1) The document provides an investment analysis on BSRM Steels Limited, a Bangladeshi steel manufacturer. It recommends buying the stock with a 1-year target price of BDT 92.69, representing a 55% capital gain from the current price of BDT 59.80. 2) Valuation is determined using the FCFF, P/E multiple, and DDM models, with 50%, 30%, and 20% weight respectively. Key growth drivers include expanding production capacity and opening new factories in Bangladesh and abroad. 3) BSRM is a leading steel producer in Bangladesh and expects continued growth in demand driven by large infrastructure projects and economic expansion. However, the stock currently trades at a discount to

1. Company fundamentals
Market Cap (BDT mn) 22,369.17
Market Weight 0.70%
Free-float (Public + Institution +
Foreign) 29.40%
No. of Shares Outstanding 375,952,500
Paid-up Capital (BDT mn) 3759.53
Current Price (BDT) 59.8
52-Week Price Range (BDT) 54.00-79.10
Sector Forward P/E 19.2
Figure 1: Company Fundamentals
Model Name
Price
(BDT) Weight
Weighted
Price
FCFF 89.69 50% 44.84
DDM 112.73 20% 22.50
P/E Multiple 84.33 30% 25.30
Total 100%
Target Price 92.69
Market Price (21
April 2019) 59.80
Comment
Undervalued
by 55.00%
Figure 2: Valuation Summary
Date: 23rd
April 2019 Recommendation: BUY Sector: Engineering
Current Price (21st
April ’19): BDT 59.80 (USD 0.71) Target price: BDT 92.69 (USD 1.10) DSE: BSRMSTEELS
Exchange rate: BDT 84.36/USD Capital Gain: 55% Bloomberg: BSRM:BD
Investment Summary
BSRM Steels Limited mainly engaged in the production and supply of “Xtreme 500W” (the only EMF
(Elongation at Maximum Force) tested and Fatigue ductile rod in Bangladesh) deformed bars of
reinforced steel. Xtreme500W also demonstrated superior yield strength and ductility compared to the
traditional Grade 60 rebar. This reduced the quantity of steel consumed in any building by 15%. The
main purpose of the Company is to manufacture M.S. products by setting up rolling and re-rolling mills
and marketing the same. In 2017 the Company launched ‘BSRM Maxima’ which is the first Rebar of the
country designed specifically for the mega projects. The new Grade 80 will be more economical as it will
require 20% less steel in construction. The Company is supplying specialized steel to Padma
Multipurpose Bridge, Roopur Nuclear Power Plant, Mass Rapid Transit Project (Rail), Metro Rail, Rampal
1320MW Power Plant, First Dhaka Elevated Express Way, Payra 1320 MW Thermal Power Plant Project.
Moreover, people are more quality and safety conscious. Resultantly, demand for quality steel like BSRM
product is rising. The production efficiency of the mill is very impressive during the period of July 2017
to June 2018. BSRM Steels Limited again produced more than its installed capacity. (Figure 3)
Highlights and Business Description:
We have issued a buy recommendation with a 1-year target price of BDT 92.69; representing a capital
gain of 55% from its April 21st
2019 closing price of BDT 59.80. To get this price, we allocated 50% weight
on FCFF model, 30% on P/E multiple and 20% on DDM model. (Figure 2). Our recommendations are
based on the following key catalysts:
• Bangladesh Steels is going to increase their production capacity with setting up new factories
in Mirsharai Economic Zone. According to the proposals, it was learnt that the BSRM group has
submitted two separate investment proposals for establishing iron plant and steel mill shop. They are
going to invest $59.45 million and sought some 100 acres of land in Mirsharai economic zone’s sector-
4 for iron plant and $180 million for another steel mill factory over 40 acres of land (Steel makers
contemplating fresh investment, 2018).
• BSRM is set to open a Sh6.5 billion ($65 million) factory in Kenya. Bangladesh Steel Re-Rolling
Mills Ltd (BSRM) announced the local venture to be known as BMS Steel Limited. The investment
partners have operations in Kenya and other countries in Africa. BMS Steel Limited will set up a
manufacturing facility with total investment of about $65 million to produce 0.40 million metric tons
BMS bars and sections per year. The new entrant is expected to take the battle for local production and
sale of steel products to local players’ doorsteps. (Bangladeshi steel maker, 2018).

2. Figure 3: Capacity, Production and Sales of BSRM Steels
Figure 4: Price Volume Chart of BSRM Steels
Key Financials 2019E 2020E 2021E 2022E 2023E
Revenue
Growth 12.07% 12.07% 12.07% 12.07% 12.07%
EBITDA Margin 9.38% 9.47% 9.55% 9.63% 9.70%
Net Profit
Margin 4.96% 5.01% 5.06% 5.11% 5.14%
ROE 20.03% 18.83% 17.87% 17.09% 16.44%
EPS 8.63 9.78 11.06 12.51 14.12
Figure: 5 Key Financials
Particulars Jun-18 Jun-17 Jun-16 Dec-15 Dec-14
Installed
capacity
(M.Ton) 700,000 700,000 700,000 700,000 60,000
Production
(M.Ton) 727,034 681,061 362,254 602,832 623,918
Capacity
Utilization (%) 103.86% 97.29% 103.50% 99.50% 104.00%
Sales (M.ton) 710,995 692,504 373,747 604,513 679,803
• BSRM is set to open a Sh6.5 billion ($65 million) factory in Kenya. Bangladesh
Steel Re-Rolling Mills Ltd (BSRM) announced the local venture to be known as BMS Steel
Limited. The investment partners have operations in Kenya and other countries in Africa.
BMS Steel Limited will set up a manufacturing facility with total investment of about $65
million to produce 0.40 million metric tons BMS bars and sections per year. The new
entrant is expected to take the battle for local production and sale of steel products to
local players’ doorsteps. (Bangladeshi steel maker, 2018).
• BSRM Group is setting up a coal based 150 MW merchant power plant by
investing BDT 1.0 billion, which is likely to commence operation by 2019. The plant will
benefit the Company by providing smooth power supply at reduced cost.
• The Company is supplying specialized reinforcing steel for construction of Padma
Multi-purpose Bridge and Rooppur Nuclear Power plant and new Kanchpur Meghna
Gumti bridges.
• In 2016-17, the Company rolled out new grade reinforcing steel conforming to
the US standard ASTM 706 Grade 80 which will be more economical as it will require 20%
less steel in construction along with higher elongation than the older Grade 60.
 From the above 1 year price volume chart we can get an insight of the fluctuation
of price and trading volume of the stock over the last year. BSRM Steels stock price
comparatively fluctuated in small range over the last year on average the price was
around 70. The 3 years price volume chart shows that the stock price has significantly
decline over the last years. In 2016 the stock price was more than 100 and now it’s
around 60. Moreover it also shows that the volume of trading has also decreased over
the years. The BSRM Steels share price maintained stable price across the range of 80-60
BDT over the year. Since, he BSRM Steels has an below average industry P/E ratio so it is
an undervalued share, which means it can be highly profitable to invest in this share
during the normal periods and gain high profit by selling of during/after the dividend is
announced. (Figure 4).
• BSRM Group is the pioneer and leading the steel market from the front in the
branded steel products with a market share of 27%.
1.63%
3.09%
1.24%
2.97%
1.67% 1.64% 1.62% 1.59% 1.56% 1.54%
0.00%
1.00%
2.00%
3.00%
4.00%
2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E
Dividend Yield

3. Figure 6: Year-wise Macro-economic factors and BSRM Steels growth
Figure 7: Year-wise steel industry factors growth and BSRM steels CAGR
-20.00%
0.00%
20.00%
40.00%
60.00%
2011 2012 2013 2014 2015 2016 2017 2018
Year-wise Growth
GDP Growth GDP from Contruction
Per capita steel consumption BD Population
Real Estate BSRM Steels
-50.00%
0.00%
50.00%
100.00%
150.00%
2011 2012 2013 2014 2015 2016 2017 2018
Year-wise Growth
GDP Growth GDP from Contruction
Real Estate Per capita steel consumption
Import of iron Scrap'000MT BSRM Steels
Industry overview & Competitive Positioning
Macroeconomics
Construction sector and infrastructure growth of the country:
The construction sector is playing an increasingly strong role in the economy amid
continued urbanization and an array of large infrastructure projects undertaken by the
government. It is one of the 15 major sectors that contribute to the gross domestic product
(GDP).The sector posted 9.92 percent growth in 2017-18, up from 8.77 percent in the
previous fiscal year, according to the state-run Bangladesh Bureau of Statistics (BBS). The
sector's share to the GDP increased to 7.50 percent in the last fiscal year, which was 7.36
percent in 2016-17. The value of the economic activities in the sector was Tk 73,595 crore in
the last fiscal year. The mega projects taken by the government will boost up the growth of
this sector even higher. (Figure 6 and 7)
Stable economic growth and mega projects of the government:
Bangladesh's economy has grown 8.13 per cent this fiscal year, the highest in its history,
Finance Minister AHM Mustafa Kamal said while releasing a provisional estimate. (GDP
growth 8.13%, breaks previous records, 2019)Bangladesh is likely to be the biggest mover in
the global gross domestic product rankings in 2030, becoming the 26th largest economy in
the world from 42nd now, according to the latest report of HSBC Global Research. HSBC's
long-term growth model projections showed that the real GDP growth of Bangladesh would
be 7.1 percent per year up to 2030, the highest among the 75 countries included in the report.
The country is projected to grow 7.3 percent from 2018 to 2023, 7.0 percent from 2023 to
2028, and 7.2 percent from 2028 to 2033. Bangladesh will be a $700 billion economy in 2030
from $300 billion now, according to the report. (Bangladesh to be 26th largest economy,
2018). (Figure 4).
Population growth, urbanization and stable unemployment rate:
In addition to favorable demographics, rapid growth in urbanization will certainly
contribute the steel industry to grow further. Bangladesh has a market of over 160 million
people with a population growth of 1.04% (Source: CIA Factbook, 2017). The country’s
urban population is growing faster than the growth of the total population which is
favorable for the industry which is eventually causing potential rise in living standard and
income level of the people. This will certainly help to propel the steel industry by generating
more revenue through increasing sales volume. The population growth remained constant
at 1.21% and the unemployment rate was around 4.20% which seems positive for a country
with such large population. The literacy rate and male-to-female ratio also followed
constant patterns.
8

4. Figure 9: Key players in Steel Industry
Figure 10: Imports of Steel industry
Figure 11: Import of Iron Scrap
Steel industry overview
Market players
There are around 400 steel mills in Bangladesh with a total production capacity of around 8 Million MT.
Currently major steel producers Abul Khair and BSRM plan on significantly raising their crude steel
production. KSRM, GPH, Anwar, Rani, and SSRM are also expanding. According to a 2016 report by EBL,
Abul Khair, BSRM, and KSRM account for more than 90% of total capacity in manufacturing billet, and
more than 50% of the country’s annual demand. (Figure 9)
Market Fundamentals
The demand for steel in Bangladesh is mainly driven by infrastructure projects in commercial, housing,
and public sector. The public sector can be further broken down to implementation of the government’s
annual development plans and infrastructure projects. It’s estimated that the sector turns over around
$3.6bn every year. In 2016, government projects amounted for almost 40% of total steel consumption.
Bangladesh is heavily reliant on imports of semi-finished and finished steel products as well as flat
products while being strategically positioned next to the top two steel producers in the world, China and
India. The majority of imports are scraps, flat products, and semi-finished and finished steel products
making up a total of 6.992 Million MT or over 93% of all imports. Given the nature of steel businesses as
heavy manufacturing, cost of production for goods sold can be as great as 80-90% of revenue. The
business mainly relies on importing billet, the main raw material required for production. Although the
local market is capable of meeting over 90% of demand for billets, a considerable amount of imports are
still required due to the majority of production is used as a backward linkage for producer’s own re-
rolling mills. (Figure 10 and 11)
The emerging market
The global steel industry is going through a slowdown; however there are a few countries which have
performed extremely well and Bangladesh is one of them. The steel sector in Bangladesh has recorded a
15 per cent growth in 2015 riding on infrastructure projects both housing and public utilities. The
country is one of Asia’s most emerging steel markets and has a growing need for raw materials and
steelmaking technologies. The growth trend will continue for the next 20 years to 25 years and the steel
demand will also increase in line with development activities of the government and the booming
housing sector in both urban and rural areas. The ongoing major projects like 'Padma Bridge', 'Dhaka-
Chittagong Access Control Highway' and the upcoming major projects like 'Dhaka Elevated Expressway'
and the 'Deep Sea Port' would be requiring huge quantity of quality construction materials. Historical
data shows that consumption of steel has been increasing. The industry grew from producing a merge
47,000 MT in 1971 to 4.0 million Mt in 2016.The production of this sector expected to double about 8.0
million Mt on 2022 by the industrialists. (Steel industry review, 2018). Per capita steel consumption in
Bangladesh is now 45 kilograms (kg). The country's per capita steel consumption is projected to increase
to 73 kg by 2022. (Mega projects lift demands for steel, 2018). Iron Scrap is a major raw material for
steel units based in Bangladesh. Only a small amount of required small materials are available from local
source and the country needs to import significant volume of iron scrap materials from abroad. The
import of iron scrap has increased significantly over the last few years. Increasing trend of the importing
indicates future growth of the industry. (Figure 11)

5. Figure 12: FCFF Valuation
Figure 13: P/E Multiple Valuation
Figure 14: DDM Model
FCFF
Long-term FCF growth rate 7.50%
Weighted average cost of
capital (WACC) 12.45%%
Enterprise value 53898469903
Cash 1019379483
Debt 28645869540
Equity value 26271979846
No of shares 375952500
Intrinsic value 89.69
Market price 21/04/2019 59.8
Undervalued by 49.98%
P/E Multiple
Industry PE 16.18
BSRM Steels PE 14.21
BSRM EPS 5.21
Intrinsic value 84.33
Price on 21/4/2019 59.80
Undervalued by 41.02%
Dividend Discount Model (DDM)
Average PE 18.92
Dividend payout ratio 41.33%
Growth 13.16%
WACC 12.45%
Intrinsic value 112.4
Market price 59.8
Comment Undervalued
Valuation: For the valuation we have use three different models name FCFF model, Dividend Discount
Model and Market Multiplier model.
FREE CASH FLOW TO FIRM (FCFF): FCFF model has been chosen for BSRM Steel’s valuation because, in the
past years, the company have maintained consistent growth in free cash flow. According to our analysis,
free cash flow is expected to increase in the upcoming years as well. FCFF reflects the overall
fundamentals of a company. Hence FCFF was found to be much relevant model to determine the stock
value of BSRM steels Ltd. For this model, we have first calculated the pro forma financial statements for
the next five years (2019-2023). Based on the future growth we calculated the FCFFs. For the next five
years the sales growth is 12.07% and that has been reflected in the FCFF as well. For the second phase, we
have assumed a constant terminal growth rate for the rest of years till liquidation of the company. We
fixed terminal growth as 7.5%. We assume that the growth rate will be closer to our GDP growth from the
next five years. Therefore, we fixed a terminal rate which is very close to our gdp growth. Based on the
growth rate we calculated the present value of the future cash flows and then we deducted net debt from
the enterprise value to calculate the equity value. Furthermore, dividing the equity value by no of shares
outstanding we calculated the intrinsic value per share. We have found the current market price of the
company is less than the intrinsic value hence the company is undervalued. Our expected terminal growth
rate is 7.5%. To determine this rate, we analyzed the growth potential of the industry and BSRM Steels
Ltd. As the company still has a lot of scope to grow and its growth is aligned with the overall development
of the country, we expect 7.5% terminal growth rate for the company. With the continuous development
of the country there will rise in the construction sector in the country. Moreover, the population of
Bangladesh is on the rise. There will be growth in the housing and construction sector in the future.
Moreover the country has a constant GDP growth rate above 6%. Therefore, we assume that growth rate
will be close to the GDP growth rate of the country. (Figure 12)
Relative valuation (P/E Multiple): We have also done the valuation by using P/E multiple. We have
considered seven company’s stocks in our valuation model. Then we calculated the average price to
earnings ratio of the industry which is 16.18. The PE of BSRM steels Ltd is lower than industry average.
Multiplying the company’s EPS with the Industry average PE we calculated the intrinsic value of 69.88 per
share for BSRM Steels Ltd. The current market price per share of 59.8 indicates the company is now
undervalued. (Figure 13)
Dividend Discount Model: As the company has declared dividend over the last 5 years we used DDM
method for the valuation of the company. In the valuation process we first identified the dividend ratio in
each of previous five years. We the calculated the average dividend payout ratio over the last 5 years. Also
we considered the geometric EPS growth of the company. We found that the geometric EPS growth exceeds
the WACC. Therefore, instead of using constant growth rate model we followed multistage dividend growth
for next five years. And to find out the terminal value we used last five years PE ratio of the company. After
calculating we found the intrinsic value per share is 112.4 which is much higher than the current market
price of the company. Therefore, the company is now undervalued. (Figure 14)

6. Figure 15: WACC Calculations
Sensitivity Analysis
Intrinsic
value
Change in WACC
89.69 10.45% 11.45% 12.45% 13.45% 14.45% 15.45%
ChangeinGrowthRate
5.50% 99.47 70.14 49.35 33.65 21.54 11.87
6.50% 137.19 94.40 66.13 45.80 30.69 18.97
7.50% 200.48 130.95 89.69 62.04 42.47 27.84
8.50% 328.68 192.27 125.20 84.84 58.22 39.27
9.50% 726.78 316.49 184.82 119.18 80.33 54.55
Figure 16: Sensitivity analysis
Required Rate of Return (Equity)
Risk-Free Rate 4.95%
Beta 1.210
Market Return 7.17%
Equity risk premium 10.96%
CAPM 18.21%
Required Rate of Return (Debt)
Risk free rate 6.44%
Average credit spread 4.15%
Tax rate 25.00%
Required Rate of Return 7.94%
WACC
Name Value Weight Re and Rd
Equity 22218792750.00 44.58% 18.33%
Net Debt 27626490057.00 55.42% 7.80%
Total 49845282807.00 100%
WACC 12.49%
Valuation summary: Combining all the three models we calculated the intrinsic value of per
share of BSRM Steels Ltd. Based on their relevance in the valuation we fixed different weight
for different valuation models. To our valuation FCFF model gets heights priority compare to
the others. Therefore we gave 50% weight to this model. We gave lowest weight to DDM model.
We have seen that the dividend payout ratio has decreased over time. Moreover, the company
is expanding its capacity and focused on increasing retained earnings. It might be the case that
the company might not declare dividend in the upcoming years. Therefore, we believe that the
model should get lowest weight in the valuation. For the relative valuation we fixed the weight
of 30%. The overall valuation gives us intrinsic price of 92.69 per share of the company. So the
stock is undervalued by 55.00%. (Figure: 2). In order to determine our expected terminal growth
we used a sensitivity analysis of change in terminal growth against change in WACC. (Figure 16).
If WACC increases above 14.50% it will be a sell call, and if terminal growth falls below 6.50% it
will be a sell call.
Weighted Average Cost of Capital (WACC)
To calculate the required rate of return of equity we followed the CAPM model. Here we
calculated the beta of the stock and market return using last 6 years data. As the market return
is too low we can’t find out appropriate risk premium. Therefore, we have used the equity risk
premium directly that is calculated by Aswath Damodaran. To calculate the required rate of
return of debt we first considered the risk free rate on 5 years debt. Then we considered the
average credit spread in Bangladesh. According to Bangladesh Bank the average credit spread
in the country is 4.15%. Since the company has high debt to equity ratio the weighted average
cost of capital is comparatively lower than other companies who have more equity in the capital
structure.
Financial Analysis
BSRM Steels Limited mainly engaged in the production and supply of “Xtreme 500W” (the only
EMF (Elongation at Maximum Force) tested and Fatigue ductile rod in Bangladesh) deformed
bars of reinforced steel. Xtreme500W also demonstrated superior yield strength and ductility
compared to the traditional Grade 60 rebar. This reduced the quantity of steel consumed in any
building by 15%. It was incorporated in July 2002, commenced its commercial operation from
April 2008. The main purpose of the Company is to manufacture M.S. products by setting up
rolling and re-rolling mills and marketing the same. The Company launched ‘BSRM Maxima’
which is the first Rebar of the country designed specifically for the mega projects. The company
got listed on Dhaka Stock Exchange in 2009. The paid up capital of the company is 3,417.75
million. The current capacity is 700000 MT. (Figure 1, 3 and 19)

7. Figure 17: Distribution Plot
Figure 18: 6-month’s regression against DSEX
0
200
400
600
800
1000
-0.237623762
-0.206753309
-0.175882855
-0.145012401
-0.114141948
-0.083271494
-0.05240104
-0.021530586
0.009339867
0.040210321
0.071080775
0.101951228
0.132821682
0.163692136
0.19456259
0.225433043
0.256303497
0.287173951
0.318044404
0.348914858
BSRM Steels Return Distribution
Frequency Freq. Double
y = 1.1581x + 0.0002
R² = 0.0325
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
-1.50% -1.00% -0.50% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50%
6 months Regression model BSRM Steels vs DSEX
BSRM Steels v/s DSEX Linear (BSRM Steels v/s DSEX)
BSRM Steels
Skewness 2.509702849
Kurtosis 57.93837785
Count 1286
Max 34.89%
Min -23.76%
Range 0.58653862
Bin 19
Width per Bin 0.030870454
The average expected growth rate of 12.07% was calculated based on the multiple
regression analysis of the several dependent and independent variables such as: GDP,
per capita consumption of steel, population growth, GDP from construction, CAGR of
BSRM Steels, Import of Iron scraps and Real Estate sector of Bangladesh. We found the
relative growth average (with given weight 0.4 and 0.6) for the two multiple regression
models 7.64% and 15.02%. We used the average of these two YoY average growth
rates of relative variables and assumed our expected growth rate for BSRM Steels to
be 12.07% over the next 5 years (2019-2023). Running regression of these major
determining factors with the annual sales of BSRM gave an R^2 of around 90%.
Kurtosis (distribution or volatility of skew): The kurtosis of BSRM Steels return
distribution is 57.9384. The distribution is longer and the tails are flatter. The peak of
the return distribution is higher than normal distribution, this means the returns are
heavily tailed and there are a lot return outliers. The outliers stretch the horizontal axis
so this makes the returns appear in a narrow and high vertical range, and the
distribution can be addressed as a leptokurtic distribution.
Skewness (measure of asymmetry in the distribution): The skewness for the return
distribution of BSRM Steels is 2.5097, which means the return distribution is highly
positively-skewed. The median will be greater than the mode as there is asymmetry in
the return distribution. Thus, the BSRM Steels stocks will provide high returns to the
investors.
Figure: 19 Key Profitability ratios of BSRM Steels
0.00
5.00
10.00
15.00
0.00%
10.00%
20.00%
30.00%
2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E
Key Ratios
Earnings Per Share (EPS) Operating Profit Margin
Return On Equity (ROE) Net Profit Margin
EBITDA margin to Sales

8. 0
20
40
60
80
100
120
140
0
11
22
33
44
55
66
77
88
99
110
121
132
143
154
165
176
187
198
209
220
231
242
Price
Trading days/Time period
Simulated 10 lognormal pathways of BSRM
Steels stock price
Path 1 Path 2 Path 3 Path 4 Path 5
Path 6 Path 7 Path 8 Path 9 Path 10
Risk factors and concerns
1. Business Risks
 Risks associated with sourcing of Raw Materials: Against their production capacity of 7,00,000 MT MS Rod, they have their billet manufacturing plant having capacity
of 2,20,000 MT. On the other hand BSRM Steel Mills Limited, an associate company of BSRM Steels Limited can meet rest of the required billets of the company.
BSRM Steels Limited is going to establish it’s another Melting Unit with a capacity of 430,000 MT per annum at Mirsarai, Chattogram which will start its commercial
production during year 2019. So group will be self-sufficient for its basic raw materials of billet.
 Risks associated with Power Supply: Presently the primary constraint on the economic development of Bangladesh is the shortage of power for which new
industrial investments proposal from home and aboard have failed to materialize.For ensuring uninterrupted power supply BSRM Group has made a deal with
PGCB and installed a substation for tapping power from the 230 KV national grids.
2. Market Risks
 Interest rate risk: The business of BSRM Steels Limited requires huge working capital. Although the company closely monitors and manages requirement of capital
investment, the actual capital requirement may deviate from the projected one due to factors beyond its control, thus potentially affecting the borrowing costs.
Interest rate on working capital and term loan has increased during last six months of this year which also affected the net income of the company.
 Foreign Exchange Fluctuations: Foreign currency risk is the risk of changes in exchange rates that adversely affect the company’s earnings, equity, and
competitiveness. They are hugely involved with Foreign Trade i.e. Import & Export and thus they are also exposed to Foreign Currency Risks. Exchange rate gains
or losses related to foreign currency transactions are recognized as transaction gains and losses in our income statement as incurred. They also maintain foreign
currency account in which export collection is directly deposited and they can meet foreign currency payment requirements.
 Competition and Economic conditions: Competition refers to the risks of decreasing present market share caused by new entrants. As it’s an oligopoly industry
the industry is driven by few large companies. Actions of a large company has direct effect on others business. They try to mitigate this risk through active brand
management and customer relationship and by ensuring timely supply of quality product.
Initial price 59.08 Current market price of the stock on 16th April, 2019
Mean 3.29% Annualized mean return
Sigma 35.29% Annualized standard deviation
Delta_t 0.004 We considered 250 trading days a year
To simulate 10 pathways for the stock price with lognormal distribution we used the
Initial stock price to be 59 and multiplied it with the
EXP(Mean*Delta_t+Sigma*SQRT(Delta_t)*NORM.S.INV(RAND())) Here we kept the
probability as random because stock prices can take any random values. The lognormal
distribution generates simulation of positive stock prices. This is more realistic and
logical compared to the normal distribution simulation. We calculated the Delta_t by
dividing 1 by 250, since we assumed 250 days in a year. The Lognormal simulation helps
us to get an idea of the share price range in the future and we can see that the highest
the price will go around 120 BDT and the lowest around 20 BDT.

9. Appendix
BSRM Steels Limited SWOT Analysis
Strengths. Weakness
Large market share in the industry.
Product like “Xtreme 500 and BSRM Maxima in the product line.
Strong brand image in the industry.
Integrated supply chain system.
Most advanced technology in the industry.
Heavily dependent on importing for raw materials.
High debt/equity ratio.
High cogs margin.
Product price high compare to competitors.
Opportunities Threats
Going to launch billet manufacturing plant.
Investing in new subsidiary in Kenya.
Setting up a coal based 150 MW merchant power plant.
Oligopoly industry.
Future economic growth.
Construction sector future growth.
Increasing in interest will increase cost of debt.
Exposure to foreign exchange rate risk.
Strong rivalry in the industry may arise.
Shipbuilding industry is shrinking.

10. Absolute value
BSRM Steels Income statement 2014 2015 2016 2017 2018 Average 2014 2015 2016 2017 2018 Average
Revenue
Cost of sales -92.7% -86.5% -82.4% -90.4% -90.6% -88.5% 92.72% 86.48% 82.39% 90.35% 90.64% 88.52%
Gross profit 7.3% 13.5% 17.6% 9.6% 9.4% 11.5% 7.28% 13.52% 17.61% 9.65% 9.36% 11.48%
Selling and distribution costs -1.7% -2.7% -2.9% -2.9% -2.3% -2.5% 1.75% 2.66% 2.91% 2.91% 2.30% 2.50%
Administrative costs -0.6% -0.8% -0.9% -1.0% -0.8% -0.8% 0.65% 0.83% 0.95% 1.00% 0.76% 0.84%
Other operating income 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.02% 0.05% 0.01% 0.03% 0.03% 0.03%
Profit from operating activities/EBIT 4.9% 10.1% 13.8% 5.8% 6.3% 8.2% 4.91% 10.08% 13.77% 5.77% 6.33% 8.17%
Finance costs -1.3% -2.1% -1.2% -1.3% -4.6% -2.1% 1.26% 2.08% 1.19% 1.35% 4.64% 2.10%
Finance income 0.5% 0.2% 0.2% 0.0% 2.5% 0.7% 0.49% 0.21% 0.23% 0.05% 2.51% 0.68%
net finance cost 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Profit before WPPF and Welfare Fund 4.1% 8.2% 12.8% 4.4% 4.2% 6.7% 4.14% 8.20% 12.81% 4.38% 4.20% 6.74%
Contribution to WPPF and Welfare fund-0.2% -0.4% -0.6% -0.4% -0.3% -0.4% 0.21% 0.41% 0.64% 0.37% 0.28% 0.38%
Profit on bargain purchase 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.00% 0.00% 0.00% 0.03% 0.00% 0.01%
Share of profit/(loss) of associate (Net of tax)0.0% 0.2% -0.3% -0.4% 0.5% 0.0% 0.01% 0.23% 0.29% 0.36% 0.48% 0.01%
Profit before income tax 3.9% 8.0% 11.9% 3.7% 4.4% 6.4% 3.92% 8.03% 11.88% 3.67% 4.40% 6.38%
Income tax expenses: -1.1% -1.6% -4.0% -0.8% -1.0% -1.7% 1.10% 1.58% 4.04% 0.83% 1.05% 1.72%
Current tax -1.0% -1.2% -3.9% -1.2% -1.1% -1.7% 0.96% 1.22% 3.86% 1.17% 1.07% 1.65%
Deferred tax -0.1% -0.4% -0.2% 0.3% 0.0% -0.1% 0.14% 0.37% 0.19% 0.34% 0.02% 0.07%
-0.1% -0.1% -0.9% -4.2% -0.8% -1.2% 0.06% 0.09% 0.87% 4.20% 0.82% 1.21%
Profit aftertax 2.8% 6.4% 7.8% 2.8% 3.4% 4.7% 2.82% 6.44% 7.84% 2.84% 3.36% 4.66%
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Other comprehensive income: 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Acturial (loss)/ gain on defined benefit plans0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.00% 0.00% 0.00% 0.00% 0.01% 0.00%
Total comprehensive income 2.8% 6.4% 7.8% 2.8% 3.4% 4.7% 2.82% 6.44% 7.84% 2.84% 3.35% 4.66%
BSRM Steels Income statement

11. BSRM Steels Balance sheet 2014 2015 2016 2017 2018 Average
ASSETS
Non-current assets 22.16% 29.94% 31.03% 34.29% 26.69% 28.82%
Property, plant and equipment 16.78% 21.76% 28.23% 39.31% 30.27% 27.27%
Capital work in progress 0.13% 0.00% 0.00% 0.00% 0.00% 0.03%
Accumulated depreciation 0.00% 0.00% -5.44% -8.68% -6.41% -4.11%
Intangible assets 0.09% 0.09% 0.09% 0.08% 0.04% 0.08%
Investment in subsidiary 2.71% 3.23% 3.38% 0.00% 0.00% 1.86%
investment in associate 2.45% 4.86% 4.78% 3.58% 2.79% 3.69%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Current assets 48.27% 46.58% 77.48% 87.43% 68.53% 65.66%
Short term investment 0.57% 0.83% 0.84% 0.75% 0.55% 0.71%
Inventories 29.26% 21.32% 30.98% 36.00% 28.70% 29.25%
Trade and other receivables 7.71% 6.96% 12.49% 16.61% 16.98% 12.15%
Current account with related companies6.76% 8.13% 24.47% 27.70% 12.63% 15.94%
Advances, deposits and prepayments 2.62% 7.90% 8.14% 5.03% 7.92% 6.32%
Cash and cash equivalents 1.35% 1.45% 0.56% 1.34% 1.75% 1.29%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total Assets 70.43% 76.53% 108.52% 121.72% 95.21% 94.48%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
EQUITY AND LIABILITIES 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Shareholders equity 19.45% 28.10% 33.87% 30.84% 22.71% 27.00%
Share capital 8.87% 10.58% 11.04% 9.09% 6.44% 9.20%
Retained earnings 5.04% 10.93% 16.00% 14.79% 11.81% 11.71%
Revaluation reserve 5.55% 6.60% 6.84% 6.97% 4.47% 6.08%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Non currents liabilities 3.11% 4.44% 7.10% 6.27% 9.21% 6.03%
Long term borrowings- non current portion1.12% 1.70% 4.04% 2.90% 6.98% 3.35%
Retirement benefit obligations - Gratuity0.10% 0.17% 0.21% 0.30% 0.28% 0.21%
Deferred tax liability 1.89% 2.57% 2.86% 3.08% 1.95% 2.47%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Current liabilities 47.87% 43.98% 67.54% 84.60% 63.29% 61.46%
Trade payable 0.14% 0.10% 0.09% 7.29% 15.47% 4.62%
Short term borrowings 44.18% 39.15% 55.20% 62.91% 40.91% 48.47%
Current portion of long term borrowings0.59% 0.61% 1.76% 1.60% 1.18% 1.15%
Current account with related companies0.00% 0.00% 0.00% 6.67% 0.47% 1.43%
Liabilities for expenses 0.94% 0.73% 0.90% 0.90% 1.52% 1.00%
Current tax liabilities 1.28% 1.73% 3.87% 1.63% 1.90% 2.08%
Provision for WPPF and Welfare Fund 0.21% 0.41% 0.64% 0.37% 0.28% 0.38%
Other liabilities 0.53% 1.25% 5.08% 3.24% 1.55% 2.33%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total Liabilities 50.98% 48.43% 74.64% 90.88% 72.50% 67.49%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total Equity and Liabilities 70.43% 76.53% 108.52% 121.72% 95.21% 94.48%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Depreciation 0.06% 0.09% 0.87% 4.20% 0.82% 1.21%
CapEx 0.45% 1.85% 6.39% 20.27% 5.76% 6.94%
EBITDA 4.98% 10.18% 14.64% 9.97% 7.15% 9.38%
BSRM Steels Balance sheets, Income Statements and Ratios

12. BSRM Steels Balance sheet 2018 2019E 2020E 2021E 2022E 2023E
ASSETS
Non-current assets 15,576,744,606 17,368,248,243 19,348,938,468 21,553,019,861 24,005,174,656 26,732,732,321
Property, plant and equipment 17,668,362,090 19800642409 22190253846 24868252028 27869440487 31232822964
Capital work in progress
Accumulated depreciation (3,743,335,312) (4,280,371,621) (4,909,237,763) (5,629,643,214) (6,454,912,661) (7,400,310,367)
Intangible assets 25,484,116 25,484,116 25,484,116 25,484,116 25,484,116 25,484,116
Investment in subsidiary
investment in associate 1,626,233,712 1822493338 2042438269 2288926931 2565162714 2874735607
Current assets 40,002,278,335 45,816,224,564 52,699,894,636 60,462,344,681 69,211,906,371 79,070,316,728
Short term investment 319,833,530 358432169.6 401689029.4 450166279.7 504493935.8 565378045.2
Inventories 16,753,099,378 18774922562 21040746506 23580018084 26425737921 29614889276
Trade and other receivables 9,911,646,856 11107819394 12448350257 13950661118 15634276158 17521075806
Current account with related companies 7,374,991,691 8265031727 9262484938 10380314324 11633047307 13036964529
Advances, deposits and prepayments 4,623,327,397 5181286871 5806582864 6507341786 7292670768 8172776025
Cash and cash equivalents 1,019,379,483 2,128,731,840 3,740,041,041 5,593,843,090 7,721,680,281 10,159,233,047
Total Assets 55,579,022,941 63,184,472,807 72,048,833,104 82,015,364,543 93,217,081,027 105,803,049,049
EQUITY AND LIABILITIES
Shareholders equity 13,258,559,602 16,194,667,448 19,517,503,999 23,273,741,038 27,515,682,869 32,301,946,058
Share capital 3,759,525,000 3,759,525,000 3,759,525,000 3,759,525,000 3,759,525,000 3,759,525,000
Retained earnings 6,892,000,691 9,513,482,480 12,483,722,790 15,844,811,030 19,643,916,108 23,933,899,443
Revaluation reserve 2,607,033,911 2921659968 3274256209 3669405009 4112241761 4608521616
Non currents liabilities 5,376,120,480 6,004,941,685 6,709,651,254 7,499,407,661 8,384,474,660 9,376,354,669
Long term borrowings- non current portion 4,072,406,248 4,563,878,613 5,114,663,597 5,731,919,259 6,423,667,513 7,198,898,389
Retirement benefit obligations - Gratuity 165,623,229 165,623,229 165,623,229 165,623,229 165,623,229 165,623,229
Deferred tax liability 1,138,091,003 1275439844 1429364427 1601865173 1795183918 2011833051
Current liabilities 36,944,342,859 40,984,863,673 45,821,677,852 51,242,215,844 57,316,923,498 64,124,748,321
Trade payable 9,030,450,761 10120277443 11341628257 12710375999 14244309052 15963362561
Short term borrowings 23,882,556,282 26764787497 29994856552 33614741745 37671487463 42217815579
Current portion of long term borrowings 690,907,010 774288107.4 867731930 972452883 1089811930 1221334282
Current account with related companies 275,429,270 0 0 0 0 0
Liabilities for expenses 887,392,682 994486364 1114504490 1249006827 1399741380 1568667112
Current tax liabilities 1,109,937,984 1243889219 1394006162 1562239747 1750776356 1962066228
Provision for WPPF and Welfare Fund 161,299,331 180765504 202580923 227029104 254427778 285133020
Other liabilities 906,369,539 906,369,539 906,369,539 906,369,539 906,369,539 906,369,539
Total Liabilities 42,320,463,339 46,989,805,358 52,531,329,106 58,741,623,504 65,701,398,158 73,501,102,990
Total Equity and Liabilities 55,579,022,941 63,184,472,807 72,048,833,104 82,015,364,543 93,217,081,027 105,803,049,049
EFN 0 0 0 0 0 0
BSRM Steels ProForma Balance sheet

13. BSRM Steels Income statement 2018 2019E 2020E 2021E 2022E 2023E
Revenue 58,372,407,184 65416995381 73311749354 82159270110 92074540910 103186421599
Cost of sales (52,911,534,499) (57,905,064,881) (64,893,252,558) (72,724,799,398) (81,501,484,962) (91,337,371,927)
Gross profit 5,460,872,685 7511930500 8418496796 9434470712 10573055949 11849049671
Selling and distribution costs (1,344,485,740) (1,506,743,026) (1,688,582,094) (1,892,366,144) (2,120,743,571) (2,376,682,393)
Administrative costs (442,821,958) (442,821,958) (442,821,958) (442,821,958) (442,821,958) (442,821,958)
Otheroperating income 19,569,215 21,930,897 24,577,595 27,543,706 30,867,778 34,593,010
Profitfromoperating activities/EBIT 3,693,134,202 5584296413 6311670338 7126826317 8040358197 9064138330
Finance costs (2,705,588,387) (3,032,108,346) (3,398,033,887) (3,808,120,614) (4,267,698,055) (4,782,738,925)
Finance income 1,462,311,066 1638787928 1836562642 2058205506 2306597013 2584965285
Profitbefore WPPF and Welfare Fund 2449856881 4190975995 4750199093 5376911209 6079257155 6866364690
Contribution to WPPF and Welfare fund (161,299,331) -180765504 -202580923 -227029104 -254427778 -285133020
Profit on bargain purchase -
Share of profit/(loss) of associate (Net of tax) 281,267,990 315212404 353253350 395885212 443662037 497204738
Profitbefore income tax 2,569,825,540 4325422896 4900871520 5545767316 6268491414 7078436407
Income tax expenses: (610,873,085) -1081355724 -1225217880 -1386441829 -1567122853 -1769609102
Current tax (624,830,108) -1081355724 -1225217880 -1386441829 -1567122853 -1769609102
Deferred tax 13,957,023 0 0 0 0 0
Depreciation -537036309 -628866142 -720405451 -825269447 -945397706
Profitaftertax 1,958,952,455 3,244,067,172 3,675,653,640 4,159,325,487 4,701,368,560 5,308,827,306
Othercomprehensive income:
Acturial (loss)/ gain on defined benefit plans (3,392,066) 0 0 0 0 0
Total comprehensive income 1,955,560,389 3,244,067,172 3,675,653,640 4,159,325,487 4,701,368,560 5,308,827,306
Dividends 622585382 705413330 798237247 902263482 1018843971
Retained Earnings 2621481789 2970240310 3361088240 3799105078 4289983335
Depreciation 479204248 537036309 601847746 674480857 755879589 847101806
Numberof shares 375952500 375952500 375952500 375952500 375952500 375952500
BSRM Steels ProForma Income statement

14. Year 2018 2019E 2020E 2021E 2022E 2023E
Free cash flow calculation
Profit after tax 3,244,067,172 3,675,653,640 4,159,325,487 4,701,368,560 5,308,827,306
Add back depreciation 537,036,309 628,866,142 720,405,451 825,269,447 945,397,706
Subtract increase in current assets (4,704,593,872) (5,272,360,871) (5,908,647,996) (6,621,724,498) (7,420,857,591)
Add back increase in current liabilities 4040520814 4836814179 5420537991 6074707655 6807824823
Subtract increase in fixed assets at cost (2,132,280,319) (2,389,611,437) (2,677,998,182) (3,001,188,458) (3,363,382,478)
Add back after-tax interest on debt 2,274,081,260 2,548,525,415 2,856,090,461 3,200,773,542 3,587,054,194
Subtract after-tax interest on cash and mkt. securities (1,229,090,946) (1,377,421,981) (1,543,654,129) (1,729,947,760) (1,938,723,964)
Free cash flow 2,029,740,416 2,650,465,087 3,026,059,082 3,449,258,487 3,926,139,996
Current assest (without cash) 38,982,898,852 43,687,492,724 48,959,853,595 54,868,501,591 61,490,226,090 68,911,083,680
Current liabilities 36,944,342,859 40,984,863,673 45,821,677,852 51,242,215,844 57,316,923,498 64,124,748,321
Working capital 2,038,555,993 2,702,629,051 3,138,175,743 3,626,285,748 4,173,302,591 4,786,335,359
Working capital investment 664,073,058 435,546,692 488,110,005 547,016,844 613,032,768
Capex 2,669,316,628 2,991,459,183 3,352,479,040 3,757,068,047 4,210,484,284
BSRM Steels ProForma Cashflow Calculations
Year-wise Growth GDP Growth GDP from Contruction Real Estate Per capita steel consumptionImport of iron Scrap'000MTBSRM Steels
2011 6.46% 6.13% 6.18% 8.33% 36.55% 41.93%
2012 6.52% 8.42% 3.92% 11.54% -36.92% 22.47%
2013 6.01% -2.02% 4.04% 3.45% 36.10% -5.29%
2014 6.06% 19.19% 4.25% 6.67% 64.52% 6.37%
2015 6.55% 8.60% 4.40% 5.31% 106.10% -16.14%
2016 7.10% 8.56% 4.47% 3.86% 112.58% -4.19%
2017 7.30% 8.79% 4.80% 28.57% 6.51% 21.48%
2018 7.86% 9.91% 4.98% 8.89% 38.75% 55.19%
Avg. YoY growth 2 15.02%
Year-wise Growth GDP Growth GDP from Contruction Per capita steel consumptionBD Population Real Estate BSRM Steels
2011 6.46% 6.13% 8.33% 1.19% 6.18% 41.93%
2012 6.52% 8.42% 11.54% 1.22% 3.92% 22.47%
2013 6.01% -2.02% 3.45% 1.22% 4.04% -5.29%
2014 6.06% 19.19% 6.67% 1.21% 4.25% 6.37%
2015 6.55% 8.60% 5.31% 1.20% 4.40% -16.14%
2016 7.10% 8.56% 3.86% 1.20% 4.47% -4.19%
2017 7.30% 8.79% 28.57% 1.20% 4.80% 21.48%
2018 7.86% 9.91% 8.89% 1.20% 4.98% 55.19%
Avg. YoY growth 1 7.64% 12.07%Average expected growth based on multiple regression analysis

15. BSRMSteelsFinancial Ratios 2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E
CurrentRatio 1.01 1.06 1.15 1.03 1.08 1.12 1.15 1.18 1.21 1.23
QuickRatio 0.40 0.57 0.69 0.61 0.63 0.66 0.69 0.72 0.75 0.77
Cash(Coverage) Ratio 0.03 0.03 0.01 0.02 0.03 0.05 0.08 0.11 0.13 0.16
InventoryTurnover 3.17 4.06 2.66 2.51 3.16 3.08 3.08 3.08 3.08 3.08
Total AssetTurnover 1.42 1.31 0.92 0.82 1.05 1.04 1.02 1.00 0.99 0.98
FixedAssetTurnover 4.51 3.34 3.22 2.92 3.75 3.77 3.79 3.81 3.84 3.86
AccountReceivableTurnover 12.97 14.38 8.00 6.02 5.89 5.89 5.89 5.89 5.89 5.89
AverageCollectionPeriod(Days) 28.15 25.39 45.60 60.63 61.98 61.98 61.98 61.98 61.98 61.98
AveragePaymentPeriod(Days) 0.54 0.44 0.38 29.46 62.29 63.79 63.79 63.79 63.79 63.79
GrossProfitMargin 7.28% 13.52% 17.61% 9.65% 9.36% 11.48% 11.48% 11.48% 11.48% 11.48%
OperatingProfitMargin 4.91% 10.08% 13.77% 5.77% 6.33% 8.54% 8.61% 8.67% 8.73% 8.78%
NetProfitMargin 2.82% 6.44% 7.84% 2.84% 3.36% 4.96% 5.01% 5.06% 5.11% 5.14%
BasicEarningPower(BEPratio) 0.07 0.13 0.13 0.05 0.07 0.09 0.09 0.09 0.09 0.09
ReturnOnAsset(ROA) 4.00% 8.42% 7.22% 2.34% 3.52% 5.13% 5.10% 5.07% 5.04% 5.02%
ReturnOnEquity(ROE) 14.49% 22.93% 23.14% 9.22% 14.78% 20.03% 18.83% 17.87% 17.09% 16.44%
NetAssetValuepershare(NAV) 21.93 26.57 30.69 33.94 35.27 43.08 51.91 61.91 73.19 85.92
Retentionratio 0.53 0.51 0.84 0.25 0.81 0.88 0.90 0.91 0.92 0.93
DividendPayoutRatio 0.47 0.49 0.16 0.75 0.19 0.12 0.10 0.09 0.08 0.07
Numberof shares 341775000 341775000 341775000 341775000 375952500 375952500 375952500 375952500 375952500 375952500
Marketpricepershare 91.8 97 93.9 78.5 59.9 60.9 61.9 62.9 63.9 64.9
DividendPerShare 1.5 3.0 1.2 2.3 1.0 1.0 1.0 1.0 1.0 1.0
EBITDAmargintoSales 4.98% 10.18% 14.64% 9.97% 7.15% 9.38% 9.47% 9.55% 9.63% 9.70%
BookValuePerShare 21.93 26.57 30.69 33.94 35.27 43.08 51.91 61.91 73.19 85.92
EarningsPerShare(EPS) 3.18 6.09 7.10 3.13 5.21 8.63 9.78 11.06 12.51 14.12
Debt-to-AssetRatio 0.72 0.63 0.69 0.75 0.76 0.74 0.73 0.72 0.70 0.69
Debt-to-EquityRatio 2.62 1.72 2.20 2.95 3.19 2.90 2.69 2.52 2.39 2.28
Equitymultiplier 3.62 2.72 3.20 3.95 4.19 3.90 3.69 3.52 3.39 3.28
TimesInterestEarnedRatio(times) 3.89 4.84 11.61 4.28 1.37 1.84 1.86 1.87 1.88 1.90
P/ERatio 28.88 15.92 13.22 25.09 11.50 7.06 6.33 5.69 5.11 4.60
P/BRatio 4.19 3.65 3.06 2.31 1.70 1.41 1.19 1.02 0.87 0.76
P/SRatio 0.81 1.03 1.04 0.71 0.39 0.35 0.32 0.29 0.26 0.24
M/BRatio 4.19 3.65 3.06 2.31 1.70 2.15 1.79 1.50 1.27 1.08
Dividendyield 1.63% 3.09% 1.24% 2.97% 1.67% 1.64% 1.62% 1.59% 1.56% 1.54%
MARKETValue RATIO
DEBTMANAGEMENTRATIO
BSRM Steels Financial Ratios
PROFITABILITY RATIO
ASSETMANAGEMENTRATIOS
LIQUIDITY RATIO

16. Credit Rating: Credit Rating information and Services Limited (CRISL) assigned rating as below:
Long term Short term
AA+ ST-2
The entities rated “AA+” are adjudged to be of high quality, offer higher safety and have high credit quality. This level of rating indicates a corporate entity with a
sound credit profile and without significant problems. Risks are modest and may vary slightly from time to time because of economic conditions. “ST-2” indicates
high certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small. The Company in
the evaluation of Credit Rating Company was also placed with “Stable Outlook”.
Intercept(Alpha) -0.000099626
Slope(Beta) 1.210248472
R Square 0.132170923
Tslope 13.98406308
Tintercept -0.171691744
Avg Daily retun 0.01%
Daily variance 0.05%
Daily Standard deviation 2.23%
Annualized Return 3.29%
Annualized variance 12.45%
Annualized Standard deviation 35.29%
Covariance 0.00005440
CAPM, Re of BSRM Steels 4.74%
Trading days 250
Risk-Free rate, Rf 4.95%
Avg Daily retun 0.02%
Daily Standard deviation 0.67%
Annualized Return 4.78%
Annualized Standard deviation 10.60%
DSEX
BSRM Steels v/s DSEX
BSRM Steels
Average monthly return 0.006
Average annualized return 7.2%
Variance 0.00205
Standard deviation 0.04527
Annual standard deviation 0.15682
Beta 1
DSEX 6 Years annualized return
Return and Sigma Calculations: We collected the daily trading close price and volume
from January 2014 to 21st April 2019 of BSRM Steels in DSE, and the DSEX trade
volume and price of the corresponding days, from the Dhaka Stock Exchange website.
The daily average return was calculated using the average change in price for the each
day over the 5 years period. The daily standard deviation was calculated using the
=STDEV.S() function in excel, the y-variable was the BSRM Steel daily return % and the
x-variable was the DSEX daily return %.
We assumed the annual trading days to be 250 in a year, and multiplied it with the
daily return to get the Annualized return. We multiplied the squared-root of 250 days
with the daily standard deviation to get the annualized standard deviation. The Beta of
the BSRM Steels stock price with DSEX index was calculated using the =Slope() function
in excel and also using regression analysis.
Calculating Return on Equity using regular CAPM formula gives a very low value which
is not reliable and logical. So, in the WACC worksheet we found the Return on Equity
through more integrated calculations.

17. Name Value Weight Re and Rd
Equity 22218792750.00 44.58% 18.21%
Net Debt 27626490057.00 55.42% 7.80%
Total 49845282807.00 100%
12.45%
Risk-Free Rate 4.95%
Beta 1.2102
Market Return 7.17%
Equity risk premium 10.96%
CAPM 18.21%
Risk free rate 6.44%
Average credit spread 4.15%
Tax rate 25%
Required Rate of Return 7.94%
Average of corporate tax rate and BSRMSteels YOY implied tax rate
(Risk Free Rate +Credit Spread)*(1-Tax Rate); this is the cost of debt for BSRMSteels
Calculated
Average of DSEX Return ( 6years). It seemes very lower market return. Therefore we will directly use equity risk remium to calculate CAPM
Required Rate of Return (Debt) Details
T-bill 5year rate
Bangladesh bank
Country default spreads and risk premium by Aswath Damodaran
This is the cost of equity for BSRMsteels Ltd
BSRM STEELS
Required Rate of Return (Equity) Details
1year T-bill rate
WACC
Shares outstanding 375952500 2014 2015 2016 2017 2018
Share price, 4th April 2019 59.1 Cash and cash equivalents 521092776 468886084 173417317 505247144 1019379483
Equity value, E 22218792750
Net debt, D 27,626,490,057 Short-term debt 17252850097 12847526725 17636668756 24262393500 24573463292
Tax rate, TC 25.64% Long-term debt 431897159 548388963 1251696088 1091223642 4072406248
Cost of debt, rD 7.67% Total debt 17684747256 13395915688 18888364844 25353617142 28645869540
Expected market return, E(rM) 7.17% Net debt 17163654480 12927029604 18714947527 24848369998 27626490057
Risk-free rate, rf 4.95%
Equity beta, b 1.210248472 Interest expense -486981060 -673131697 -367244216 -507117525 -2705588387
Cost of debt, rD? 2.33% 10.31%
Income before tax 1,510,680,374 2,593,948,797 3,678,512,777 1,381,719,934 2,569,825,540
Income tax expense -424,472,568 -512,071,634 -1,251,162,976 -312,281,861 -610,873,085
Implied tax rate 28.10% 19.74% 34.01% 22.60% 23.77%
Average tax rate 25.64%

18. Skewness 2.509702849
Kurtosis 57.93837785
Count 1286
Max 34.89%
Min -23.76%
Range 0.58653862
Bin 19
Width per Bin 0.030870454
Bins Beginning Point Ending Point Midpoint Frequency Freq. Double
1 -24.00% -23.76% -0.22456 1 1
2 -23.76% -20.68% -0.22219 0 0
3 -20.68% -17.59% -0.19132 0 0
4 -17.59% -14.50% -0.16045 0 0
5 -14.50% -11.41% -0.12958 0 0
6 -11.41% -8.33% -0.09871 2 2
7 -8.33% -5.24% -0.06784 4 4
8 -5.24% -2.15% -0.03697 102 102
9 -2.15% 0.93% -0.0061 921 921
10 0.93% 4.02% 0.024775 211 211
11 4.02% 7.11% 0.055646 33 33
12 7.11% 10.20% 0.086516 11 11
13 10.20% 13.28% 0.117386 0 0
14 13.28% 16.37% 0.148257 0 0
15 16.37% 19.46% 0.179127 0 0
16 19.46% 22.54% 0.209998 0 0
17 22.54% 25.63% 0.240868 0 0
18 25.63% 28.72% 0.271739 0 0
19 28.72% 31.80% 0.302609 0 0
20 31.80% 34.89% 0.33348 1 1
BSRM Steels Return Distribution
BSRM Steels

19. Regression Statistics
Multiple R 0.967914171
R Square 0.936857843
Adjusted R Square 0.779002449
Standard Error 0.115998245
Observations 8
ANOVA
df SS MS F Significance F
Regression 5 0.399288788 0.079857758 5.934911823 0.150459199
Residual 2 0.026911186 0.013455593
Total 7 0.426199974
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -40.18380524 10.96677526 -3.664140487 0.067075493 -87.37003076 7.002420269 -87.37003076 7.002420269
GDP Growth 35.71808294 10.04938686 3.554254946 0.070849803 -7.520938854 78.95710473 -7.520938854 78.95710473
GDP from Contruction 1.172005069 0.806023963 1.454057351 0.283139803 -2.296036137 4.640046274 -2.296036137 4.640046274
Per capita steel consumption -0.329712167 0.621826099 -0.530232114 0.648933429 -3.005213929 2.345789595 -3.005213929 2.345789595
BD Population 2958.218498 840.2435081 3.52066808 0.072064727 -657.0575256 6573.494522 -657.0575256 6573.494522
Real Estate 47.26659932 10.56490185 4.473926971 0.046502716 1.809495545 92.7237031 1.809495545 92.7237031
-20.0%
Regression Statistics
Multiple R 0.983956431
R Square 0.968170259
Adjusted R Square 0.888595907
Standard Error 0.082358469
Observations 8
ANOVA
df SS MS F Significance F
Regression 5 0.412634139 0.082526828 12.16686318 0.077684847
Residual 2 0.013565835 0.006782917
Total 7 0.426199974
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -1.923839119 0.372730012 -5.161481654 0.035546904 -3.527566923 -0.32011 -3.527566923 -0.320111315
GDP Growth 20.42273438 5.691021047 3.588588798 0.069638213 -4.063752865 44.90922 -4.063752865 44.90922162
GDP from Contruction 1.124941474 0.567866617 1.980995961 0.186114297 -1.318391374 3.568274 -1.318391374 3.568274322
Real Estate 20.11064949 4.54908624 4.42081078 0.047547971 0.537511159 39.68379 0.537511159 39.68378781
Per capita steel consumption -1.398362891 0.537300275 -2.602572445 0.121343199 -3.710179386 0.913454 -3.710179386 0.913453605
Import of iron Scrap'000MT -0.420076497 0.08151641 -5.153275248 0.035654221 -0.7708133 -0.06934 -0.7708133 -0.069339694

20. Particulars 2013 2014 2015 2016 2017 2018
Revenue 36,229,050,933 38,535,936,754 32,316,100,562 30,961,724,880 37,613,575,605 58,372,407,184
Operating profit 2,314,398,453 1,892,833,850 3,257,931,547 4,262,604,320 2,171,622,735 3,693,134,202
Net profit 1,693,468,511 1,086,207,806 2,081,877,163 2,427,349,801 1,069,438,073 1,958,952,455
Revenue Growth 6.37% -16.14% -4.19% 21.48% 55.19%
106.37% 83.86% 95.81% 121.48% 155.19%
Operating profit growth -18.21% 72.12% 30.84% -49.05% 70.06%
81.79% 172.12% 130.84% 50.95% 170.06%
Net profit growth -35.86% 91.66% 16.59% -55.94% 83.18%
64.14% 191.66% 116.59% 44.06% 183.18%
BSRM Steels Limited
Market capitalization 21,466,888,000
Shareholder’s equity 13,258,559,602
Book value per share 35.27
P/B ratio 1.70
Forward P/E 15.7
EPS 5.21
P/E ratio 11.50
Price to sales 0.39
5 years CAGR earnings growth 12.52%
5 years CAGR revenue growth 8.66%
Paid up capital 3,759,530,000
Last years revenue growth 55.19%
Last 5 years revenue growth 10.01%
Last years operating profit growth 70.06%
Last 5 years operating profit growth 9.80%
Last years net profit growth 83.18%
Last 5 years net profit growth 2.96%
ROE 14.78%
ROA 3.52%
Debt to equity 3.19
Stock Statistics
Ratios
Year Sponsor Govt. Instt. Foreign Public
31-Dec-18 70.57% 0.00% 17.98% 0.28% 11.17%
31-Dec-17 70.57% 0.00% 18.16% 0.36% 10.91%
31-Dec-16 70.87% 0.00% 16.06% 0.36% 12.71%
31-Dec-15 70.87% 0.00% 16.06% 0.36% 12.71%
ShareholderscategoryofBSRMSteels

21. PE ratio EPS Revenue growth Operating profit growth ROA ROE
BSRMLTD 13.91 12.95 40.55% 50.27% 13.47% 20.33%
BSRMSTEEL 14.21 5.21 55% 9.58% 11.34% 15%
GPHISPAT 18.76 1.97 25.18% 16.57% 2.83% 11.64%
RSRMSTEEL 19.3 7.05 2.28% 0.19% 10.68% 15.75%
SSSTEEL 14.74 1.2 45.00% 22.0% 13.26% 7.76%
Apollo Ispat 18.3 0.5 -0.32% -106.00% 0.16% 0.27%
Industry average 16.18 5.68 33.60% 19.72% 10.32% 14.05%
Company average 14.21 5.21 55.00% 9.58% 11.34% 14.78%
Bsrm steel is trading at lower p/E than industry average but has higher ROA and RO
Therefore we think it is cheaper and also profitable
Intrinsic value 84.33
Price price on 21/4/2019 59.8
Undervalued by 41.018%
BSRM Steels
https://www.dsebd.org/displayCompany.php?name
Year EPS Dividend Div payout EPS growth PE ratio
2014 3.18 1.50 0.47 28.88
2015 6.09 3.00 0.49 91.7% 15.92 191.7%
2016 7.10 1.17 0.16 16.6% 13.22 116.6%
2017 3.13 2.33 0.75 -55.9% 25.09 44.1%
2018 5.21 1.00 0.19 66.5% 11.50 166.5%
Average 18.92 18.9
Dividend pay out 41.33%
Growth 13.16%
Wacc 12.45%
G>k so we cannot use the constant dividend growth model, we are using multistage dividend growth for 5 years and t
Year Eps Div PV
1 2019 5.90 2.44 2.1670306
2 2020 6.67 2.76 2.180742883
3 2021 7.55 3.12 2.194541933
4 2022 8.54 3.53 2.208428299
5 2023 9.67 4.00 2.222402534
Terminal value
ending eps * avg PE
5 Price 182.9177371 101.7548354
Intrinsic value 112.7279817
Market price 21/4/2019 59.8
Undervalued by 88.51%
BSRM Steels limited