UTOPIAN INVESTMENTS

Business Description

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 Business
New
Strategy
Joint Allianc Acquisiti Integrat
Brands Ventures es ons ion
Diversificati Focus -Core Activities
on Capex 2011
Segmen Rs %
Acquire t (mln
d )
Dairy & 3,33 64.4
Juices 7 %
Launch Ice 1,09 21.0
Cream 1 5
ed Farm 406 7.83
Rice 350 6.75
Engro SC: Rs10.64/share
Plant
Total 5,18 100
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Industry PROJECTED MARKET SIZE

Overview
90,000
80,000
12

10
UHT CAGR (%)
Ice Cream
70,000 CAGR(%)
60,000 8 Milk Powder
50,000 CAGR (%)
6
40,000 Juices&Nectare
30,000 4 s CAGR (%)

20,000 Ambient UHT

2 Ice Cream
10,000
0 0 Milk Powder
Rs2010
(mln) 2011 2012 2013 2014 2015
% Juices&Nectare
s

Ambient Ice cream Juices Powder

UHT Milk
876 million 79 million 519 million 616 million
liters liters liters liters
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Reasons to
Ambient UHT
Invest
Market Share: 44% in 2011 E HHI
11% Foods 58.2%
Estimated sales: Rs 22.9 B 10%
44% Nestle 2011
YoY growth of 25% 35% Halee
b 57.5%
Rev Contribution: 86% - 2011 2010

Market Leader

1
st

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Reasons to
Ice cream
Invest
Market share: 24% in Walls HHI
2011 8%
8%
Engro 55.1%
44% Foods 2011
Sales: Rs 2,7 B 16%
Igloo
24% Yummy
YoY increase of 72% 52.7%
Others 2010
Rev Contribution: 10% -
2011
Strong
Competitor
nd
2

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Reasons to Juices
Invest13%
Nestle

10%
11%
Maza HHI
Sheezan 60%
2%

77% 15% 2010

54% Engro
18% Foods
Still Drinks VASD Juices & Nectares 59.9%
Others*
2011
Juices Market Segmentation

Focus on: Juices & New

Nectars Entran
Value Added t
Still Drinks
2010
SIZE: 114 Million
Reason to Financial
Liters
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 Reasons to
Invest Milk Powder
Nestles Brands
Nido HHI
Everyday Nestl 98%
2%
e 2011
Milk Pak
Focus on Engro
98% 99%
Growing Up Foods
2010
Infant

New
Entrant
2010

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 Reasons to
HALAL MEAT
Invest

Global Halal Meat US $ 253

Planned Al-safa
Acquisition 2013 Global Halal Food US $ 632
Estimated Cost US $ 10
15 million
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 Valuation:
BUY Projections for
2011-2015
Intrinsic 26.85 Stock Price
value
50.00
Actual 23.92 42.77
luevalue
Stock: - Higher Intrinsic
40.00 38.07
value 33.89
30.00 30.17
Growth Stock: - No 26.85
dividend payouts 20.00
- Earnings
reinvested 10.00
- High
0.00
Future Growth 2011 2012 2013 2014 2015

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 RECOMMENDATION: BUY
Valuation: TARGET PRICE : Rs 30.17
ACTUAL PRICE: Rs 23.92
UPSIDE : 26.12 %

HOL
D

BUY

SELL

BUY

Source:http://investing.businessweek.com/research/stocks/charts/charts.asp?ticker=EFOODS:PA

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Valuation: Discounted
Cash Flow
Figure 12: FCF growth 2 STAGE DCF MODEL
High Growth Decreasing
4,500,000 50%
45%
Stage growth stage
4,000,000
3,500,000 40%

3,000,000 35%
30%
1st Stage 43 2nd Stage 22%
2,500,000
Rupees
2,000,000
25% Growth % Growth exponential
1,500,000
Years 20%
15%
Rate Rate decay
1,000,000 F 10%
500,000 5%
1st Stage 5 2nd Stage 10 years
Time Period Time
yrs
0 0%
0 5 10 15 20
Period
Perpetuity Growth 5%
FCF

DCFC
Rate
Growth
Rate
Time Period to 15 years
Source: Student Estimates
Perpetuity

Compan Initiatio
Reason to Why Financial
Financial Risk Risk
Data and
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Valuation: Discounted
Cash Flow
WACC
Assumptions
WACC 12.34
COST OF 9.06 TAX RATE 0.35
DEBT
COST OF 14.14 PROPORTION 0.35 :
EQUITY OF DEBT TO 0.65
EQUITY
RISK FREE 12 BETA 1.18
RATE
RM 13.81 BORROWING 13.94
RATE

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Valuation: Variability In The DCF
Model
DCF Sensitivity Analysis
Cash flow Growth Rate First 5 years (high
growth stage)
WACC 34 37 40 43 46 49 52
35.1 36.7 42.2
9.34 33.62 6 8 38.5 40.31 2 44.24
30.2 31.8 36.9
10.34 28.83 9 2 33.45 35.16 8 38.89
26.7 28.2 33.1
11.34 25.4 7 3 29.77 31.4 2 34.93
24.0 25.4
12.34 22.78 8 7 26.85 28.47 30.1 29.54
21.9 23.2 27.6
13.34 20.69 3 4 24.63
Financial
26.1 5 29.29
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Financial Analysis
150.00% 80000000
60000000
100.00%
40000000
50.00%
20000000
0.00% 0
2011 2012 2013 2014 2015
Net sales SGR %
CAGR % Debt to equity ratio

SENSITIVITY: +_ 10 % OF THE
Year 2010 TARGET GROWTH
2011 2012 2013 2014 2015
SGR
60.6 58.4 53.94 34.6 48.47 66.43
%
CAGR
93.11 76.86 75 65 60 60
%
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 Financial Analysis
For the period 2011-15 Income statement
2011(P 2013(
2010 2012(P) 2014(P) 2015(P)
) P)
CAGR of 41.17 % for REV 103.5
21 B 26 B 43 B 50 B 65 B
B

CAGR of 4.93 % for EBITDA 1.67 B 2.36 B 3.93 B 5.52 B 7.75 B 11.4 B

CAGR of 7.90 % for EBIT 0.92 B 1.46 B 2.43 B 3.82 B 5.58 B 7.89 B

CAGR of 56.14% for NET PRO 0.27 B 0.97 B 1.67 B 3.06 B 4.55 B 5.78 B

Free Cash Flow

CAGR of 43.0 % for FCF (0.50)
0.68 B 0.57 B 1.46 B 1.98 B
(0.90)
B B

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 Financial Analysis
100 10
90 8
80
70 6
60 SGR %
4
50 CAGR %
Percent 40 2 Times Sales to Assets
30 0 OCF to Sales
20
10 -2 FCF to Sales
0 -4

2011 2012 2013 2014 2015

Capital Expenditure
in PKR (1.73) (2.28) (2.63) (6.58)
(0.98)
B B B B
B Financial
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Financial Analysis
Assumption for Product
segment sales contribution
Market
Growth Target
Position HHI
Rate
100
80 UHT
UHT
60 Ice-
86% - 2011 cream
Percent 40
Dec Juices
20 Milk
49% - 2015 0 Powder

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Financial Analysis
For the period ending 2015 (P)
21.9 % UHT CAGR
Revenues of approx PKR 50 B

81% Ice Cream CAGR

Revenues of approx PKR 28 B

120.02 % Milk Powder

CAGR
Revenues of approx PKR 14.4 B

99.6 % Juices & Nectars CAGR

Revenues of approx PKR 10.3 B

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Financial Analysis
140.00% 60,000,000

120.00% 50,000,000
100.00%
40,000,000
80.00%
30,000,000
Rupees
CAGR
60.00%
20,000,000
40.00%

20.00% 10,000,000

0.00% 0
1 2 3 4 5
UHT CAGR (%) Ice Cream CAGR(%)
Milk Powder CAGR (%) Juices&Nectares CAGR (%)
Ice Cream Milk Powder
Juices&Nectares Ambient UHT

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Financial Analysis
Competitor Estimates for 2010
ROE
EFL NESTLE UNILEVER
9.09% - 2010 143.59
Increasing
33.19% - 2015
69.65
EBITDA
7.98% - 2010
15.0612.27 18.9224.55
Increasing 7.89 4.72 9.09

11.02% - 2015 EBITDA ROA ROE

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Risk analysis:
analysis Risk matrix

Percept Demand
ion
Unprocessed Milk Flavoured Milk
Year % % share
growth
2006 - 2.5%
2007- 79% 7.7%
2009
2010- 23.1% 11.7%
2:UHT 2012 1st: Ice-
Strong competition 1st:Juice cream(W
s alls)

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Risk analysis
Exchange
rate risk
Current
exchange
rate Rs
89.5: US $1

Expected to
rise to Rs
95: US $1 by
2013

Al-safa
purchase
Reason to Financial
price:
Compan
y
US $
invest
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Risk analysis
Business and
2nd most Coe Financial risk 10%
10% Projecti
variable Var dec ons inc
High ROIC 0.09 0.32 0.12
Business ROE 0.31 0.46 0.25
Risk EBIT 0.40 0.60 0.65
EPS 0.19 0.58 0.35 Risk via
EPS most Mean 10% Projecti 10% leverage
variable dec ons inc &
Financial ROIC 8.42 16.81% 9.25 Debt
Risk % % Financing
Highest ROE 8.48 21.25% 8.68
% %
EPS 0.66 2.67 0.92
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Risk analysis:
analysis Risk matrix
Economic
Indicators
GDP growth
2011: 2.39%
Infaltion: 10.2%
Nov-2011
Interest rate:
12% 2011

Floods
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 Free Cash Flows for 2011 2015
2011 2012 2013 2014 2015
Sales: 26,063,727 43,263,007 50,150,587 64,691,656 103,506,650

EBITDA
2,368,463 3,931,396 5,524,488 7,750,125 11,402,086
EBIT
1,467,388 2,435,707 3,826,490 5,582,890 7,897,557
NOPAT
953,802 1,583,210 2,487,218 3,628,878 5,133,412
Operating activities, cash flows provided by or used in:

Depreciation and amortization

901,075 1,495,689 1,697,999 2,167,235 3,504,528
Changes in Working Capital:

Decrease (increase) in accounts receivable

(12,679) (42,601) (17,060) (36,017) (96,142)

Increase (decrease) in liabilities (A/P)

154,250 (188,330) 300,811 477,225 1,369,278

Increase (decrease) in liabilities

518,185 819,478 200,541 318,150 912,852

Decrease (increase) in inventories

(618,572) (570,810) (592,304) (1,250,473) (3,337,933)

Increase (decrease) in other operating activities

(236,751) (800,531) (320,579) (676,806) (1,806,623)

Net cash flow from operating activities

1,659,310 2,296,105 3,756,626 4,628,192 5,679,372

Capital expenditures
(975,788) (1,726,510) (2,278,024) (2,633,846) (6,585,601)

Free Cash Flow

683,522 569,595 1,478,602 1,994,347 (906,228)

Free Cash Flow per share

0.91 0.76 1.98 2.67 (1.21)

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Income Statements for 2011 2015
2011 2012 2013 2014 2015
Net sales 26,063,726.72 43,263,007.03 50,150,586.86 64,691,656.41 103,506,650.25
Cost of sales 20,590,344.11 34,177,775.55 38,615,951.88 49,165,658.87 79,700,120.69
Gross profit 5,473,382.61 9,085,231.48 11,534,634.98 15,525,997.54 23,806,529.56
less:expenses:
Distribution and marketing expenses 3,388,284.47 5,624,190.91 6,519,576.29 8,409,915.33 13,455,864.53

Adminstrative expenses 1,003,011.74 1,293,833.13

521,274.53 865,260.14 2,070,133.00

Other operating expense

164,201.48 272,556.94 315,948.70 407,557.44 652,091.90
Other operating income
67,765.69 112,483.82 130,391.53 168,198.31 269,117.29

Opearting profit / (loss)

1,467,387.81 2,435,707.30 3,826,489.78 5,582,889.95 7,897,557.41

Finance cost 1,031,007.45

493,984.99 761,759.70 763,858.70 2,111,215.05

Profit/ (Loss) before taxation 1,673,947.59 3,062,631.08 4,551,882.50

973,402.82 5,786,342.36

Taxation
(340,690.99) (585,881.66) (1,071,920.88) (1,593,158.88) (2,025,219.83)

Profit/(Loss) for the year

632,711.83 1,088,065.94 1,990,710.20 2,958,723.63 3,761,122.53
Other comprehensive income for the year

Total comprehensive income/(loss) for the year

632,711.83 1,088,065.94 1,990,710.20 2,958,723.63 3,761,122.53

YoY growth %
259.59 71.97 82.96 48.63 27.12

Profit/(Loss) per share

0.85 1.45 2.66 3.96 4.42

CAGR of EPS
70.18

NOPAT
953,802.08 1,583,209.74 2,487,218.36 3,628,878.47 5,133,412.32
 Free Cash Flows for 2011 2015
2011 2012 2013 2014 2015
Sales: 26,063,727 43,263,007 50,150,587 64,691,656 103,506,650

EBITDA
2,368,463 3,931,396 5,524,488 7,750,125 11,402,086
EBIT
1,467,388 2,435,707 3,826,490 5,582,890 7,897,557
NOPAT
953,802 1,583,210 2,487,218 3,628,878 5,133,412
Operating activities, cash flows provided by or used in:

Depreciation and amortization

901,075 1,495,689 1,697,999 2,167,235 3,504,528
Changes in Working Capital:

Decrease (increase) in accounts receivable

(12,679) (42,601) (17,060) (36,017) (96,142)

Increase (decrease) in liabilities (A/P)

154,250 (188,330) 300,811 477,225 1,369,278

Increase (decrease) in liabilities

518,185 819,478 200,541 318,150 912,852

Decrease (increase) in inventories

(618,572) (570,810) (592,304) (1,250,473) (3,337,933)

Increase (decrease) in other operating activities

(236,751) (800,531) (320,579) (676,806) (1,806,623)

Net cash flow from operating activities

1,659,310 2,296,105 3,756,626 4,628,192 5,679,372

Capital expenditures
(975,788) (1,726,510) (2,278,024) (2,633,846) (6,585,601)

Free Cash Flow

683,522 569,595 1,478,602 1,994,347 (906,228)

Free Cash Flow per share

0.91 0.76 1.98 2.67 (1.21)

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 THANK YOU

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