Team Medallion holds 66% of the tobacco market in Bangladesh and generates most of its revenue from local cigarette sales and tobacco exports. It focuses on the top 3 market segments which have higher prices and profit margins. While it has a strong market position currently, regulations are expected to get stricter due to health concerns. Domestic sales may plateau so the company is expanding export capacity to drive future growth. Efficiency gains and price increases can help offset rising costs from inflation. The valuation ranges from 605-661 BDT per share based on dividend discount and DCF models.

1. Team Medallion

2. British American Tobacco Bangladesh Company Limited (BATBC)
Founded in 1911, now the tobacco company
with the highest market share of 66%
Generates revenue from local cigarette sales,
and exports of cigarettes and tobacco leaf
Operates in all segments, but focuses more on
the top 3 segments
High paid-up capital despite only 3.05% of the
company being owned by individuals
S W
O T
• High market share
• Reputed brand value
• Strong corporate governance
• Highly efficient productions
• Export growth in both finished
goods & leaf
• Withdrawal of SD on export
• Shutting down of ‘Marlboro’
• Negative perception towards the
core product
• Highly taxed industry
• Weak presence in low segment
• Anti-tobacco policies across the
world & increasing tax
• Growing popularity of non-
combustible tobacco products

3. Tobacco Market in Bangladesh
BAT holds 66% of the market, JTI holds 21% and the
rest is held by the rest of the companies
The key 4 external stakeholders are consumers,
partners, government, and suppliers
The local market has hit a plateau in recent years,
but there are endless opportunities in the export-
based market
There is higher level of competition in the lower
segment, but BAT has a monopoly over the higher
segments
• Tobacco industry is the highest revenue driver of the country
• 90% of company’s revenues go to taxes
• The price is controlled by NBR through slabs. After every election, changes in fiscal policies change
the price and tax levied on tobacco
• Inflation has increased significantly in recent times, impacting the supply chain & raw materials
• There is an elastic demand, especially towards the high segment of cigarettes
• The pricing of cigarettes changes frequently due to changing tax policies
• There is generally a negative perception towards tobacco products in the country, especially
towards female consumers.
• Despite illegal to smoke in public areas, it is socially acceptable to smoke in public gatherings
• The company is increasing tech usage to increase efficiency in operations & management
• The company has recently used AI to improve its distribution and marketing channels

4. Tobacco Market in Bangladesh
Market Drivers:
• Export opportunities
• Efficient supply chain
• Increased pricing
• Decreasing consumption of ‘Bidi’
Market Concerns:
• Impact of Covid-19
• Ever-changing tax policies
• Low consumer loyalty in low tiers
• Increasing alternatives to cigarettes
Very High
High
Moderate
Low
Very Low
Threat of
Substitutes
Threat of New
Entrants
Bargaining Power
of Suppliers
Bargaining Power
of Buyers
Competitive Rivalry

5. Considerations & Assumptions
Regulations & Declining
Markets
Covid-19 & Plateau in
Domestic Sales
Capacity Expansion &
Export Opportunities
Elasticity of & Monopoly
in High-Segments
Production &
Operational Efficiency
Tax Structure &
Implications

6. Consideration 1: Regulations & Declining Markets
Alternatives to Cigarettes
Control by Government in Tobacco Industry
The government will have considerable
influence on price and regulations will get
stricter
Market growth rate in the domestic market
will be in single digits and profits have to be
driven by price
Key Assumptions

7. Consideration 2: Covid-19 & Plateau in Domestic Sales
26435
30040
35338
39098
43046
50027
53734
49326
50151
55637
0
10000
20000
30000
40000
50000
60000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Domestic Sales of Sticks (in mil)
Impact of Covid-19
• Disrupted supply chains & increased inflation
• Increased cost of raw materials import
• Hindered sales growth rates
• Increased operational expenses
Other Factors to Consider
• Increasing popularity of non-combustible tobacco
products and other stimulators
• High competition in the lower segments
Disrupted supply chains will impact the COGS
in the initial years
The impact will reduce with increased efficiency
and adjusted inflations after 2023
Domestic sales will stay low in the initial
years and follow the moving average of the
last 5 years
Key Assumptions

8. Consideration 3: Capacity Expansion & Export Opportunities
Date of
Announcement
Investment
Approval
Amount
Investment Objective
28.07.2021
3,202
mil BDT
Cater upcoming export opportunities
and create contingency capacity
17.02.2021
1,925
mil BDT
Increase the manufacturing capacity
in Savar Factory to enhance the
upcoming export opportunities
Price Sensitive Information Regarding Expansion
Price, Cost & Duties Comparison between BD & AUS
• Profit per stick in Australia is more than 20x that of
Bangladesh
• Cost of production is higher in Australia than retail price
in Bangladesh
Profitability in export sales will be higher due
to low COGS & no added SD
The company will retain its dividend payout of
recent years due to high growth & sufficient
capacity, will retake expansion after 7-8 years
Capacity & Export sales will pick up from
2023-24 after completion of the new projects
for expanded and contingency capacity
Key Assumptions

9. Consideration 4: Elasticity of & Monopoly in High-Segments
Elasticity & Monopoly in High Segment
• Philip Morris announced suspension of production and
distribution of ‘Marlboro’
• B&H maintained volume growth after 17% price hike in
2019
• BAT introduced ‘Royals’ in the low segment recently
• The market share of ‘Bidis’ have come down to 10%
from 30%
Market Segmentation & Volume Contribution
The rising middle-class population will drive the
increased sales of the high segment, this will in
turn increase operational efficiency due to
economies of scale
Sales in the high segment will sustain the
domestic gross turnover and future gross
turnover will be driven by price
Key Assumptions

10. Consideration 5: Production & Operational Efficiency
58%
58%
56%
54%
53%
55%
52%
50%
53%
51%
46%
40%
31%
29%
29%
30%
28%
24%
30%
25%
10%
30%
50%
70%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
COGS as a % of Net Turnover OpEx as a & of Gross Profit
Decreasing COGS & Operational Costs
COGS & OPEX will come down by 1% after
three years
Both a/c receivable and a/c payable situation will
improve following the trend of recent years
COGS & OPEX will remain stable in the initial
years due to increased raw material costs
Key Assumptions
0
10
20
30
40
50
2011 2012 2013 2014 2015 2016 2017 2018 2019
Receivable Turnover Ratio
0
2
4
6
2011 2012 2013 2014 2015 2016 2017 2018 2019
A/C Payable Turnover Ratio

11. Consideration 6: Tax Structure & Implications
SD & Pricing Structure by NBR (2011-20)
VAT* HDSC*
Export
Duty
Corporate
Tax
Surcharge
Minimum
Turnover
Tax
15% 1% 0% 45% 2.5% 1%
Effective Tax Rate
Pricing of products of all segments will
change along with the SD structure.
The effective tax rate will be uniform throughout
the next 10 years.
All segments will initially have a uniform SD
of 65% and then follow a linear pattern after
a significant growth in 2024 after election.
Key Assumptions

12. Financial Statements: Income Statement
Particular Assumption & Driver
Capacity • Will Plateau in Initial Years (0-2% Growth)
• Will Increase Significantly after Project Completion
(~15%)
• Will Increase Gradually From that Point (4-6.5%)
Volume • Domestic Sales Will Increase Gradually (up to 2.5%)
• Export Sales Will Depend on Capacity & Grow
Significantly (by 20x in 8 years)
Pricing • Will Follow the Changes in SD
Sales • Driven by Volume & Pricing Growth
SD • Straight 65% on All Segments for 2 Years
• Following Linear Regression after Election Year
COGS & OPEX
• Moving Average of Previous 5 Years (Decrease by
.5% on average)
• Lesser by 1% in Subsequent Years
WPFF • 5% of PBT
Effective Tax • 46.5% of PBT after WPFF

13. Financial Statements: Balance Sheet
Particular Assumption & Driver
CAPEX &
Depreciation
• Sales revenue is the key driver
• Both will be calculated as a % of sales to simplify the
model
• Capital asset turnover ratio is used for capital asset
forecasting (PPE)
A/C Receivable
• A/C receivable will reduce gradually due to
operational efficiency
• The lowest collection period in the next 10 years will
be equal to the lowest of the last 5 years
Prepaid
Expenses
• Prepaid expenses will be driven by SD and payment
to suppliers
A/C Payable • The average growth rate of a/c payable days is an
estimate for a/c payable
Dividend
Payout
• Dividend payout is going to be at least 50% as the
rate has averaged at around 50% in recent years
• The company is at a good cash position and will not
require additional retained earnings for capacity
expansion

14. Valuation: Dividend Discount Model
1.13
0.71
0.61 0.59
0.46 0.44 0.46
0.36 0.32
-
0.20
0.40
0.60
0.80
1.00
1.20
2011 2012 2013 2014 2015 2016 2017 2018 2019
Dividend Payout Ratio
Dividend per Share in 2021: 325%
WACC: 8.91%
Growth Rate: 4%
661.3 BDT
Expected Value per Share
Dividend Discount Model
No. of shares 540,000,000
Growth rate 4.00%
Dividend per Share in 2021 325%
WACC 8.91%
Expected Value per Share 661.34
CAPM
Risk-free Rate 6.71%
Market Return 10.00%
Beta 0.67
WACC 8.91%
Assumptions
• The market is assumed to give 10% returns, higher from
8.82% (avg of the last 5 years)
• Perpetual growth rate of dividends is assumed to be 4%
due to waning tobacco market

15. Valuation: Discounted Cash Flow
Discounting Factor (WACC): 8.91%
Perpetual Growth Rate: 4%
Enterprise Value: 326,690 mil BDT
605.0 BDT
Expected Value per Share

16. Valuation: Relative Using Forward P/E
Company Similarities to BATBC
UNILEVERCL • Industry: Food & Allied
• Nature: Multi-National Organization
MARICO • Nature: Multi-National Organization
• Other: Recently started exporting and expanding its capacity
BERGERPBL • Nature: Multi-National Organization
• Other: Recently started exporting
OLYMPIC • Industry: Food & Allied
• Other: Exports products
GP • Nature: Multi-National Organization
• Market Cap: 339,822 mil BDT
• Tax Structure: 40% Corporate Tax
Name of Company Annualized EPS
Market
Price
Forward P/E Weightage
UNILEVERCL 42.80 2,802.70 65.48 10%
MARICO 125.46 2,298.00 18.32 15%
BERGERPBL 51.32 1,781.00 34.70 15%
OLYMPIC 8.24 173.00 21.00 30%
GP 25.64 355.20 13.85 30%
Average 24.96
Valuation of BATBC
Annualized EPS of BATBC 31.92
Market Price of BATBC 654.80
Forward P/E of BATBC 20.51
Considerations:
Industry, Nature of Organization, Exporting &
Capacity Expansion, Market Cap, Tax Structure
796.6 BDT
Expected Value per Share

17. Ratio Analysis
34%
Operating Profit Margin
46%
Gross Profit Margin
16%
Net Profit Margin
40.16%
33.88%
33.91%
25.83%
32.02%
26.73%
26.98%
29.93%
25.66%
26.29%
26.65%
29.13%
27.81%
28.79%
30.45%
0%
10%
20%
30%
40%
50%
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Return on Equity
0.095
0.132
0.175
0
0
0.04
0
0
0
0
0.05
0
0
0.06
0
0
0.05
0.1
0.15
0.2
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Debt to Equity Ratio
2.121
1.729
1.469
1.667
1.527
1.301
1.373
1.462
1.363
1.392
1.434
1.552
1.484
1.528
1.575
0
0.5
1
1.5
2
2.5
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Inventory Turnover

18. Risk Factors
Regulatory Risk
Factors
Tax regulations are
unpredictable. Tax burdens may
increase due to higher imposed
SD. Price slabs and segments
may change as well, impacting
demand.
Market Index &
Technical Factors
Stock market is unpredictable.
Sudden upward or downward
momentum due to other factors
might impact the company’s
price. E,g, the stock market crash
impacted prices for a long time.
Currency Risk
Factors
The current inflation rates may
last longer than expected and
impact businesses through
higher costing of raw materials.
Fiscal and monetary policies
might be impacted as well.
Uncertainties of the
Pandemic
Covid-19 may change the
demand of tobacco products.
COGS, OpEx and turnover ratios
might be impacted in
unexpected ways too if the
pandemic persists for long.

19. Sensitivity Analysis
Variables Used:
• Growth in Dividend
• Dividend per Share in 2021
• Payables Payment Period
• Receivable Collection Period
• Tax Rate
76.31%
Certainty Level of higher valuation than 688
Entire range is from 638.5 to 798.7
Base case is 687.6
After 10,000 trials, the std. error of the mean is 0.2

20. Scenario Analysis
951.8 BDT
45.4%
Best Case Scenario
687.6 BDT
5.05%
Base Case Scenario
563.8 BDT
-13.87%
Worst Case Scenario
WACC TP Gain
Best Case 7% 800.6 22.31%
Base Case 9% 687.6 5.05%
Worst Case 11% 563.8 -13.87%
DCF Valuation Sensitivity Analysis

21. Recommendation & Conclusion
661.3 BDT
Dividend Discount Model
605.0 BDT
Discounted Cash Flow
796.6 BDT
Relative Using Forward P/E
687.6 BDT
Weighted Average
Recommendation: HOLD
Current Market Price: 654.6 BDT
Target Market Price: 687.6 BDT
Upside Potential: 5.05%

22. Thank you