Company Description• RAK Ceramics, UAE is officially recognized as world’s largest

ceramics manufacturer, which was established in 1991

• Supplies to more than 160 countries across the world including Europe, America and Australia

• RAK Ceramics (Bangladesh) Limited, a UAE-Bangladesh joint venture company, was incorporated in 1998

• It holds about one-third of the ceramics market in Bangladesh, earning the reputation of pioneering new technology in Bangladesh

• Gained approval for book building IPO issued by the Registrar of Joint Stock Companies in 2009

Company Description

• 90% held by RAK Ceramics PSC and its nominees and remaining 10% owned by local investors mostly by the Managing Director, Mr. S.A.K. Ekramuzzaman

• Local registered office is situated in Uttara also its running factory is in Gazipur

• RAK Ceramics (Bangladesh) Ltd. diversified its business approach by investing in mainly two subsidiaries namely RAK Pharmaceuticals Pvt. Ltd., RAK Power Pvt. Ltd.

• Incurring loss on these investments, the Board of Directors has decided to sell entire shareholding in 2014

• Spent tk. 2.9 million for CSR activities for education and medical purpose

Ratio AnalysisLiquidity Ratio Analysis

• Both the Current Ratio and Quick Ratio were higher in 2014 than 2013

• Which meant RAK Ceramics (BD) was more liquid and more capable of paying its short term liabilities in 2014

• From Annual Report 2014, the reason was due to from greater current asset and lower inventories

Year Current Ratio Quick Ratio

2014 2.01 1.49

2013 1.97 1.31

Ratio AnalysisActivity Ratio Analysis

• For both 2014 and 2013, Total Asset Turnover values were unchanged which meant company’s ability was same to generate sales using its assets. As its below 1, RAK(BD) was not so proficient to create sales

• The higher Inventory Turnover indicated products were sold and replaced faster in 2014

• With almost same Average Collection Period in both years, RAK(BD) managed similarly to turn its receivables into cash

Year Total Asset Turnover Inventory Turnover Avg. Collection Period

2014 0.53 1.67 41.42

2013 0.53 1.45 42.49

Ratio AnalysisDebt Ratio Analysis

• From Debt-to-Equity ratios, it was evident RAK(BD) had quite less portion of debt. In 2014 it was 10% and in 2013 it was 8%. It can be due to company’s good health or due to conservative management policy

• With lower debt, RAK(BD) generated lower interests. Consequently against EBIT the Times Interest Earned was higher in both years

Year Debt Equity Ratio Times Interest Earned

2014 0.10 136.34

2013 0.08 86.15

Ratio AnalysisProfitability Ratio Analysis

• Similar Gross Profit Margin indicates company’s stability

• Net Profit Margin was lower in 2014 meaning RAK(BD) generated less profit than 2013. The reason stated in annual report is increased operating expenses in 2014

• More than 5% Return on Assets in both years indicate acceptable earnings. But 2014 value was lower due to lower profit and higher assets than 2013

• Return on Equity values are pretty low due to lower net profit

Year Gross Profit Margin Net Profit Margin ROA ROE

2014 39.14% 9.67% 5.15% 8.25%

2013 39.10% 12.48% 6.56% 10.14%

P/E Ratio for RAK(BD)Year Market Price (tk.) EPS P/E

2014 58.45 1.67 35

2013 53.90 2.03 27

Industry P/E Average is 30

• Higher P/E ratio in 2014 than 2013, also it has higher P/E value than industry average. So it could be expected RAK(BD) will grow more than the industry

• With relevant value analysis (both Market price and EPS), the reason behind higher P/E in 2014 was due to lower EPS

Capital Asset Pricing Model

• CAPM describes relation between risk and expected return

• With higher Beta of 1.37 it has a higher return of 22% where the market premium is 8.4%

• This is a risky stock, with higher return

• Investors should keep in mind the lower Net Profit in 2014 than 2013, also growing operating expenses

Common Size Analysis of Year 2014

Balance Sheet 2014

• Total non-current assets were 25% and total current assets were 75%

• Total equity was 62% and total liability was 38%, in which non-current liability was only 0.8%

Income Statement 2014

• Gross profit was 39% and total operating expenses were18%

• Income tax was around 8%

• Total comprehensive income was near 10%

Index Analysis from Year 2013 to 2014

Balance Sheet 2013 - 2014

• The value of total non-current assets were lower in 2014 (78%)

• Total current assets increased (119%) due to loan to associates, advance income tax and prepayments

• Total equity remained same

• Total liabilities increased in 2014 (115%) due to employee benefits payable and trade payable

Income Statement 2013 – 2014

• Total comprehensive income was 83% in 2014 compared to 2013 higher tax and higher operating expenses