12 - financial modelling
DESCRIPTION
Financial ModelingTRANSCRIPT
2015
Session 12
Security Analysis
Azfer Naseem, CFA
2015
Financial Modelling
Security Analysis Azfer Naseem, CFA3
Financial Statement Analysis Framework
Collect Input Data
Process Data
• Financial statements/other data
• Discussions with industry players
• Company site visits
• Data from previous phase
• Organized financial statements
• Financial data tables (excel sheets)
• Adjusted financial statements
• Common-size statements
• Ratios and Graphs
• Models/Forecasts
Articulate the
purpose & context
of Analysis
Phase
• Equity Analyst
Sources of Information
• Prepare a detailed financial model on
Attock Cement.
• Estimate Jun-16 Target Price
• Give a recommendation
Output
Security Analysis Azfer Naseem, CFA4
About Attock Cement
Incorporated in 1981 and commenced production in 1988.
Owned by Pharon Group, which holds 84% equity in the company.
Plant located at Hub and has 2 production lines:
Line-1: 0.75 million tons per annum (Romanian Plant)
Line-2: 1.0 million tons per annum (Chinese Plant)
Plants use coal as fuel base for kiln.
Buys electricity from KESC.
Has a 12 MW Waste heat plant.
Sells cement under the brand of Falcon Cement.
Security Analysis Azfer Naseem, CFA5
Key forecast themes
Demand Outlook
Local
Export
Margin Outlook
Selling Prices
Production Cost
Capacity additions
Efficiency Projects
Security Analysis Azfer Naseem, CFA
Forecasting revenues
Exports
Calculate historical export retention – USD/ton
Forecast in USD terms based on export market outlook
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Security Analysis Azfer Naseem, CFA
Forecasting COGS
Raw & Packaging material cost
Forecasted on a per ton basis based on historical growth trend of per ton costs
Other Cost
Forecasted on a per ton basis based on historical growth trend of per ton costs
Fuel Cost
Linked to coal price
Assume a kiln heat rate ==== 850,000 kcal per ton
Assume a coal heating value === 6,300 kcal per kg
Calculate coal requirement === 135 kg per ton
Take historical coal price
• FOB price + sea freight (USD20) + port charges and inland freight (USD10)
Pre estimates for fuel cost for last few years
Back test
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Security Analysis Azfer Naseem, CFA
Forecasting COGS
Power Cost KESC
Take an electricity requirement assumption
Take electricity price
Calculate historical power cost estimates
Back test and adjust electricity requirement assumption
Waste heat
Take waste heat capacity
Take a utilization assumption
Assume a nominal cost for waste heat
Calculate weighted average
Share of KESC in in overall electricity mix
Share of waste heat in in overall electricity mix
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Security Analysis Azfer Naseem, CFA9
Forecasting other financial statement items
Depreciation
Based on capex forecasts and fixed assets schedule
Financial charges
Based on debt repayment schedule and interest rate
Other income
As %age of cash
Other charges
As %age of operating profit
Taxation
Tax rate of 32%
Security Analysis Azfer Naseem, CFA10
Forecasting other financial statement items
Capital expenditure
Maintenance capex + expansion plans
Other assets/liabilities
%age of sales
Deferred taxation
Based on analysis of taxation information
Dividends
Based on cash flow statement and company’s dividend policy
Security Analysis Azfer Naseem, CFA
Asset schedule
Net PPE
Gross PPE less accumulated depreciation
Gross PPE
Beginning
Additions
Disposals
Ending
Accumulated Depreciation
Beginning
Additions (depreciation Expense)
Disposals
Ending
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Security Analysis Azfer Naseem, CFA
Asset Schedule
Depreciation Expense
Depreciation %
1 / useful life
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Security Analysis Azfer Naseem, CFA
Debt Schedule
Loan Size
Repayment schedule
Grace period
Installment size
Installments in a year
Interest rate
Bench mark
Spread
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