With the help of 10-year data span from 2007 to 2017, we will find out the intrinsic value in a different method and will compare it to the current share price of Orion Pharma and find out whether it is overvalued or undervalued. The structure of the slide is in the following way 1. Introduction 2. Company Overview 3. Findings 5. Analysis 6. Conclusion The total valuation was done in the following way 1. Dividend Discounting Model 2. Operating Free Cash Flow Model 3. Relative Valuation The analysis is done with 1. Fundamental Analysis

1. 1
WELCOME

2. 2
“VALUATION OF ORION PHARMA
LIMITED”

3. Introduction
▪ Orion Group Limited was founded in 1965
▪ It has been specializing in industrial products
▪ Orion exports its products to more than 10
countries
3

4. Introduction
▪ This giant group consists of more than 27
companies from at least 12 industry sectors
▪ Almost 18,000 people are employed by various
sister concerns of Orion Group.
4

5. Research
Question
5
Is the Intrinsic Value of Orion Pharma Limited
Overvalued or Undervalued on the basis of its
Market Stock Price?

6. Research
Objectives
 To provide an estimation of the common stock value
of Orion Pharma Limited using dividend discount
model, free cash flow to equity and relative
valuation.
 To compare the obtained intrinsic values with the
current market price
6

7. Research
Objectives  To find out whether the intrinsic value of Orion Pharma
limited is overvalued or undervalued
 To identify & discuss the reasons of variability between
Intrinsic & Market Value of Stock.
7

8. Limitations
8
Mentionable limitations of our term paper is
 time constraint
 data unavailability

9. Research
Methodology ▪ Research methodology is quantitative in nature
▪ We used secondary sources of Data
▪ We used data form Dhaka stock exchange and
annual report of Orion Pharma Ltd.
9

10. Company
Overview ▪ Orion Pharma Ltd. is one among the 27 sister concerns of
ORION Group
▪ Orion Pharma strongly believes in quality and doesn’t settle
for anything until it surpasses the prevailing standard
10

11. Company
Overview
▪ For serving its esteemed customers with products of outstanding
value, the company has been bestowed with the ISO-9001: 2000
Certificate in January 2003
▪ Its diverse medicinal collection includes life-saving anti-cancer
drugs and injectables with more than 110 generics and 220
arrangements of Capsule, cream ointment products etc.
11

12. Company
Overview  In order to cope up with the development of technical brilliance in
Pharma and Healthcare, Orion Pharma Ltd. has by now started its
erection of new plant which will be one of the newest facilities for
medicinal finished products in south-east Asia
12

13. Quality
Policy
13
With devotion to help its cherished clients with products of
admirable value Orion Pharma Ltd. is constantly enhancing
itself in expertise, method and human resources fulfilling
the strategies of Good Manufacturing Practice (GMP) and
the regulations of ISO-9001: 2008 Quality Management
System (QMS).

14. Corporate
Governance
14
Incorporated as a Private Limited Company
(earlier known as Orion Laboratories Limited) 21 June, 1965
Date of Commercial Operation 25 November, 1966
Converted into Public Limited Company 24 June, 2010
Name changed into Orion Pharma Limited 15 October, 2010
Initial Public Offering (IPO) of shares of Orion
Pharma Limited
2012
Listing with both Dhaka & Chittagong Stock
Exchanges
2013
Authorized Capital Tk. 5,000 Million
Paid-up Capital Tk. 2,340 Million
Number of Employees 2,063
Subsidiary Company Orion Power Meghnaghat Limited
Dutch Bangla Power & Associates Limited

15. 15
Corporate
Governance

16. 1. Historical growth rate of
Orion Pharma
2. Industrial Growth Rate
3. Company Future Prospects
Estimating
Growth rate

17. “
1717
A. Historical Growth
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Historical Growth rate
Sales Net income EPS Dividend Cashflow

18. “
18
B. Industrial Growth
0%
5%
10%
15%
20%
25%
30%
Peer Comparison
Growth

19. “
₪ Orion Pharma has developed a new pharma park in Shiddhirganj,
which will help increase the revenue thereby increasing the growth.
₪ Over the next 10 years the growth will decrease again due to severe
competition.
₪ So, over all we assume the perpetuity growth to be 1%. 19
C. Company Future Prospects

20. Stock Intrinsic
Valuation &
Comparison with
Market Price

21. Calculation of Required Rate of Return:
(r)
Capital Asset Pricing Model
21

22. Calculation
of Required
Rate of
Return
THE FORMULA
 𝑟 = 𝑅𝐹 +𝛽(𝑅𝑀 −𝑅𝐹)
22
Where,
♠ r : Required rate of return by investors
♠ RF : Risk free rate (interest rate of 5-year
Treasury bond)
♠ RM : Market return
♠ 𝛽 : Systematic risk

23. The Term
Structure of
Treasury
Bond Rate
23

24. “
In Bangladesh, currently
interest rate of 5-year
Treasury bond is 5.45%
So, RF=5.45% 24

25. “
25
Systematic Risk (beta) as per the report of June 30, 2017
of Orion Pharma is,
1.40283968128837

26. Market return of Dhaka Stock Exchange
26

27. Calculating
the Market
Return
Monthly data of two years, DSEX index data from 2nd
October, 2016 to 2nd October, 2018, is considered.
27
The Market Return will be the percentage change of the
monthly closing Index from closing Index of previous
month (which is Opening Index for this month)
2nd date of each month is considered as the representative.

28. Calculating
the Market
Return
28
Date Monthly Opening Index Monthly Closing Index Market Return
2 Oct,2016 4,690.93
2 Nov, 2016 4,690.93 4,633.19 -0.012309996
2 Dec, 2016 4,633.19 4,823.02 0.040973609
2 January,2017 4,823.02 5,119.59 0.061489365
2 Feb, 17 5,119.59 5,365.14 0.047962365
2 March, 17 5,365.14 5,586.75 0.041305456
2 April,17 5,586.75 5,691.37 0.018727655
2 May, 2017 5,691.37 5,521.38 -0.029867673
2 June, 2017 5,521.38 5,438.71 -0.014974325
2 July,2017 5,438.71 5,654.62 0.039700175
2 August,17 5,654.62 5,891.16 0.041831613
2 Sep,2017 5,891.16 6,038.38 0.024988535
2 Oct, 17 6,038.38 6,092.95 0.009038392
2 Nov, 17 6,092.95 6,099.02 0.000996372
2 Dec, 2017 6,099.02 6,296.20 0.032329157
2,Jan,2018 6,296.20 6,279.97 -0.00257819
2 Feb,18 6,279.97 6,021.45 -0.041165909
2 March, 18 6,021.45 5,870.83 -0.025012705
2 april,2018 5,870.83 5,827.52 -0.007378484
2 May, 18 5,827.52 5,698.69 -0.022106691
2 June, 18 5,698.69 5,316.97 -0.066984389
2 July,18 5,316.97 5,322.41 0.001024223
2 August, 18 5,322.41 5,399.79 0.014538856
2 Sep,18 5,399.79 5,590.42 0.035302889
2 October,18 5,590.42 5,380.93 -0.037473298

29. “
29
DSE Index
Average Monthly Market
Return
0.6265%
Annual Market Return 7.5179%

30. Calculation
of Required
Rate of
Return
30
▪ 𝑅𝐹 = 5.45%,
▪ Estimated values of 𝑅𝑀=7.5179% and
▪ 𝛽, = 1.40283968128837
▪ Required rate of return(r) from Orion Pharma
can be estimated as below,

31. 31
Dividend Discounting
Model

32. “
 This model is based on the theory that the stock price of a company is
equal to the sum of all of its future dividend payments, discounted to
their present value.
 it is assumed that the expected dividend per share grows at a
constant rate of 𝑔 in perpetuity. 32
Dividend Discounting Model

33. Dividend
Discounting
Model
▪ The formula is
▪ 𝐏 =
𝐃𝟏
𝟏+𝐤
+
𝐃𝟐
(𝟏+𝐤) 𝟐 +
𝐃𝟑
(𝟏+𝐤) 𝟑 + ⋯ … …
33
Here,
D0 = the value of the last paid dividend per share
𝐷1 = the value of next year’s dividend per share
K = is the required rate of return by investors.

34. r= 8.35 and growth rate decreasing from 4.13% (growth rate for
dividends) and taking perpetual growth rate of 1% after 10 years.
34
Year Growth Rate Dividend 8.35% PV factor PV
1 4.13% 224920800 1.0835 207587263.5
2 4.00% 233917632 1.17397225 199253118.6
3 3.75% 242689543.2 1.271998933 190793826.1
4 3.25% 250576953.4 1.378210844 181813221.5
5 3.10% 258344838.9 1.493291449 173003628.4
6 3.00% 266095184.1 1.617981285 164461224.9
7 2.75% 273412801.6 1.753082723 155961152.4
8 2.25% 279564589.7 1.89946513 147180690.6
9 2.105 868048050.9 2.058070468 421777613.7
10 2% 885409012 2.229919352 397058759.6
Constant Growth 1% 894263102.1 5456181594
Total PV 7695072093
Shares Outstanding 234000000
Loan Outstanding 442828999
Total PV 30.99249186
For our
calculation we
have
discounted the
dividends up to
10 years.

35. 35
Present Value of Operating
Free Cash Flow of Orion
Pharma Ltd.

36. “
₪ To discount the firm’s operating free cash flow to the firm at the firm’s weighted
average cost of capital
₪ The Operating Free Cash Flow, OFCF is the cash flow generated by a company’s
operations and available to all who have provided capital to the firm (both equity
and debt) 36
Procedure

37. “
37
₪ As it is the cash flow available to all capital suppliers, it is discounted at the
firm’s WACC.
₪ Before getting the present value, we required the Weighted Average Cost of
Capital, WACC

38. “
38
What is WACC?
Weighted average cost of capital (WACC) is a calculation of a firm's cost of
capital in which each category of capital is proportionately weighted.

39. “
39
What is WACC?
Generally, a company finances its assets either through debt or
with equity. WACC is the average of the costs of these types of
financing, each of which is weighted by its proportionate use in the
given situation.

40. WACC
Calculation
40
The formula that we have used to calculate WACC:
𝑊𝐴𝐶𝐶 =
𝐸
𝐸+𝐷
(𝑘) +
𝐷
𝐸+𝐷
(1 − 𝑇)(𝑟d)
E = Market Value of the firm’s Equity
D = Market Value of the firm’s Debt
k = Cost of Equity
rd = Cost of Debt
T = Tax rate

41. 41
Calculation of WACC of Orion Pharma Ltd.
The WACC of Orion Pharma Ltd. = 8.87%

42. 42
Operating Free Cash Flow
Operating Free cash flow for the firm (OFCF) represents the amount of cash flow
from operations available for distribution after depreciation expenses, taxes, working
capital, and investments are paid.
A measurement of a company's
profitability after all expenses and
reinvestments
One of the many benchmarks used
to compare and analyze financial
health

43. 43
𝑷𝑽 =
𝑶𝑭𝑪𝑭 𝟎(𝟏 + 𝒈) 𝟏
(𝟏 + 𝑾𝑨𝑪𝑪)
+
𝑶𝑭𝑪𝑭 𝟎(𝟏 + 𝒈) 𝟐
(𝟏 + 𝑾𝑨𝑪𝑪) 𝟐
+
𝑶𝑭𝑪𝑭 𝟎(𝟏 + 𝒈) 𝟑
(𝟏 + 𝑾𝑨𝑪𝑪) 𝟑
+ ⋯ … … … … . +
𝑶𝑭𝑪𝑭 𝟎(𝟏 + 𝒈) 𝒏
(𝟏 + 𝑾𝑨𝑪𝑪) 𝒏
𝑂𝐹𝐶𝐹0 = Operating Free Cash Flow for the current year
𝑔= Growth rate
𝑊𝐴𝐶𝐶 = Weighted average cost of capital for the firm
n = Number of years
Calculation of Present Value of OFCF

44. “
44
For infinite period constant growth rate, 𝑷𝑽 =
𝑶𝑭𝑪𝑭 𝟏
(𝑾𝑨𝑪𝑪−𝒈)
𝑂𝐹𝐶𝐹1= Operating free cash flow for period 1
g= Constant growth rate

45. “
 the present value of operating FCF for 10 years with the free cash flow of 2017
 The Operating FCF, OFCF0 was Tk 202,200,000
 the growth rate of 12.3% for 2018
 Starting from 2018, we assumed that the growth rate will decline gradually each
year 45
Calculation of Present Value of OFCF

46. “
 Finally after the tenth year, it will stand at 1% and this 1% growth rate is perpetual
 Then the free cash flow for each year was discounted using the WACC (8.87%) to
get their present value
 Summation of all the present values finally gave us the total present value of OFCF
of Orion Pharma Ltd. which is Tk 5,415,071,395 46
Calculation of Present Value of OFCF

47. 47
Calculation of
Present Value
of OFCF

48. Calculation of
Estimated
Intrinsic value
48
▪ Number of Outstanding Shares is 234,000,000
▪ Amount of loan outstanding = Tk 442,828,999
▪ The per share value based on the present value of operating free
cash flow is= {(Tk 5,415,071,395- Tk 442,828,999)/234,000,000} =
Tk 21.249

49. Relative Valuation Techniques
49

50. Relative
Valuation
Techniques
50
Here the Stock Value of BATA Shoe BD on the basis of
industry average will be obtained.
There are 6 Shoe & Leather companies listed under DSE.
A table with,
 The current share prices of 6 companies
 The last year EPS, Cash Flow, Sales of these 6
Companies.
The average of these data to obtain the industry average
EPS, Cash Flow & Sales.

51. 51
Contents
in
the Table
1. Share Price of 31 Companies on 25th
October, 2018
2. EPS, Cash Flows & Sales of These
Companies on 30th June,2017
(Last Audited)

52. Calculating
the Market
Return
52
SL No. Name of The Companies Share Price EPS Sales(in Million) Cash Flows
1 ACI Limited 347.7 77.99 49,236.08 324.11
2 ACI Formuations Limited 151.3 2.74 3333.35 745.03
3 ACME Labratiories Ltd 86.8 5.85 3,663.01 234.76
4 Active Fine Chemicals Ltd 40.7 3.46 10,128.93 11.22
5 Advent Pharmaceuticals Ltd 38.6 0.98 12279.45 745
6 AFC Agro Biotech Ltd 37 3.49 5992.5 38.05
7 Ambee Pharmaceuticals Ltd 510.1 3.02 12351.81 908.95
8 Beacon Pharmaceuticals Ltd 17 0.27 11,491.80 44.24
9 Beximco Pharmaceuticals Ltd 73.5 5.49 15,508.77 54
10 Beximco Synthetics Ltd 6.9 -2.62 1407.05 -3.64
11 Central Pharmaceuticals Ltd 14.1 1.05 9010.45 -1.27
12 Far Chemical Industries Ltd 13.8 1.79 8,436.56 -55.44
13 Global Heavy Chemical Ltd 37.2 1.08 10538.38 4.65
14 GSK Bangladesh Ltd 1105.8 53.51 19,284.01 -26.69
15 IBN SINA BD Pharmaceuticals Ltd 246.3 9.06 4,009.15 28.11
16 Indo-Bangla Pharmaceuticals Ltd 33 1.02 12700.32 30.5
17 Imam Buttons industries Ltd 24 -0.38 11550.34 -183.4
18
JMI Syringes & Medical Industries Ltd 182.2 6.78 20,362.70 -138.71
19 Keya Cosmetics Ltd 7.5 2.01 10,406.60 7.72
20 Kohinoor Chemicals Company Ltd 398.9 12.04 8,393.18 157.64
21 Libra Infuisions Ltd 749 4.86 24244.25 -22.3
22 Marico BD Ltd 1148.2 45.72 8,916.10 -313.69
23 Orion Infusion Ltd 45.8 1.53 4679.91 -4.33
24 Orion Pharma Ltd 36.8 3.4 9,534.35 43.36
25 Pharmaceuticals Aids 560 8.16 8566.99 2.49
26 Reckitt Benckiser(Bd.)Ltd 1725.6 19.37 12873.08 92.3
27 Reneta Ltd 1217.3 42.89 16,043.43 166.62
28 Salvo Chemical Industry Ltd 17.9 0.6 12225.09 5.6
29 Silva Pharmaceuticals Ltd 26.8 1.03 11602.49 38.57
30 Square Pharmaceuticals Ltd 262.8 15.51 36,543.14 7,246.12
31 Wata Chemicals Ltd 308 4.13 399.95 -151.54
Industry Average 305.5032258 10.8332258 12,442.36 323.48

53. The Price/
Earing Ratio
53
₪ The Price/ Earing Ratio=Price/EPS
= 305.5032258/10.8332258
= 28.20057767
₪ So the Industry P/E Ratio is 28.20
₪ The EPS of Orion Pharma last year (2017)= 4.19.
The historical Growth rate average of EPS=
3.36%.
₪ Company facing a negative growth rate in EPS in
the recent years (-8.6% on 2017 & -12.5% on
2016).

54. The Price/
Earing Ratio
54
 Estimated growth of -5% this year (2018), the
EPS this year.
 =3.4(1-.05) =3.06
 Intrinsic value of its share, which is
 =Industry P/E Ratio* EPS of Orion Pharma on
2018
 = 28.20057767 *3.06= 86.29

55. The Price/
Cash Flow
Ratio
55
 The Price/ Cash Flow Ratio=Price/CF
= 305.5032258/ 323,480,000
= 0.00000094442
 So the Industry P/CF Ratio is 0.00000094442
 The Cash Flow of Orion Pharma last year (2017)=
43,360,000.
 The historical Growth rate average of CF =22%.

56. The Price/
Cash Flow
Ratio
56
 The company faced a high negative growth rate in
CF in the last year (-58.85%).
 Estimated growth of -20% this year (2018), the
Cash Flow this year = 43,360,000 (1-.2) =
34,688,000
 Intrinsic value of its share
= Industry P/CF Ratio* CF of Orion Pharma on 2018
= (0.00000094442*34,688,000)
= 32.76

57. The Price/
Sales Ratio
57
 The Price/ Sales Ratio=Price/Sales
= 305.5032258/12,442,360,000
= 0.000000024553
 So the Industry P/Sales Ratio is
0.00000000245523
 The Sales of Orion Pharma last year (2017) =
11,011,880,000.
 The historical Growth rate average of Sales =
11.13%.

58. The Price/
Sales Ratio
58
 But a negative growth rate is going on with the
sales in recent years (-3.3% on 2016, -21% on
2016).
 Estimated growth of -15% this year (2018), the
Sales this year =9,534,350,000 (1-.15)
=8,104,197,500
 The intrinsic Value of Stock =Industry P/Sales
Ratio* Sales of Orion Pharma on 2018
= (0.000000024553*8,104,197,500) = 198.99

59. 59
Analysis with current
market price

60. “
 If Estimated Intrinsic Value > Market Price, Buy or Hold it if you Own It.
 If Estimated Intrinsic Value < Market Price, Don’t Buy or Sell it if you Own It.
 Based on DSE stock Index the current market price of Orion Pharma Ltd. Is
36.80 Bdt.
60
Formula Says

61. “
61
Analysis with Dividend Discounting Model:
30.9
36.8
ESTIMATED INTRINSIC VALUE MARKET PRICE
Series 1
Overvalued

62. “
62
Analysis with Operating Free Cash flow:
21.9
36.8
ESTIMATED INTRINSIC VALUE MARKET PRICE
Overvalued

63. “
We have obtained three intrinsic values of the stock of Orion Pharma by
using the Three Relative Valuation techniques.
Here the Industry ratios (P/CF, P/Sales, P/E) have been multiplied with
growth adjusted Earning, CF & Sales in 2018(Next year) of Orion Pharma.
63
Analysis with Relative Valuation

64. Comparison of
stock intrinsic
value with
today’s Market
Share Price.
64
Used Relative
Valuation
Techniques
Stock’s Intrinsic
Values
Today’s Share
Price in DSE
(27/10/18)
Decision
P/E Ratio 86.29 36.8 Undervalued
P/CF Ratio 32.76 36.8 Overvalued
P/Sales Ratio 198.99 36.8 Undervalued

65. Overall
Valuation
65
198
32.76
86.29
21.24
30.99
36.8
0 50 100 150 200 250
Price Per Sales
Price Per Cashflow
PE Ratio
OFCF
DDM
Current Market Price
Stock Price
Price Per Sales Price Per Cashflow PE Ratio
OFCF DDM Current Market Price

66. “
₪ If the investment demand is higher than investment supply then there is a
possible chance of overvaluation
₪ The operation of the new pharmapark might increase the demand for Orion
pharma over the next few years
₪ So, it can be estimated that Orion Pharma Ltd posses a great chance to be
overvalued
66
Valuation Outcome

67. Conclusion  The stock price was overvalued in case of DDM, OFCF and
Price per Cashflow Ratio
 But undervalued in case of PE ratio and Price per sales ratio.
 As a result it is found that Orion Pharma is a matured
company with less growth than comparatively new
companies.
 Because of the operation of new pharmapark there might be
increase in investment demand which tends for
overvaluation.
67

68. 68
THANK YOU