Company Background

MM BDT 2009A 2010A 9M 2011A

Sales 15,843.6 22,098.0 22,497.7

Cost of goods sold (14,084.0) (19,883.0) (20,457.3)

Gross Profit 1,759.6 2,215.0 2,040.4

General Administration (76.6) (149.9) (167.7)

Selling and Distribution (134.1) (230.3) (227.0)

WPPF (30.2) (56.9) (64.8)

Operating Profit 1,336.5 1,777.9 1,581.0

Financial Income 62.3 2.0 37.9

Share Issue Expense (1.4) Financial Cost (823.0) (706.8) (638.8)

PBT 574.4 1,073.1 980.1

Tax 0.0 (6.1) (135.5)

Consolidated NPAT 574.4 1,067.0 844.5

EBITDA 1,518.7 1,777.9 1,581.0

Basic EPS 1.76 4.90 2.59

52-week Price Range (BDT) 83.70 - 155.40

Current Price BDT (Apr 16, 2012) 110.50

9-month Fair Value BDT (Dec 2012) NA

Price Return -

Dividend Yield -

Total Return -

Number of Shares MM* 325.5

Market Cap BDT MM 35,967.8

Free Float 49%

Average Daily Turnover Value BDT MM (2012) 56.9

Share Data

Balance Sheet

Stock Chart

Income Statement

Key Ratios

BSRM Steel DSE: BSRMSTEEL; Bloomberg: BSRM:BD

Sector: Construction Materials (Steel)

BRAC EPL Research [research@bracepl.com]

Investment Positives

BSRM Steels Ltd is the only listed steel manufacturing company of Bangladesh.

Currently the company has lion share of 60-grade iron-bar market with 550K

metric tones of installed capacity after completing a 46% capacity expansion in

2010.The company also successfully took over 95% of BISCO (backward

integration project of the same sponsor group) by issuing one stock against

each stock of the target.

Risks and Challenges

BSRMSTEEL is currently trading at trailing P/E multiple of 36.8x based on

2011’s actual consolidated earnings.

The company recently increased its production capacity to 550K metric tons

(in the last quarter of 2010) from 375K metric tons.

Demand for iron-bar is expected to grow at 10-12% annually till 2013. Large

Infrastructure projects will demand a lot of quality steel-bar within the next 3-5

years.

BSRMSTEEL has been successful in establishing its brand-value in the high-

end market segment. They are able to charge premium price for their products.

Unlike its competitors, BSRMSTEEL has controlled raw material sources.

Recent News

The industry is suffering badly because of lack of adequate gas-supply. Most

of the producers cannot operate at their optimum level of production due to

weak national gas production scenario.

We believe BSRMSTEEL is unable to utilize its full capacity due to the

ongoing energy crisis in the country. Getting adequate supply of gas is critical

for attaining optimal level of production.

Margins eroded since 2009 - EBITDA margin for BSRMSTEEL was 9.59% in

2019 which dropped to 8.11% in 2011 (in nine months). Margin may remain

lower than expected, if national gas production not does not pick up.

The company also suffered due to high raw material prices in the international

market. Adverse movement of raw material (iron) prices may further impact the

margin.

The company is highly leveraged. Around 80% of operating assets are

financed through debt that have floating rate (six month T-bill rate + 6%).

Interest rate is currently very high in the banking system which will lead to high

interest burden.

The Board of Directors recommended cash dividend at 15% for the year

ended December 31, 2011.

The Company also reported consolidated net profit after tax of BDT 977.3

million, consolidated EPS of BDT 2.98, NAV per share of BDT 9.86 for the year

ended December 31, 2011.

MM BDT 2009A 2010A 9M 2011A

PPE (depreciation adjusted) 3,950.2 5,800.6 5,842.3

Capital Work in Progress 1.7 10.2 646.2

Unallocated Revenue Expense 180.1 0.0 0.0

Inventories 3,303.1 4,349.5 5,238.6

Accounts Receivable 1,655.4 3,339.5 6,074.0

Advances and Deposits 2,242.0 1,313.8 1,624.4

Cash and Bank Balances 189.1 187.2 445.3

Total Asset: 11,521.5 15,000.8 19,870.7

Long Term Debt 2,639.2 2,317.0 2,455.1

Short Term Liabilities 7,348.0 9,096.2 12,025.9

Advance against Sales 348.1 312.0 238.7

LTD- Current Portion 415.3 707.3 845.0

Provision for Income Tax 0.0 3.3 138.9

WPPF 30.2 56.9 65.1

Other Liabilities 162.3 209.5 707.6

Total Liability: 10,943.1 12,702.2 16,476.2

Share Capital 1,450.0 2,712.5 3,255.0

Accumulated loss (1,325.0) (474.3) 71.8

Non Controlling Interest 453.4 60.4 67.8

Total Equity 578.4 2,298.7 3,394.5

BVPS (BDT) 79.45 55.3 61.05

2009A 2010A 9M 2011A

Gross Margin 11.1% 11.2% 10.2%

Operating Margin 8.4% 8.0% 7.0%

Net Income Margin 3.6% 4.8% 3.8%

Revenue Growth 188.9% 39.5% NA

Gross Profit Growth NA 41.0% NA

Net Profit Growth NA 85.8% -8.4%

ROE 39.6% 39.3% NA

ROA 5.0% 7.1% NA

Net Debt (BDT mm) 10,138.1 11,832.6 13,525.5

Debt to Equity 1785.5% 522.9% 411.6% .0

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* Net Profit growth for full year 2011; the company disclosed the earnings figure only

for 2011