Chapter 20 · Day 20 — Complete worked company
Himal Foods Ltd — a complete analysis
Every step of the course applied to one company, with the arithmetic shown and the conclusion argued both ways.
1. The business
A packaged-foods manufacturer, listed, one main plant, selling nationally through distributors. Capacity utilisation 78%.
2. Income statement (Rs '000)
| Line | FY5 | FY4 | FY3 |
|---|---|---|---|
| Revenue | 1,20,000 | 98,000 | 79,500 |
| COGS | (74,400) | (61,700) | (51,200) |
| Gross profit | 45,600 | 36,300 | 28,300 |
| Operating expenses | (27,600) | (22,900) | (18,700) |
| EBIT | 18,000 | 13,400 | 9,600 |
| Interest | (4,200) | (3,900) | (3,700) |
| PBT | 13,800 | 9,500 | 5,900 |
| Tax | (3,450) | (2,375) | (1,475) |
| **Net profit** | **10,350** | **7,125** | **4,425** |
3. Balance sheet and cash flow (FY5, Rs '000)
| Item | Value |
|---|---|
| Current assets | 48,000 |
| Non-current assets | 1,32,000 |
| **Total assets** | **1,80,000** |
| Current liabilities | 31,000 |
| Long-term debt | 42,000 |
| **Equity** | **87,600** (opening 78,000) |
| Operating cash flow | 12,900 |
| Capex | (7,400) |
| **Free cash flow** | **5,500** |
4. The ratios, calculated
| Metric | Working | FY5 |
|---|---|---|
| Gross margin | 45,600 ÷ 1,20,000 | 38.0% |
| Operating margin | 18,000 ÷ 1,20,000 | 15.0% |
| Net margin | 10,350 ÷ 1,20,000 | 8.6% |
| ROE | 10,350 ÷ 82,800 avg | 12.5% |
| ROA | 10,350 ÷ 1,72,500 avg | 6.0% |
| EPS | 10,350k ÷ 90,00,000 sh | Rs 11.50 |
| BVPS | 87,600k ÷ 90,00,000 sh | Rs 92.00 |
| D/E | 42,000 ÷ 87,600 | 0.48 |
| Interest cover | 18,000 ÷ 4,200 | 4.3× |
| Current ratio | 48,000 ÷ 31,000 | 1.55 |
| OCF ÷ net profit | 12,900 ÷ 10,350 | 1.25 |
| Revenue CAGR (FY3→FY5) | (1,20,000÷79,500)^(1/2)−1 | 22.9% |
| Profit CAGR (FY3→FY5) | (10,350÷4,425)^(1/2)−1 | 52.9% |
5. Valuation at Rs 184
- P/E 16.0× · P/B 2.0× · EV/EBITDA 8.7× · dividend yield 3.3% · payout 52%
6. Scorecard
| Area | Score | Reasoning |
|---|---|---|
| Growth | 17 / 20 | Revenue CAGR 22.9%, profit growing faster — margins expanding |
| Profitability | 13 / 20 | ROE 12.5% is respectable, not exceptional; margins improving |
| Financial health | 15 / 20 | D/E 0.48 comfortable; interest cover 4.3× adequate, not generous |
| Valuation | 12 / 20 | 16× earnings for this growth is not obviously cheap |
| Cash flow | 9 / 10 | OCF 1.25× profit — earnings convert well |
| Dividend | 7 / 10 | 52% payout, covered by earnings and cash |
| **Total** | **73 / 100** |
7. The conclusion, argued both ways
For: margins expanding at every level, profit compounding faster than revenue, cash conversion above 1.0, moderate leverage with adequate cover, and spare capacity at 78% so growth need not be bought with capital.
Against: 16× earnings already prices in continued growth; interest cover of 4.3× is adequate rather than safe given operating leverage; the 76-day cash conversion cycle ties up working capital; and a single plant is a single point of failure.
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