Analysis on Hamid Fabrics Ltd (HFL) Date: Nov 04

Analysis on Hamid Fabrics Ltd (HFL)
IPO Information
Face Value
Offer Price
Authorized Capital (BDT mn)
Pre IPO Paid up Capital (BDT mn)
Retained Earnings (BDT mn)
Post IPO Paid up Capital (BDT mn)
IPO Issue size ( No. of Shares) (mn)
IPO Issue Size (BDT mn)
Issue managers
Auditor
Credit rating (CRAB)
Income Data BDT mn
Net Sales
COGS
Gross Profit
Operating Profit
PAT
Operating Activities mn
Inventories
Account Receivables
Account Payables
Working Capital
Balance sheet BDT mn
Asset
Liabilities
Equity
Paid up
Margins
Gross Margin
Operating Margin
Net profit Margin
Return
ROE
ROA
Growth
Revenue Growth
Operating Profit Growth
Net Profit Growth
Per Share BDT (Post IPO)
EPS
NAV (with Revaluation)
NOCF
Debt & Cash BDT mn
Total Debt
Long Term Debt
Times Interest Earned
Debt/Equity×
Date: Nov 04, 2014
10
35
2000
488
861
788
30
1050
ICB Capital Management
Howladar Yunus & Co
AA3(LT), ST-2 (ST)
2011-12
1391
879
512
364
158
2011-12
222
1367
387
92
2011-12
3528
1956
1570
488
2011-12
37%
26%
11%
2011-12
10%
4%
2011-12
-18%
21%
11%
2011-12
2.00
23.00
0.37
2011-12
1362
671
1.9
0.9
2012-13
2120
1487
633
452
245
2012-13
320
1124
385
424
2012-13
3679
1669
2010
488
2012-13
30%
21%
12%
2012-13
12%
7%
2012-13
52%
24%
55%
2012-13
3.11
28.15
2.74
2012-13
1040
439
2.1
0.5
2013-14
2199
1536
663
464
273
2013-14
337
1364
168
740
2013-14
3490
1207
2285
488
2013-14
30%
21%
12%
2013-14
12%
8%
2013-14
4%
3%
11%
2013-14
3.46
30.24
1.87
2013-14
784
186
2.8
0.3
BDT Mn
Mn
BDT
x
BDT
BDT
246.20
78.8
3.12
12.46
38.88
62.40
BDT
28.99
1.56
45.22
57.98
Company Profile:

Incorporation: April 27, 1995 as Siddique Fabrics Limited &
changed to Hamid Fabrics Limited on May 23, 2000

Converted into a public limited company on February 25,
2010

2 Production Units: (1) Weaving, (2) Dyeing & Finishing

Factory: Shilmandi, Narsingdi; Employees: 956.

Management: Mr. A. H. Md Mozammel Haque (Chairman,
2.02%), Mr. Abdullah Al Mahmud (Managing Director,
31.82%)
Business Profile:

Product Line: (1) Grey Fabrics (Weaving) & (2) Woven
Fabrics (Dyeing & Finishing). The company has planned to
set up a Yarn Dyeing Project due to high global demand.

Customers: PVH (16%), Hamid Weaving Mills (11%) , H&M
(10%), GAP, Zara, C&A, Tesco, Walmart etc.

Major competitors: South China Bleaching & Dyeing Ltd,
Sinha Textiles, Zaber & Zubair, Beximco Textiles Ltd.

Raw materials sources: India, Thailand, Switzerland

Installed Capacity: (1) Weaving: 6.85 mn yards (Utilization:
76.56%) & (2) Dyeing and Finishing: 21.60 mn yards
(Utilization: 79.60%) (FY 2013-2014)

Post IPO Securities holding:
Shareholder Type
No. of
% Holding
Shares(mn)
Directors
40.5
51.4%
Other Sponsors*
8.3
10.5%
IPO offering
30.0
38.1%
*ICB & Associates/ Funds Holding: 5.39 mn shares, 6.84%
Industry Review:


Earning Based Valuation
NPAT (FY 2014-15 ):
No of Shares
EPS
P/E Multiplier (Textile Sector)
Value
Price @ 20x P/E


NAV Based Valuation
NAV (FY 2013-14) Adj.
Avg. P/NAV Multiplier
Value
Price @ 2x P/NAV
BDT
BDT

The RMG sector of Bangladesh provided 4 mn direct jobs,
contributed 10.8% of the GDP and fetched BDT 24,492 mn
(81%) of Bangladesh’s total exports (2013-14) (BGMEA).
After China & EU, Bangladesh is the largest exporter in
RMG in the $1.1 trillion Global Apparel Market (2013).
Global Apparel Market is forecasted to cross $2.0 trillion
by 2020.
Factors behind growth: cheap labor cost, cheap resources,
supplier capacity and also the government’s supportive
measures.
Bangladesh’s current demand supply gap is about 50% on
cotton based products and around 25% for non-cotton
based products. Therefore, Bangladesh has a huge
untapped demand for fabric production.
Though there is a demand and supply gap in this industry,
new firms are quite discouraged to enter due to high
startup costs and lack of expertise.
Disclaimer: This document has been prepared by EBL Securities Ltd. (EBLSL) for information only of its clients on the basis of the publicly available information in the market and own research. This
document has been prepared for information purpose only and does not solicit any action based on the material contained herein and should not be construed as an offer or solicitation to buy or sell or
subscribe to any security. Neither EBLSL nor any of its directors, shareholders, member of the management or employee represents or warrants expressly or impliedly that the information or data of the
sources used in the documents are genuine, accurate, complete, authentic and correct. However all reasonable care has been taken to ensure the accuracy of the contents of this document. EBLSL will not
take any responsibility for any decisions made by investors based on the information herein.
Analysis on Hamid Fabrics Ltd (HFL)


Date: Nov 04, 2014
As a consequence of electricity crisis, the textile
production capacity has been reduced by up to 30%.
A comparison between the listed companies are shown
below:
Companies
HFL(2013-14)
HWA Well
Zahin Tex
Tung Hai
FEKDIL(2013)
Saiham Cot
Paid
up
Cap
(mn)
488
560
569
801
1160
1352
Rev
(mn)
NPAT
(mn)
EPS
NAV
2199
2108
1804
1172
2678
2092
273
197
66
112
242
218
3.46
3.52
1.16
1.40
2.66
1.60
30.24
25.55
31.99
13.69
21.73
24.59
Concluding Remarks:

Considering the recent market focus on IPO shares, HFL
may trade in the range of BDT 60s.

P/E ratio at BDT 40 is 12.82x, at BDT 50 is 16.03x & at BDT
60 is 19.23x.

Similar companies/ recent textile IPOs like HWA Well
Textiles & Far East Knitting is now trading at BDT 39.40 &
27.70 respectively.
Revenue Trend- last 5 years (BDT mn):
IPO Fund Utilization Plan:
Particulars
Amount
Settlement of Loan
304 mn
Expansion Project*
722 mn
IPO Expenses
24 mn
TOTAL
1050 mn
*Expansion Project Total Cost: 1059 BDT mn
%
29
69
2
100
Investment Positives:

HFL decided to liquidate its present loan with the IPO
proceeds; this will reduce its cost of capital.

HFL’s Expansion of business activities will result in higher
production and hence higher turnover & profitability.

HFL is a low risk company as it has a low debt-equity ratio
which is decreasing throughout the years.

HFL is a 100% export oriented company.

To support the local manufacturers in the RMG industry,
the government reduced the tax rate to 15%. (Source:
Bangladesh Tax Handbook FY 2013-2014).

Globally competitive cost structure makes the textile
sector more attractive to Global Buyers.

5 year CAGR- Sales: 15%, NPAT: 43%.
Investment Negatives:

HFL is exposed to raw material supply risk as the company
imports Yarn, Gray Fabrics, Dyes & Chemicals from
international market.

Shortage of Gas & Power Supply may affect HFL’s
production.

Political & Labor unrest and any change in global or
national policies may affect its productivity/ performance
significantly as HFL is a 100% export oriented company.

Cash Flow appears to be volatile throughout last five years.
NPAT Trend- 6 years (BDT mn):
300
246
273
246
250
200
100
158
142
150
65
50
0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15A
EPS Trend- 6 years (BDT):
4
3.5
3
2.5
2
1.5
1
0.5
0
3.46
3.11
1.86
2.00
2010-11
2011-12
3.12
0.84
2009-10
2012-13
2013-14 2014-15A
Financial Review: (2013-14)

NPAT stood at BDT 273 mn, which is an 11% increase
compared to previous year (BDT 245 mn).

Debt-Equity ratio decreased from 0.5 to 0.3 as Long Term
Debt decreased from BDT 671 mn to BDT 186 mn.

ROE & ROA stood at 12% and 8% respectively.
Financial Review: (Q1 2014-15)

Annualized NPAT stood at BDT 246.20 mn, which is around
10% decline compared to previous year (BDT 73 mn).

Post-IPO annualized EPS declined to BDT 3.12
EBL Securities Ltd. Research Team:
M. Shahryar Faiz
Farah Tasneem
Shahriar Azad Shashi
Head of Research
Research Associate
Research Associate
[email protected]
[email protected]
[email protected]
Disclaimer: This document has been prepared by EBL Securities Ltd. (EBLSL) for information only of its clients on the basis of the publicly available information in the market and own research. This
document has been prepared for information purpose only and does not solicit any action based on the material contained herein and should not be construed as an offer or solicitation to buy or sell or
subscribe to any security. Neither EBLSL nor any of its directors, shareholders, member of the management or employee represents or warrants expressly or impliedly that the information or data of the
sources used in the documents are genuine, accurate, complete, authentic and correct. However all reasonable care has been taken to ensure the accuracy of the contents of this document. EBLSL will not
take any responsibility for any decisions made by investors based on the information herein.

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