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    BSRM Steels Limited

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    BSRM Steel Limited is a Bangladeshi steel manufacturing company that produces reinforced steel bars. It commenced commercial operations in 2008 and has an annual production capacity of 600,000 metric tons, 96% of which was utilized in 2012. While BSRM owns a subsidiary that produces billets, its raw material, it still imports 70% of its billets from various countries. However, BSRM is establishing its own billet production plant to become self-sufficient in raw materials and reduce costs. BSRM has the largest market share in Bangladesh at 25% and aims to benefit from increasing infrastructure development driving up domestic steel demand. However, high raw material costs and interest expenses have squeezed BSRM's margins in recent

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    BSRM Steels Limited

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    293 views2 pages
    BSRM Steel Limited is a Bangladeshi steel manufacturing company that produces reinforced steel bars. It commenced commercial operations in 2008 and has an annual production capacity of 600,000 metric tons, 96% of which was utilized in 2012. While BSRM owns a subsidiary that produces billets, its raw material, it still imports 70% of its billets from various countries. However, BSRM is establishing its own billet production plant to become self-sufficient in raw materials and reduce costs. BSRM has the largest market share in Bangladesh at 25% and aims to benefit from increasing infrastructure development driving up domestic steel demand. However, high raw material costs and interest expenses have squeezed BSRM's margins in recent

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    BSRM Steel Limited is a Bangladeshi steel manufacturing company that produces reinforced steel bars. It commenced commercial operations in 2008 and has an annual production capacity of 600,000 metric tons, 96% of which was utilized in 2012. While BSRM owns a subsidiary that produces billets, its raw material, it still imports 70% of its billets from various countries. However, BSRM is establishing its own billet production plant to become self-sufficient in raw materials and reduce costs. BSRM has the largest market share in Bangladesh at 25% and aims to benefit from increasing infrastructure development driving up domestic steel demand. However, high raw material costs and interest expenses have squeezed BSRM's margins in recent

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    293 views2 pages

    BSRM Steels Limited

    Uploaded by

    ashek ishtiak haq
    BSRM Steel Limited is a Bangladeshi steel manufacturing company that produces reinforced steel bars. It commenced commercial operations in 2008 and has an annual production capacity of 600,000 metric tons, 96% of which was utilized in 2012. While BSRM owns a subsidiary that produces billets, its raw material, it still imports 70% of its billets from various countries. However, BSRM is establishing its own billet production plant to become self-sufficient in raw materials and reduce costs. BSRM has the largest market share in Bangladesh at 25% and aims to benefit from increasing infrastructure development driving up domestic steel demand. However, high raw material costs and interest expenses have squeezed BSRM's margins in recent

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    Rezwana Nasreen

    Head of Research
    rezwana@ilslbd.com

    BSRM STEEL LIMITED


    Company Overview

    Investment Negatives

    BSRM Steel mainly engaged in production and supply of Xtreme


    500W deformed bars of reinforced steel. It commenced its
    commercial operation from April, 2008. Its annual installed
    capacity is 600,000 MT of which 96% has already been utilized in
    2012. BSRM Steel Limited (BSL) was listed to DSE and CSE in
    January 2009. BSRM Steels annual consumption of billet (raw
    material for producing high quality steel) is 7.2 lakh tones. BSRM
    Steel owned 95% interest of its only subsidiary BSRM Iron & Steel
    Co. Ltd. (BISCO), which is an in-house billet manufacturing plant.
    Still at present, to meet its total requirement, 70% of its raw
    materials are imported from Japan, Taiwan, Korea, Turkey, North
    America and South America.

    Industry Overview

    Company Fundamentals

    Bangladesh has more than 400 steel, re-rolling and auto-re-rolling


    mills with a combined annual production capacity of 80 lakh tones,
    against the total demand of only 40 lakh tones. The government
    accounts for nearly 40% of total steel consumption.
    Bangladesh is one of the lowest consumers of steel products in the
    world. Per capita steel consumption in Bangladesh now stands at
    only 25 kilograms, while it is 55 Kilograms in India, 324 kilograms in
    developed nations. Although a number of companies of the sector,
    including BSRM, GPH, RSRM, Rahim Steel and Bashundhara Steel,
    are producing the raw material, billet, locally, around 15 lakh tones
    are still imported every year.
    Over capacity of the steel industry indicates enormous export
    potential, though the option is still kept unexplored following some
    bottlenecks in the export process.
    Initiation of Padma Bridge construction, acceleration of
    Governments big infrastructure projects under Annual
    Development Program (ADP) and revival of the local real-estate
    industry will undoubtedly boost-up the steel consumption locally.

    Investment Positives

    Since the prices of billet fluctuate violently in the international


    market - increasing the cost of rod production locally, BSRM
    Group has taken initiative to set-up a melt shop to produce
    860,000 MT MS Billet under the name of BSRM Steel Mills
    (BSRM Steel owned 25% stake). The plant is scheduled to
    commence its commercial operation by the middle of 2014.
    This will fully eliminate its dependence on imported billet,
    reduce costs significantly and increase operational efficiency
    of the company.
    To ensure undisrupted power availability to its upcoming
    billet plant, BSRM Steel planned to set-up a captive power
    plant. The company already inked a Tk 149.66 crore (Rs 104.4
    crore) deal with Siemens Ltd in last April to build the gas
    insulated switchgear (GIS) substation that is expected to be
    completed within 15 months.
    BSRM Steel Ltd. is the leader in the local steel market. Despite
    having the highest prices, it caters to more than 25% of the
    total domestic steel demand.

    BSRM Steels gross and net margin squeezed to 4.96% and


    2.26% respectively in 2012, due to rise in the costs of raw
    materials, gas & electricity, bank borrowing and BDT
    depreciation. Setting up its own billet plant will surely help the
    company to secure better margin.
    BSRM Steel Ltd. is heavily exposed to leverage. It has two
    syndicated term loan at 6-month t-bill rate+6%. This high
    interest eats-up a significant portion of its profit. Both loans
    will be expired in February, 2014. Moreover, BSRM Steel has
    got nod from Bangladesh Bank to borrow $40 million at 6month LIBOR + 4.50% interest rate from foreign sources for its
    upcoming billet manufacturing plant.

    Market Cap (BDT mn)


    Market weight
    Free-float (Public +Inst.)
    Paid-up Capital (BDT mn)
    3 Months Average Turnover (BDT mn)
    3 Months Return
    Current Price (BDT)
    52-week price range (BDT)
    Fuel & Power Sector Forward P/E
    2010

    24,847.0
    1.2%
    51.6%
    3,418.0
    46.9
    12.0%
    72.7
    43.7 108.0
    17.6x
    2013

    2011

    2012

    31,243
    922
    24,070
    2,185
    3,221
    15/0

    38,262
    1,001
    26,807
    977
    6,448
    10/5

    39,130
    1,901
    27,933
    625
    7,076
    ---

    8.8%
    7.0%
    4.4%
    4.4%

    7.9%
    6.0%
    3.4%
    3.0%

    6.5%
    4.5%
    3.9%
    2.6%

    12.4%
    10.0%
    7.1%
    4.9%

    39%
    21.9%
    8.6%
    68.1%

    42%
    27.7%
    21.5%
    -4.4%

    22%
    0.9%
    -9.2%
    8.6%

    2%
    94.5%
    129.4%
    89.9%

    8.7%
    85.4%

    5.1%
    34.4%

    3.9%
    20.7%

    6.9%
    28.1%

    Financial Information (BDT mn):


    22,008
    Sales
    965
    PAT
    12,234
    Assets
    1,198
    LT Debt
    2,135
    Equity
    Div. % (C/B)
    0/20

    (Annualized)

    Margin:
    Gross Profit
    Operating Profit
    Pretax Profit
    Net Profit
    Growth:
    Sales
    Gross Profit
    Operating Profit
    Net Profit
    Profitability:
    ROA
    ROE
    Leverage:
    Debt Ratio
    Debt-Equity
    Ratio
    Interest
    Coverage
    Valuation:Ratio
    Price/Earnings
    Price/BV
    EPS (BDT)
    NAVPS (BDT)
    DPS (BDT)

    9.8%

    9.1%

    5.7%

    4.8%

    56.1%

    67.9%

    23.8%

    19.1%

    2.9

    2.3

    2.6

    3.4

    25.8x
    11.6x
    2.8
    6.2
    0.0

    26.9x
    7.7x
    2.7
    9.4
    1.5

    24.8x
    3.9x
    2.9
    18.9
    1.0

    13.1x
    3.5x
    5.6
    20.7
    ---

    September 15, 2013

    Rezwana Nasreen
    Head of Research
    rezwana@ilslbd.com

    Concluding Remark

    6-yr Earnings Per Share (BDT)


    8.0

    5.6

    6.0
    4.0

    2.8

    2.7

    2.9

    2010

    2011

    2012

    1.7

    2.0
    0.0
    -2.0
    -4.0
    -6.0
    -8.0

    -5.6
    2008

    2009

    2013 (Ann)

    Price Performance Since Listing (BDT)

    BSRM is operating in a high cost- low margin steel industry. Since it


    imports a significant part of its required raw material, violent
    fluctuation of the billet price in the international market
    significantly increases the cost of rod production and squeezes the
    profit. Recent decline of billet price enable the company to achieve
    improved profit and enhanced margin in 1st two quarters of 2013.
    This profit growth of 2013 will sustain if the billet price follows the
    declining trend. Nonetheless, the up-coming in-house raw material
    plant of the company is expected to reduce the per ton cost of rod
    production by BDT 4,000 BDT 5,000, which will provide the
    market leader a competitive edge over its existing competitors.

    300
    250
    200
    150
    100
    50
    0
    Jan-09

    Jan-10

    Jan-11

    Jan-12

    Jan-13

    Disclaimer: This document has been prepared by International Leasing Securities Limited (ILSL) 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 ILSL 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. ILSL will not take any responsibility for any
    decisions made by investors based on the information herein.

    September 15, 2013

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