• The company has been successfully assembling TOYOTA & HINO vehicles for
Bangladesh market since 1982, recently lunched HINO -Mini bus. This company
has gone through an extensive BMRE and as a result of that Paints and Battery
units were established.
• It has a great IT and R&D department. R&D department related to parts design,
shape size and its proper function or any difficulty then again check and rectify.
They started this department in full fledged research and development work with
assistance of experience research experts and Engineers.

6. Automobile industry sector in bangladesh
The automotive sector that uses various parts and components in Bangladesh
comprises of both imported and locally assembled vehicles. Bangladesh does not
have automobile industry worth the name except the single government owned
agency i.e. Progati Industries Limited involved in assembly of CKD/SKD automobiles.
Over the last two decades, particularly since 1985, the use of various types of
vehicles has shown a definite increased trend
Industry analysis of aftab automobile
Rivalry among
existing firms High rivalry
Lack of
differentiatio
n

7. Threat of new
entrants
Threat of new
entrants in very
low in the
automobile
industry
In order to cmpete
in this industry the
manufacturer must
gain economies of
scale
Threat of
subtitute
products
Bargaining
power of
buyers
Bargaining power of buyers
is moderately high.the
buyers being consumers
purchase almost of the
industries output
The buyers have low switching
cost. The reasons why the
power is not completely high
is that the buyers are not
large and few in number
Bargaining
power of
suppliers
The bargaining power of suppliers is very low in this industry
because there are so many suppliers in this industry that the
manufacturers can switch to anotner suppliers easily.

8. Strategic Analysis
Strategic
analysis
differentiation
Cost
leadership
• Cost leadership is a strategy used by
business to create a low cost
operation.Cost leadership
• Differatiation is a specific kind of
strategy that focuses on a target
market in which competitors already
offer similar product or service.
differentiation

9. Strategic Analysis
Aftab automobile has a great IT and R & D
department related to parts design, shape , size
and its proper function that enables it to gain
competitive advantage through cost leadership.
Aftab automobile maintains its product
differentiation by ensuring proper service to the
customers and brand loyalty.

10. Taslima Tahrim
16-183
You are With…….

11. 2007 2008 2009 2010 2011
Current
assets
1580535260 1797116898 2001267812 2724339339 4443899122
Current
liabilities
1319609938 1498169223 1506436474 539520383 1561742454
Cerrent
ratio
1.197729128 1.19954199 1.32847806
5
5.04955776 2.84547500
8
Ratio analysis
Current ratio
0
1
2
3
4
5
6
2006 2008 2010 2012
current ratio
The current ratio is a measure of short-term liquidity. It is calculated by
current assets divide by current liabilities. In 2007 current ratio was 1.20
that means the company has TK.1.20 in current assets for every TK.1 in
current liabilities.
The current ratio was quite stable from the year 2007 to 2009. It increases in
2010 and then again declines in 2011 which indicates to the decrease in the
current assets which is considered as a threat to the company.

12. 2007 2008 2009 2010 2011
CA 1580535260 1797116898 2001267812 2724339339 4443899122
stock &
stores
535116561 628143058 737517274 551866626 1111291786
CL 1319609938 1498169223 1506436474 539520383 1561742454
quick ratio 0.792217964 0.78026822 0.838900651 4.02667403 2.133903274
Ratio analysis
0
1
2
3
4
5
2006 2007 2008 2009 2010 2011 2012
quick ratio
Quick ratio tells us more about the liquidity as it does not
consider the inventory.
The quick ratio for 2007 was 0.79 which is lower than the
current ratio.
The quick ratio decreased in 2011 compared to 2010 which
means the increase in the amount of inventory. Relatively large
inventories are often a sign on short term trouble.
Quick ratio

13. 2007 2008 2009 2010 2011
cash 25327278 30572170 27881100 710961363 794796426
CL 1319609938 1498169223 1506436474 539520383 1561742454
cash ratio 0.019193003 0.02040635 0.018507983 1.31776553 0.50891645
Ratio analysis
Cash ratio
-0.5
0
0.5
1
1.5
2006 2008 2010 2012
cash ratio
Cash ratio in 2007 was 0.02 which means the company had
TK.0.02 cash reserve against every TK.1 of current liability.
The decrease in cash ratio in 2011 indicated to the decrease in
cash amount of the company
.

14. Samina Akter Sumi
16-252
You are With…….

15. 2007 2008 2009 2010 2011
total assets 2022458758 2238319794 2438883896 3674808151 56708957
73
total equity 585748820 621050571 905519493 3118187768 40838428
80
total debt
ratio
0.710377867 0.72253716 0.628715621 0.15146924 0.279859
295
equity
multiplier
3.452774788 3.6040862 2.693353279 1.17850765 1.388617
52
Ratio analysis
Total debt ratio
Debt-equity ratio
2007 2008 2009 2010 2011
total debt 1436709938 1615269223 1533364403 556620383 1587052894
total equity 585748820 621050571 905519493 3118187768 4083842880
D/E 2.452774788 2.60086585 1.693353279 0.17850765 0.38861752
The total debt ratio is
calculated by the formula:
(total assets- total equity)/
total assets
In 2007 the total debt ratio
was 0.71 which indicates the
company had TK.0.71 in
debt for every TK.1 in asset.
Debt-equity ratio indicates
the capital structure of the
company. The higher the
value, the higher the debt
financing relative to the
equity
.

16. 2007 2008 2009 2010 2011
net income 30471044 57423511 316616691 693786401 920329562
sales 1305809438 1851769411 2124637706 2334640308 3066223102
profit margin 0.023334985 0.03101008 0.149021497 0.29717057 0.30015088
Ratio analysis
Profit margin
The increase in profit margin
indicates the increase in the net
income of the company. In 2007
profit margin was 2.33% and in 2011
profit margin was 30.02% which is
definitely a good performance of the
company.
.
Return On Assets
2007 2008 2009 2010 2011
net income 30471044 57423511 316616691 693786401 920329562
total assets 2022458758 2238319794 2438883896 3674808151 5670895773
ROA 0.015066336 0.02565474 0.129820321 0.18879527 0.16228998
0
0.05
0.1
0.15
0.2
2006 2008 2010 2012
ROA
ROA
Return On Assets: Return On Assets is a measure of profit per dollar of
assets. The ROA of 2007 was 1.51% which increased to 16.23% in 2011.
Return on assets keeps increasing till 2010 and then again fall in 2011
which decreases the net profit of the company in 2011.

17. Ratio analysis
2007 2008 2009 2010 2011
net income 30471044 57423511 316616691 693786401 920329562
total equity 585748820 621050571 905519493 3118187768 4083842880
ROE 0.052020666 0.09246189 0.349651988 0.22249667 0.22535871
0
0.1
0.2
0.3
0.4
2006 2008 2010 2012
ROE
ROE
For every taka in equity the company generated
TK.0.05 in profit in 2007. In 2011 it was 22.54%.
Return on equity decreases in 2011 compared to the
previous year for the every change in equity
Return on Equity

18. Ratio analysis
2007 2008 2009 2010 2011
net income 30471044 57423511 316616691 693786401 920329562
no. of shares
outstanding
1686960 1855656 2319570 35368330 68380302
EPS 18.06269503 30.9451272 136.4980108 19.6160351 13.45898651
0
20
40
60
80
100
120
140
160
2006 2007 2008 2009 2010 2011 2012
EPS
EPS
Earnings per share
Earnings per share ratio are used to find out the return that the
shareholder’s earn from their shares. After charging depreciation and
after payment of tax the remaining amount will be distributed by the
shareholders .the decrease in earning per share means the decrease in the
net profit of the company.

19. Bijoy Nondini Roy
16-073
You are With…….

20. 2007 2008 2009 2010 2011
sales 1305809438 1851769411 2124637706 2334640308 3066223102
total assets 2022458758 2238319794 2438883896 3674808151 5670895773
total assets
turnover
0.645654421 0.82730333 0.87115164 0.63530944 0.540694667
Ratio analysis
0
0.2
0.4
0.6
0.8
1
2006 2008 2010 2012
total assets turnover ratio
total assets
turnover ratio
Total assets turnover indicates the generated sales for every unit in
assets. In 2007 the generated sales was TK.0.64 for every TK.1 in assets.
Total assets turnover decreased in 2011 which indicates to the decrease
in sales.

21. 2007 2008 2009 2010 2011
EPS 18.06269503 30.9451272 136.4980108 19.6160351 13.45898651
price per
share
305.50 352.25 2,048.75 451.60 141.90
P/E ratio 16.91331219 11.3830522 15.00937624 23.0219817 10.54314156
Ratio analysis
0
5
10
15
20
25
2006 2008 2010 2012
P/E ratio
P/E ratio
The P/E ratio measures how much the investors are willing to pay per
taka of current earnings. Higher PEs are often taken to mean that the
company has significant prospects for future growth. The ration is
decreased compared to the previous years.

22. 2007 2008 2009 2010 2011
Net Profit/Sales 2.33% 3.10% 14.90% 29.72% 30.02%
Sales/Total Assets 64.57% 82.73% 87.12% 63.53% 54.07%
ROA 1.51% 2.57% 12.98% 18.88% 16.23%
Total Assets/Stockhldrs.
Equity (equity multiplier)
345.28% 360.41% 269.34% 117.85% 138.86%
ROE (ROA*equity
multiplier)
5.20% 9.25% 34.97% 22.25% 22.54%
Ratio analysis
Du pont analysis
ROE can be partitioned into profit margin, total asset turnover and the equity multiplier. By du
pont analysis we can measure:
•Operating efficiency (as measured by profit margin)
•Asset use efficiency (as measured by total asset turnover)
•Financial leverage (as measured by the equity multiplier
•Weakness in either Operating or Asset use efficiency will slow up in a diminished return on
assets which will lower the ROE. On the other hand, increasing amount of debt leveraged up the
ROE. In 2011 profit margin was 30.02% which was higher than the previous years. Total asset
turnover was 16.23%. The equity multiplier was 138.86%. So the ROE was 22.54%.

23. Notes to the financial statements
• In the year 2010 & 2011, the company had no investments in shares as profit from investment in
shares was 0. Here we are assuming that, in the upcoming years, the company will not invest in
shares, hence, profit from investment in shares will be 0.
• The PPE figures is presented here net off depreciation. The calculation of growth rate of PPE, the
growth rates in 2010 and 2011 give extreme values. So we considered only growth rates in 2008
and 2009 to find out the average.
• We assumed deferred expense to be 0 in the upcoming years.
• In the last three years there was no dividend payment by the company. The information regarding
dividend is not available also in the annual reports. So simply we assumed that there will be no
dividend payment in the upcoming years.
• The long term loan is interest free sponsored loan and is carried forward since 1982.
• Preference shares were redeemed in 2009 and were not issued further.
• Dividends payable for pref. shares will be 0 since pref. shares are redeemed.

24. Tasfia Tanjim Snigdha
16-029
You are With…….

25. WACC calculation
• We assumed a terminal growth rate of 2%
• Our calculated market return is 25.25%. We used day wise DGEN index from 2007-
11 and then averaged it to calculate the market return.
• To calculate returns of the stock we used monthly closing price of Aftab
automobiles ltd. From 2007-11.
• Our calculated beta (β) is 1.38 found by the formula:
• Risk free rate (Rf) is 28 days t-bill rate, 7.25% (2011).
• Cost of equity( Ke) is 32.15% and found by the formula:
[Rf+ β(Rm- Rf)]
• Cost of debt is 0 because the company obtained long term interest free loan from
it’s sponsors.
• WACC for the company is 15.53%

26. Terminal Growth rate 0.02
Market return 0.252574692
beta 1.383306879
Risk free rate 0.0725
Ke 0.321598561
Kd 0
Equity (No of share * market price) 808600831.5
Debt 865370654
Total 1673971486
WACC 0.155346053
WACC calculation

27. Free cash flow calculation & Valuation
2011E2012 E2013 E2014 E2015 E2016
Net Profit
before tax 1071479098 589927624 705389015 824271115 925999483 966486520
Tax 151149536 144548099 172839238 201968543 226894723 236815133
Change in
net working
capital -50068328 -4967584 67454670 83941566 104458099 129989168
FCF 970397890 450347109 465095106 538361005 594646661 599682218
WACC 0.15534
PV 389794130 348431652 349089945 333741831 2195408403
PV of
perpetuity 4519347617

28. Free cash flow calculation & Valuation
Enterprise Value 3616465960
Debt 865370654
Cash 794796426
Equity Value 3545891732
No of Share 5698385
Equity Value per share 622.2625766
Procedure:
• To find the free cash flow first of all tax is deducted from the net profit before tax. Then
change in net working capital is deducted. Now we need to discount the free cash flows at
WACC to get the present values. Here WACC is 15.53%. When we added the PVs we get the
enterprise value. Enterprise value contains both the debt and equity values. To reach to the
equity value we need to deduct the book value of debt and add the cash reserves. Finally we
divide the equity value by the number of shares outstanding to get the equity value per share.
Our calculated equity value per share is TK.622.26 at the end of 2011. Market price was
144.40 at 01-01-2012. So the security was undervalued. It was an attractive investment
opportunity to the investors to invest in the shares.

29. Any Queries?

30. Thank You