Millat Tractors_Final (Sheraz)

8/8/2019 Millat Tractors_Final (Sheraz)

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EQUITY AND LIABILITIES 2007 2008 % of Sales 2009 2010

Sales ### ### 12,274,922 13,484,296

Share capital and reserves

Authorised capital

20,000,000 (June 30, 2007: 20,000,000) ordinary shares of R 200,000 200,000

Issued, subscribed and paid up capital 187,420 187,420 187,420 187,420

General reserve 1,986,000 ### 19.79% 2,428,836 2,668,135

Unappropriated profit 450,638 576,917 5.16% 633,757 696,197

Fair Value Reserve 72,522 63,542 0.57% 69,802 76,680

2,696,580 ### 3,319,816 3,628,432

Non-current liabilities

Security deposits 9,285 9,485 9,485 9,485

Deferred revenue 36,478 32,729 32,729 32,729

Deferred taxaton 5,587 12,355 12,355 12,355

Accumulating compensated absenes 26,029 28,344 0.25% 31,137 34,204

77,379 82,913 85,706 88,773

Current liabilities

Current portion of deferref ervenue 224,199 218,127 1.95% 239,618 263,226

Trade and other payables 3,241,181 ### 35.13% 4,311,727 4,736,536Mark-up accured on short term borrowings 4,579 2,858 0.03% 3,140 3,449

Short Term Borrowings 20,406 0 0.00% 0 0

3,490,365 ### 4,554,485 5,003,211

Contingencies and commitments

Total 6,264,324 ### 7,960,006 8,720,416

BALANCE SHEET(Rupees in Thousands)


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ASSETSNon-current assets

Property, plant and equipment 230,474 298,219 2.67% 327,601 359,877

Capital work-in-progress 128,969 179,955 1.61% 197,685 217,162Intangible assets-in progress 16,527 17,028 17,028 17,028

Investment property 255,708 273,203 2.44% 300,120 329,689

Long term investments 284,364 315,425 315,425 315,425

Long term loans - considered good 4,142 4,385 4,385 4,385

920,184 ### 1,162,244 1,243,566

Current assets

Stores and spares 44,081 78,292 0.70% 86,006 94,479

Stock in trade 1,840,082 ### 14.64% 1,797,353 1,974,436

Trade debts 275,953 102,660 0.92% 112,774 123,885

Loans and advances 63,163 98,082 0.88% 107,745 118,361

Trade deposit and prepayments 5,308 7,782 0.07% 8,549 9,391

Other receivables 416,300 ### 10.45% 1,282,292 1,408,628

Taxation - net 80,811 8,198 8,198 8,198

Short-term investments 2,496,300 ### 25.34% 3,110,767 3,417,252

Cash and bank balance 122,142 249,358 2.23% 273,926 300,914

5,344,140 ### 6,787,610 7,455,544

Total Assets 6,264,324 ### 7,949,854 8,699,110

EFN 10,153 21,306

7,960,006 8,720,416


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AFN / EFN 2009 AFN / EFN 2010

Total assets = ### Total assets = 8,699,110

Total Liabilities = ### Total Liabilities = 8720416

EFN = -10,153 EFN = -21,306

For projected Balance Sheet of 2009 and 2010, I took 2008 as base year and then calculated the % of sales of some of theheads of Balance Sheet. With the help of these calculated % of sales, i calculate the Balance Sheet for Years 2009 and 2010

while keeping growth rate of 9.85% as shown in Income Statement.

After calculating EFNof 2009 I came to know that my company, Millat Tractors needed External financing of Rs. 10,513 inassets in order to equalize the balance sheet. Similarly, in 2010 Millat Tractors needed External financing of Rs. 21,306 in

assets in order to equalize the balance sheet.


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INCOME STATEMENT (Rupees in Thousands)

PROFIT and LOSS ACCOUNT 2007 2008 % of Sales 2009 2010

Rupees In thousandsSales-net 10,961,438 ### 12274922 13484296

Cost of sales 9,832,853 ### 86.82% 10657108 11707089

Gross profit 1,128,585 ### 1617814 1777207

Distribution & marketing expenses 346,260 361,495 3.24% 397111 436236

Administrative expenses 183,303 210,120 1.88% 230822 253563

529,563 571,615 627933 689799

Operating profit 599,022 901,101 989881 1087408

Other operating income 332,614 321,608 2.88% 353294 388102

EBIT 931,636 ### 1343175 1475510

Finance cost 15,997 20,996 0.19% 23065 25337Other operating expenses 75,437 81,574 0.73% 89611 98440

91,434 102,570 112676 123777

Profit before taxation 840,202 ### 1230500 1351733

Taxation 203,305 309,681 363633 426984

Profit after taxation 636,897 810,458 866867 924749

Basic earnings per share - Rupees 33.98 43.24 46.25 49.34

TAX RATE 24.20% 27.65% 29.55% 31.59%TAX RATE GROWTH RATE 6.89%

No. of shares outstanding 18,741,969 ### 18,741,969 ###

Net Income 636897000 ### ### ###


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GROWTH RATE

2008 2007 2006 2005 2004

Sales - Net 11,174,014 ### 9,737,382 ### ###

GROWTH RATE i 9.85%

5

YEARS

PV ###

FV ###

n 5

GROWTH RATE 7.63%

4

YEARS

PV ###

FV ###

n 4

GROWTH RATE 4.69%

3

YEARS

PV ###

FV ###

n 3

First I took out the graowth rate of Income Statement for 5, 4 and 3 years respectively. Their growth rate will be 9.85% for 5 years, 7.

and 4.69% for 3 years. So, I took the highest growth rate 9.85% of 5 years. My base year was 2008 and then I found the % sales of he

Statements. For projected Income Statement of 2009 and 2010, I used this growth rate and % of sales.


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Trading Results (Sales)

2008 2007 2006 2005 2004

Sales - Net ### ### ### ### ###

Gross Profit ### ### ### 927,359 847,336

Operating Profit 901,101 599,022 938,960 712,651 619,805Profit before tax ### 840,202 ### 700,198 595,342

Net Profit after tax 810,458 636,897 730,577 453,862 394,622


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Sensitivity Analysis of CGS (Rs.)

PROFIT and LOSS ACCOUNT Base 30% 15% -15% -30%

Sales-net ### ### ### ### ###

Cost of sales ### ### ### ### ###

Gross profit ### ### 17,521 ### ###

Distribution & marketing expenses 361,495 361,495 361,495 361,495 361,495

Administrative expenses 210,120 210,120 210,120 210,120 210,120

571,615 571,615 571,615 571,615 571,615

Operating profit 901,101 ### ### ### ###

Other operating income 321,608 321,608 321,608 321,608 321,608### ### ### ### ###

Finance cost 20,996 20,996 20,996 20,996 20,996

Other operating expenses 81,574 81,574 81,574 81,574 81,574

102,570 102,570 102,570 102,570 102,570

Profit before taxation ### ### ### ### ###

Taxation 309,718 -495,004 -92,643 712,080 ###

Profit after taxation 810,421 ### ### ### ###

Taxation 27.65%

From Sensitivit Analysis of Cost of Sales I came to know that if I increases my Cost of Slaes by 15%, myIncome Statement will become negative which shows the loss for my company and definetely same is thecase with 30% increase in Cost of Sales. If I decreases my Cost of Sales by 15 %, then my company will be

in +ve and same is the case with 30% decrease in cost of Sales


10/22

Sensitivity Analysis of Sales (Rs.)

PROFIT and LOSS ACCOUNT Base 30% 15% -30% -15%

Sales-net ### ### ### ### ###

Cost of sales ### ### ### ### ###

Gross profit ### ### ### ### ###



571,615 571,615 571,615 571,615 571,615

Operating profit 901,101 ### ### ### ###

Other operating income 321,608 321,608 321,608 321,608 321,608

### ### ### ### ###

Finance cost 20,996 20,996 20,996 20,996 20,996


102,570 102,570 102,570 102,570 102,570


Taxation 309,718 ### 773,161 -617,166 -153,724

Profit after taxation 810,421 ### ### ### ###

Taxation 27.65%

From Sensitivit Analysis of Sales - Net, I came to know that if I decreases my Slaes by 15%, my IncomeStatement will become negative which shows the loss for my company and definetely same is the case

with 30% decrease in Sales. If I increases my Sales by 15 %, then my company will be in +ve and same isthe case with 30% increase in Sales


11/22

Sensitivity Analysis of Expenses (Rs.)

PROFIT and LOSS ACCOUNT Base (2008) 30% 15% -30% -15%

Sales-net ### ### ### ### ###Cost of sales 9,701,298 ### ### ### ###

Gross profit ### ### ### ### ###



571,615 743,100 657,357 400,131 485,873

Operating profit 901,101 729,617 815,359 ### 986,843


### ### ### ### ###

Finance cost 20,996 20,996 20,996 20,996 20,996


102,570 102,570 102,570 102,570 102,570

Profit before taxation ### 948,655 ### ### ###

Taxation 309,718 262,303 286,011 357,134 333,426

Profit after taxation 810,421 686,352 748,386 934,490 872,455

Taxation 27.65%

From Sensitivit Analysis of Expenses, I came to know that with the increase or decreases in my expenses by15% and 30%, my Income Statement remains same. It has no affect on my income statement and Millat

Tractors remains stable.


12/22

` Sensitivity Analysis of Financial Cost (Rs.)

PROFIT and LOSS ACCOUNT Base (2008) 30% 15% -30% -15%

Sales-net ### ### ### ### ###Cost of sales 9,701,298 ### ### ### ###

Gross profit ### ### ### ### ###



571,615 571,615 571,615 571,615 571,615

Operating profit 901,101 901,101 901,101 901,101 901,101


### ### ### ### ###

Finance cost 20,996 27,295 24,145 14,697 17,847


102,570 108,869 105,719 96,271 99,421


Taxation 309,718 307,977 308,848 311,460 310,589

Profit after taxation 810,421 805,863 808,142 814,978 812,699

Taxation 27.65%

From Sensitivit Analysis of Financial Cost, I came to know that with the increase or decreases in myexpenses by 15% and 30%, my Income Statement remains same. It has no affect on my income statement

and Millat Tractors remains stable.


13/22

Breakeven Analysis & Liverages

Projected

Accounting Breakeven (FC/1-(VC*Q)/(P*Q) 2008 2009 2010Administrative Expense FC 210,120 230822 253563

CGS V*Q ### 10657108 11707089Sales P*Q ### 12274922 13484296

Accounting Breakeven 210,119 230,821 253,562

Cash Breakeven Projected(FC-Dep/1-(VC*Q)/(P*Q) 2008 2009 2010

Administrative Expense FC 210,120 230822 253563

CGS V*Q ### 10657108 11707089

Sales P*Q ### 12274922 13484296

Dep 11,149

Cash Breakeven ### 1666735 1839283

Degree of Levearage(%change in EBIT / %Change in Sales Projected

2007 2008 2009 2010

EBIT 931,636 ### 1343175 1475510

Sales ### ### 12274922 13484296

Degree of Leverage 16.11 1.00 1.00

Degree of Financial Leverage(%change in EPSI / %change in EBIT) Projected

2007 2008 2009 2010

EBIT 931,636 ### 1,343,175 1,475,510

EPSI 33.98 43.24 46.25 49.34

Degree of Financial Leverage 1.15 1.42 1.48

Total Leverage 18.47 1.42 1.48

From Breakeven Analysis I came to know that Millat Tracrors Accounting Breakeven of 2009 will be atthe cost Rs. 230,821 and year 2010 breakeven will be at the cost of Rs. 253,562. At these costs the firm

will be in a NO PROFIT NO LOSS oint.


14/22

From Breakeven Analysis I came to know that Millat Tracrors Cash Breakeven of 2009 will be at the costRs. 1666,735 and year 2010 breakeven will be at the cost of Rs. 1839283. At these costs the firm will be

in a NO PROFIT NO LOSS point.


15/22

Scanerio Analysis

Worst 25 Base est 25%

Sales ### ### ###

Variable Cost ### ### ###

Fixed Cost 262650 210,120 157590Depreciation 11149 11,149 11,149

OCF

NPV

In Scenario Analysis, in its worst case sales decrases and Cost increases, whereas in its best case, salesincreases and cost decreases.


16/22

WACC

Stock Price Market Index Relative Index

2006 June 322 9,989.41 99.89

July 328 10,497.63 104.98

August 351.1 10,064.13 100.64

September 340 10,512.48 105.12

October 290 11,327.71 113.28

November 289 10,618.75 106.19

December 282 10,058.46 100.58

2007 January 294 11,272.33 112.72

February 286.1 11,179.97 111.8

March 275 11,271.59 112.72

April 300.25 12,369.70 123.7

May 342.45 12,961.26 129.61

June 331.5 13,772.46 137.72

July 330 13,738.87 137.39August 315.5 12,214.26 122.14

September 302 13,351.79 133.52

October 282.5 14,319.42 143.19

November 281 14,070.05 140.7

December 270.5 14,075.83 140.76

2008 January 271.4 14,017.01 140.17

February 297 14,934.30 149.34

March 297 15,125.29 151.25

April 292.5 15,122.47 151.22

May 265.25 12,130.51 121.31

Covariance -108.52

Variance 626.09

-0.17 UL 0

9%

11%

Beta -0.173335

rRF

RPM


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Market Risk 8%

CAPM=k= 8.06%

WACC FOR 2008

Tax rate 33%

Cost of debt 0.78%Weight of debt 57.05%

Cost of equity 8.06%

Weight of equity 43%

Cost of Prefered Stock

Weight of Prefered stock

WACC 3.91%


18/22

Dividend Policy % Change in Net Income

Year BV / Share MV / Share Year Current Year % Change

2007 14.39% 331.50 2007 636,897,000

2008 16.21% 265.25 2008 810,458,000 27.25%

2009 Projected 17.71% 298.38 2009 Projected 866,866,562 6.96%

2010 Projected 19.36% 281.81 2010 Projected 924,748,885 6.68%

Firm's Tax Bracket

Years Average Taxation

2007 24.20%

2008 27.65%

2009 Projected 29.55%

2010 Projected 31.59%

Firm's Dividend Policy Dividend Pyout Ratio

Year Dividends / Share % Change Year Retention Rate

2007 1.82% 2007 53.42% 46.58%

2008 2.45% 34.97% 2008 56.66% 43.34%

2009 Projected 2.13% -12.95% 2009 Projected 56.66% 43.34%

2010 Projected 2.29% 7.44% 2010 Projected 56.66% 43.34%

Sustainable Growth Rate

Year Retention ROE Growth Rate Average

2007 46.58% 23.62% 12.36%

12.65%2008 43.34% 26.67% 13.07%

2009 Projected 43.34% 26.11% 12.76%

2010 Projected 43.34% 25.49% 12.42%


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Internal Growth Rate

Year Retention ROA Internal Growth

2007 46.58% 10.17% 4.97%

2008 43.34% 11.15% 5.08%

2009 43.34% 10.89% 4.95%

2010 43.34% 10.60% 4.82%

The dividend policy is calculated by dividend per share and dividend payout ratio in previous years it hasdecreasing trend this is shown by the table. Company is paying dividend in cash and as bonus shares as well. In

2008 company has decreased its cash dividend and its payout ratio has decreased


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OPTIMAL CAPITAL STRUCTURE

Component of capital Proposed Proposed

2007 2008 2009 2010

1 Equity 2,696,580 3,038,879 3,319,816 3,628,432

2 Total Debt 3,490,365 4,146,004 4,554,485 5,003,211

Total Capital of firm 6,186,945 7,184,883 7874301 ###

% in total capital

% of equity 43.59% 42.30% 42.16% 42.04%

% of Debt 56.41% 57.70% 57.84% 57.96%

Net working capital

2007 2008 2009 2010

1,853,775 2,033,577 2,233,125 2,452,334

Change in N 1,853,775 179,802 199,548 219,209

.capital structure WACC and multiplies by short term borrowings, accrued mark up and provisions.WACC is calculated

by finding company share price and market index, I obtained the beta. Beta is the measure to which the portfolioreturn should exceed the risk free rate. Here the share price is the measure which increases the risk free rate.


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INCOME STATEMENT (Rupees in Thousands)

PROFIT and LOSS ACCOUNT 2008 2008 2008Rupees In thousands

With No Debt With Optimal Capital Structure

Sales-net 11,174,014 11,174,014 11,174,014

Cost of sales 9,701,298 9,701,298 9,701,298

Gross profit 1,472,716 1,472,716 1,472,716

Distribution & marketing expenses 361,495 361,495 361,495

Administrative expenses 210,120 210,120 210,120

571,615 571,615 571,615

Operating profit 901,101 901,101 901,101

Other operating income 321,608 321,608 321,608

EBIT 1,222,709 1,222,709 1,222,709

Finance cost 20,996 0 112

Other operating expenses 81,574 81,574 81,574

102,570 81,574 81,686

Profit before taxation 1,120,139 1,141,135 1,141,023

Taxation 309,681 309,681 309,681

Profit after taxation 810,458 831,454 831,342

Basic earnings per share - Rupees 43.24 44.36 44.36No. of shares outstanding 18,741,969 18,741,969 18,741,969

Net Income 810458000 831454000 831342310.84


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IPO

2009 2010

AFN 10,152,598 21,305,656

Markret price 298.38 281.81

Subscription price 1 1

# of rights = old no. of shares / new no. of shares 1.85 1787.89

# of new shares = Fund required / subscription price 10152597.54 11916.64

ex-right price=(# of rights* market price) 193.89 281.66

subcription price)/ (N+1)

Value of right 104.49 0.16

The calculated AFN is the part of equity, so I dont go forissuing the share for the public because the flotation cost anddilution effect. In order to avoid this I give the more rights toexisting share holders for the two years.

Documents

Millat Tractors_Final (Sheraz)