 Mourad El Bidaoui

 Imane El Hassani
 Anjy Alssaheli
 Omran Alssaheli
 Introduction: Dupont Analysis
1. Economy overview  1. Return on asset
2. Industry overview  2. Return on equity
3. Company overview
 Capital budgeting:
 Vertical and Horizontal Analysis: 1. Market value added and market to book ratio
1. Income statement 2. Economic value added
2. Balance sheet
3. Conclusion
 Ratios Analysis:
1. Liquidity
2. Leverage
3. Activity
4. Profitability
The annual growth of the country since 2010 is averaged
about 3,9%.

The Moroccan GDP 2016,17&18 in billions USD

was: 103.34,109.70, and 118.53 respectively.

Morocco's annual GDP growth was 1.1% in 2016, 4.7% in

2017 & 6.9% last year.

Moroccan GDP per capita: in 2016 was 3,003 and 3,349

USD in Dec 2018, compared with 3,147 USD in Dec 2017
 Agriculture 13%

 Services 57%

 Industry 30%
The total unemployment rate, measured as a percentage of the total labor force,
was 9.6% in the third quarter of 2016

The rate dropped to 9.8 percent in 2018

The minimum wage who works a full month (equivalent to 191 hours of work during
the month) is 2517 MAD. It comes with basic social security coverage CNSS & AMO.
 The Moroccan pharmaceutical industry, which was marked in
the 1920s by the creation of the first quinine production unit,
currently includes 51 industrial pharmaceutical
establishments in perpetual development
 They have a normal rate that varies of 20 %.
 7 % for the raw materials need for the production of and in order for them to
benefit from the reduced rate of 7% provided for by the provisions of article 99-1 °
of the general tax code.
 Anti-cancer drugs, antiviral drugs hepatitis B and C and medicines for treatment of
diabetes, asthma, cardiovascular disease and immunodeficiency syndrome disease
acquired (AIDS) and meningitis disease they can be exempted for the right of
reduction.
The major player in the pharmaceutical industry for the
Moroccan companies are

Afric-Phar, Bottu, Cooper Pharma, Galenica, Genpharma,

Iberma, Ipharma, Laprophan, Novapharm, Novopharma,
Pharma 5, Pharmaceutical Institute, Promopharm,
Polymédic, Sothema, Steripharma, Zenith

For the international companies implanted in morocco are

Alcon, Abbvie, Abbott, AstraZeneca, Bayer, Celgene, Eli

Lilly, GlaxoSmithKline, Janssen, Leo Pharma, Merck, MSD,
Novartis, Novo Nordisk, Pierre Fabre, Pfizer, Roche,
Sanofi, Servier, Spimaco
 It is a Moroccan public pharmaceutical laboratory company.
 It is mainly specialized in the production and marketing of drugs since 1976.
 First project started on 26 January 1976 in Bouskoura the first unit of production of
anti-cancer drug resulting from biotechnology in Africa.
 SOTHEMA started by producing a toothpaste and mouthwash.(beginning)
 SOTHEMA provides many products in the form of tablets, capsules, syrups,
ampoules, creams and ointments, as well as powders and suspensions for
injections.
 With more than 250 products were manufactured, the company represents 35
international contracting laboratories among the leaders in the world in R&D.
 SOTHEMA was listed on Casablanca stock exchange in February 2005.
 It also provides
Import and sale of
services for
Sale of medicine medicine and dental
Moroccan and
products.
foreign laboratories.
 Export their products to free trade agreement with The Company had opened
north Africa, west Africa, Europe and America new branch (4000m2 factory)
and Gulf states. recently in Senegal.
 It is 150,000 shares .
 Two different categories:
o Which are:
Class A shares: 10,200 shares (7% of the number total shares offered).
Class B shares: 139,800 shares (93% of the total number of actions offered).
 The Form of securities of the Class A shares are registered, and are fully released,
free of any commitment and have a nominal value of 100 Dh.
 Class B shares are bearer shares, and are fully released, free of any com.
 Each share gives right to a right of vote during meetings.
 The cost of revenue has increased by 0.69% from 2016 to 2017.

 The gross profit of the company grew higher by the same amount in 2017, which means that there
are both in line.
 The total operating expenses has increase by 0.68% from 2016 to 2017, and it increased
significantly by 2.98% from 2017 to 2018
 This increase because there is a rise in selling, general/administrative expenses, and income
expenses by 0.85% from 2016 to 2017.
 The operating income has increased by 0.68% from 2016 to 2017, and enhanced by 2.98% from
2017 to 2018, which means that the company's management is generating more revenue while
controlling expenses such as the interest income, and gain (loss) on sale of assets.
 The net income, it has increased by 0.59% from 2016 to 2017, and by 3.05% from 2017 to 2018.
 An increase in the total current asset between 2016 to 2017 by 0.32% and by 2.69% from 2017 to
2018.
 An increase in total receivables in the year of 2018 and 2017, due to the increase in account
receivable by 2.43%.
 There is slight decrease in inventory by 1.51% from 2016 to 2017.

 This increase in account receivable has offset the decrease in inventory.

 The company was not efficient in collecting cash from their customers, because its account
receivable remains high during the years.
 A decrease in properties plans and equipment by 0.87%, but the accumulated depreciation didn’t
change that much which mean that the company didn’t use their long-term assets efficiently.
 A decrease in the company’s long-term investment by 1.2% and a significance decrease in notes
payable by 2.83%, which means that the company paid some of its debt.
 The cost of revenue has increased from 2016 to 2017 by 6%, and an increase
significantly by 19% from 2016 to 2018.
 The gross profit has increased by 9% from 2016 to 2017 and by 22% from 2016 to 2018.

 The total operating expenses has increased from 2016 to 2017 by 8% and by 17% from
2016 to 2018 and that is due to the fact that there is an increase in selling and general
administrative expenses by 14% from 2016 to 2017 and by 23% from 2016 to 2018;
 Even though the income expenses has decreased by 49% from 2016 to 2017 and has
decreased by 146% from 2016 to 2018 .
 The operating income has increased by 2% from 2016 to 2017 and by 36% from 2016 to
2018.
 The net income has increased by 1% from 2016 to 2017 and by 46% from 2017 to 2018.
 The account receivable trade net decreased from 2016 to 2017 by 0.8%; however,
by the year 2018 it has increased significantly by 11.1%, which has affected our total
receivables that has increased by 14.3% in 2018.
 The inventory has increased by 12.3% from 2016 to 2017 and by 22.8% from 2016 to
2018.
 The property plant and equipment has an increase by 3.4% from 2016 to 2017 and
by 3.1 % from 2016 to 2018.
 The long-term investment had a significant increase of 60.8% from 2016 to 2017
and by 66.3% from 2016 to 2018.
 Sothema had an increase in their notes payable and short-term debt by 33.7%
from 2016 to 2017 and by 22.9% from 2016 to 2018.
Sothema' s net working capital slightly decreased from 2016 to
2017; however, it also knew a significant increase of their net
working capital from 2017 to 2018 which means they had
sufficient current assets to offset their current liabilities
compared to our competitor (Promopharma).
 Current ratio varies from one industry to another. For our
company the liquidity ratio has decreased from 2016 to 2017,
and it has increased significantly from 2017 to 2018.

 Regarding our competitors, they have higher liquidity ratio

than our company. Concerning our company, the current assets
are 169% of current liability. Even though we have higher net
working capital compared to our competitors, still they have a
higher liquidity ratio, we can explain this by the fact that their
company is more liquid.
 This ratio shows the ability of the firm to pay short-term
obligation with its most liquid asset since the inventory is the
lowest liquidity. We can notice from the graph that the quick
ratio has decreased from 2016 to 2017
 This ratio shows that the ability of the company to continue
to service its interest payment. We can notice from the graph
that the times interest earned has decreased slightly from 2016
to 2017, and remained stable from 2017 to 2018.

 our competitor’s times interest earning ratio has increased

significantly from 2016 to 2018, this shows that our competitor
is more able to continue to service its debt compared to
Sothema.
 This ratio demonstrates that the ability of Sothema to cover
its interest payment in terms of cash by adding back an
expense that was not paid into cash. We can notice from the
graph that the cash coverage ratio has decreased over the
three years.

 Even though that the cash covered ratio of our competitors

had decreased from 2016 to 2017 but their ratio still higher
than Sothema in 2018.
 debt to equity ratio will provide us a clear idea about the
financial leverage of our firm. From the graph above, we can
notice that the debt of equity ratio slightly decreased from
2016 to 2017 and significantly decrease from 2017 to 2018.


 Debt to total asset ratio is a ratio that help us have an idea
about the Sothem’s ability to pay its debts with its assets.
During these 3 years, Sothema’s ratio leverage has decreased
overtime from 2016 to 2018.
 The total capitalization shows the total value of Sothema’s
share of stock. It seems from the graph that Sothema’s total
capitalization has decreased from 2016 to 2017 and increased
from 2017 to 2018.

 in 2018, Sothema’s ratio has increased to 5.8941% meaning

that 5.8941% of the company’s total capitalization is from its
long-term debt. However, for our competitors, their ratio has
decreased then increased by lower percentage compared to
Sothema.

 The receivable turnover ratio(efficiency ratio) shows how
many times per year Sothema turns its account receivable into
cash in s specific period. from the graph, we analyze that
Sothema’s receivable turnover ratio has slightly increased from
2016 to 2017 and remained constant in 2018.

 It shows that our competitors’ ratio has decreased overtime

meaning that they are less efficient in collecting account
receivable than Sothema.

 Since Sothema is very efficient in collecting account
receivable from its customers. From the graph, the collection
period of our company has decreased in 2017 and remained
almost constant in 2018

 we remarked that in 2018 it took for Sothema only 120 days

to collect their account receivable compared to our
competitors that took for them 180 days because they fail
collecting their account receivable compared to Sothema.

 The payable turnover ratio shows how many times per year
the company pays its suppliers. Sothema’s payable turnover
remains almost stable throughout the three years. For
instance, for the year 2017, our company can pay 3.35 times
its purchases.

 Concerning our competitors, we noticed that in 2017, there

was a significant increase in their account payable which led to
decrease in their payable turnover ratio.
 The same conclusion can me made when it comes to how
many days the company takes to pay its suppliers. In other
words, Sothema’s payable turnover almost have constant days
due to the fact that account payable and annual credit
purchases are both in parallel
 The inventory turnover illustrates the number of times that
Sothema is able to sell or replace their inventories in a time
period. We analyzed from the graph that Sothema had a policy
in order to keep a constant level of their inventory due to the
fact that the cost of good of sold and inventory are in parallel.

 in 2018, Sothema was able to renew its inventory 2.48 times.

However, for our competitors, their ratio has increased then
decreased significantly which means that they have unstable
inventory level over time, and their company maybe holding
too much inventory compared to their sales.
 The asset turnover ratio measures Sothema’s ability to
generate sales from its assets. Sothema’s asset turnover
remained stable throughout the years from 2016 to 2018 with
an average of 1.10, which shows our company ability to
generate revenue from their assets.

 Regarding our competitors, we have noticed that there was a

significant increase in their total asset turnover from 2016 to
2017, which means that competitors are more efficient in
generating more revenue from their assets.
 Gross profit margin ratio demonstrates the percentage of
sales revenue that Sothema keeps after it covers all its costs.
From the graph above, we can analyze that the gross profit
margin ratio remained almost constant throughout the years
due to the fact that both gross profit and net sales are both in
parallel.

 even though the gross profit ratio is constant but according to

the horizontal analysis, the gross profit dollar has increased by
13%. For instance, in 2018, Sothema has 0.34 meaning that for
every one dollar generated in Sothema’s sales, it has 34 cents
leftover to cover its basic operating cost.
 The net profit margin ratio shows the amount of each dollar
that has left over after paying all the expenses. From the graph
above, we can analyze that the net profit margin ratio has
slightly decreased from 2016 to 2017, and then significantly
increase from 2017 to 2018 because there is an increase in
their net income after tax by 43%.

 However, For instance, Sothema net profit margin was 11.9%

then enhanced to 14.82% in 2018, meaning that everyone
dollar sale contributes 34 cents towards its net profit of the
business.
 This ratio helps us measure the gain and loss that are
generated on investment compared to the amount the
company has invested. We remarked from the graph above that
Sothema has highly increase between the years 17 and 18, this
means that the firm’s total revenue exceeded its total cost in
2018 compared to 2017.

 in 2018, the company made 15% as a return on investment

from its total assets. Concerning our competitors, their return
on investment has significantly decreased throughout the
years.
 This ratio helps us measure the ability of Sothema to
generate profits for its shareholders. We remarked from the
graph above that Sothema has highly increase between the
years 17 and 18, this means that the company is generating
higher profits for its stockholders in 2018 compared to 2017.

 In 2018, the company made 27% as a return on equity from its

stockholders investment. Concerning our competitors, their
return on equity has significantly decreased throughout the
years.
The return on asset has Our competitors, their
increased significantly gross profit has
due to the fact that the decreased that impacted
profit margin remained their asset turnover and
stable on the expense of this led to decrease their
its asset turnover. return on asset.
 Sothema’s return on equity has decreased slightly from
2016 to 2017 then increased significantly from 2017 to
2018.
 The decrease in the ROE is due to the slight decrease in
the leverage ratio; however, for the debt there was an
increase but due to the fact that there was a more
important decrease in both leverage ratio and operating
profit than the increase for the debt burden, which has
resulted into a decrease in the return on equity.
 In 2018, there was an increase in the return on equity,
which is due to the fact that there was a significant
increase in both total asset turnover and profit margin.
 For our competitors, they had a slightly increase in their
ROE then a significantly decrease from 2017 to 2018
because of the significant decrease in both their total asset
turnover and net profit margin.
 The market value added of Sothema has increased significantly from 2016 to 2018, this
means that Sothema became more valued in the market by shareholders; in other words,
the shareholders have a good impression about our company that’s why they are willing
to pay more.
 However, our competitor’s market value added has increased from 16 to 17 then
decreased significantly from 17 to 18.
 In 2018, our company is more valued and induces more shareholders since we have a
good impression.
 For the market to book ratio, Sothema has increased significantly from 2016 to 2018.

 In 2018, our shareholders are ready to pay 16 times more than the historical value/book
value on our balance sheet.
 after calculating the EVA value, which is the residual income
that it is increasing due to the fact that the net income and
the capital is increasing too. This shows that Sothema is
creating value with its capital investments resulting in
increasing its economic value added in the market.

 for our competitors, their EVA has decreased significantly

throughout the years; resulting in decreasing their economic
value added in the market.

We believe that Sothema can be an attractive investment for
the investors as it is making huge potential investment with
Biocad a Russian company that made her the number one
producer of anti-cancer drugs. Moreover Sothema has faced
some issues regarding payment of taxes yet they managed to
successfully increase their profits by 6.8 % in 2017 which
means that the tax audit has not affected the company also
the government fixation of prices made the whole industry
to stagnate however Sothema was not affected by this new
regulations as it helped generate more revenue.
Furthermore, Sothema is investing in developing new generic
medicines that will reduce medicines prices to become more
profitable this is why we recommend the investors to Short
buy Sothema’s shares and not Promopharma as its overall
activity profitability has decreased from 2017 to 2018.
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