Analysts: Farjad Siddiqui farjad.siddiqui@bracepl.com Sajid Huq sajid.huq@bracepl.

com

Islami Bank Bangladesh Ltd

DSE: ISLAMIBANK Bloomberg: ISLAMI:BD Company Summary Ticker Sector Date of Incorporation Date of Listing Financial Year End Number of Shares (mn) Current Market Capitalization (BDT bn) DSE Market Capitalization (BDT bn) % of DSE Market Capitalization 52 Week High (BDT) 52 Week Low (BDT) YTD Return (%) Trailing EPS (BDT) Trailing P/E ratio (x) Revenue BDT MM Net Interest Income Investment Income Commissions etc Other income Total revenue Margin and efficiency (%) Operating efficiency Loan/Deposit ROE ROA Other Key Indicators (%) Loan-Dep Rate Spread % Net Interest Margin (%) Cost-to-Income NPL ISLAMIBANK Bank 13-Mar-83 1985 December

Rating: Outperform Dec-2012 Fair Value Estimate: BDT 69 per share January 9, 2012

Enduring Remittance Market Share & Loan-Deposit Spread to Drive Record Earnings Growth We forecast YoY IBBLs 2011 Loan & Advance (L&A) growth rate (GR) of 18% and deposits GR of 23% . We further expect 2011-LDR of 88%, lower than 2010-level of 90%. LDR is expected to fall owing to 2011E multi-year high deposits GR driven by a slowing stock market as well as significant M2 GR contraction. We anticipate 2011 net interest income (NII) GR of 29.6%, NIM of 4.54%, and loan-deposit rate spread of 5.07%. IBBL also has the largest trade finance and remittance operations in the industry, and thus high 2011E non-NII GR. We estimate 2011 commission & fees income GR of 37% YoY, sharp rise from 2010 GR of 16% YoY, and 4-year average of 13% YoY. Its industrial clients are Bangladeshs largest business groups. IBBLs pricing power and the non -significant correlation between income GR and Inflation rate are borne out by regression analysis (please see enclosed report). We anticipate IBBL will avoid portfolio losses otherwise expected to cut 2011 earnings of domestic banks. In 2010, it had a minimal market exposure of 0.62% of deposits. This is 6.51 times lower than 4.05% average exposure of the next 7 banks by end-2010 aggregate L&A. Further, Bangladeshs 2011E remittance GR of 10% (our internal estimates) will lead to IBBLs FX gains GR of 40% YoY, as it manages 28% of the countrys annual inflow. Last but not least, worth noting that IBBL has lower P/E ratio and higher ROE than leading banks in other frontier markets (e.g., Sri Lanka, and Oman). Comparative price multiples and trading liquidity are illustrated in enclosed report for select frontier market banks via scatter plot. Rating: We estimate EPS of BDT 7.70 and BVPS of BDT 34.60 for the year ending December 2012, and set a target price of BDT 69.00 per share with an OUTPERFORM rating. This implies a 30.00% price return on current share price of BDT 52.60 (as on 8th January 2012). High deposit collection, loan-deposit rate spread, nominal 2010 stock market exposure, and market leadership in trade and remittance operations will cumulatively drive EPS growth.

1000
53.3 2,632.3 2.0% 78.8 50.5 -3.5% 4.4 8.8

2010 2011E 2012E 10,293 13,343 16,199 405 548 579 3,997 5,485 6,886 929 959 1,353 15,624 20,335 25,017 2010 2011E 2012E 39% 90% 20% 1% 4.7% 4.2% 39.0% 1.8% 36% 88% 23% 2% 36% 88% 24% 2%

2010 2011E 2012E 5.1% 5.1% 4.5% 4.5% 36.3% 36.0% 1.6%

Sources: Company Annual Report, BRAC EPL Research

Price performance of IBBL in last 12 months

60.00 250.0

55.00

200.0

50.00

150.0

45.00

100.0

40.00

50.0

35.00

.0

Turnover (Million BDT)

Price (BDT)

Sources: Dhaka Stock Exchange

Islami Bank Bangladesh Ltd

(DSE: ISLAMIBANK; Bloomberg: ISLAMI:BD)

Growth in Loans and Advances (L&A): We estimate 2011 L&A growth of 21% YoY, lower than 2010 L&A GR of 22% YoY, and 4-year L&A CAGR of 23%, on 2H11 M2 GR of -5.2% (21.3% to 19.6% June-Nov11) driven by inflationary pressures and FX depreciation. BB raised repo rates multiple times and allowed large loans very selectively. Mandate to domestic private banks is to enable large loans to agriculture, SME, and export-oriented sectors, but restrict them in case of capital markets, real estate, and retail sectors.
Figure 1: IBBL L&A Growth

350,000 300,000 250,000 200,000 150,000 100,000 50,000 -

28%

24%
19%

L& A (BDT MM)

20%
15% 10%

5% 0%
2007 2008 2009 2010 2011E

L&A (BDT MM)

L&A GR (YOY)

Sources: Company Annual Report, BRAC EPL Research

M2 GR fell in March-Sep11 nearing BBs FY12 year-end target of 18%. We anticipate an M2 GR lower than BB-target, as BB tries to mitigate the inflationary effect of a BoP deficit and FX depreciation. Government borrowing is likely to drop in 1H12 with its impact becoming clearer in 2H12on upward revision of energy prices.
Figure 2: IBBL L&A Composition

SME 28% Trnsport 2% Agro 5%

Industrial 43%

Real Estate 4%

Commerc ial 18%

Sources: Company Annual Report (As on 2010)

Deposit growth and loan-to-deposit ratio (LDR): We project 2011-deposit GR of 23% YoY, compared to 2010 GR of 19.5% YoY, and 4-year average of 21.87% YoY. Deposit GR was higher on low stock market liquidity and retail investor confidence as well as high bank deposit rates and declining savings certificate sales.
2

L&A GR (YoY)

22%

30% 21%

25%

Islami Bank Bangladesh Ltd

(DSE: ISLAMIBANK; Bloomberg: ISLAMI:BD)

Figure 3: IBBL Deposits Composition and GR

350,000
300,000 250,000

26% 20% 22%

20%

30% 23%
25% 20% 15% 10% 5% 0%

Deposits (BDT MM)

200,000 150,000 100,000 50,000

0 2007 2008 2009 2010 2011E

Mudaraba Savings

Mudaraba Term

Other Mudaraba
Deposits GR

Current A/C & Others

Sources: Company Annual Report, BRAC EPL Research

Further, our projection for 2011 assumes 88% gross LDR, slightly lower than 2010 LDR of 90%. IBBLs projected LDR performance is noteworthy in light of multi-year high deposit GR and contractionary monetary policy.
Figure 4: IBBL Loan-Deposit Ratio (LDR)

90.5% 89.5%
LDR

90%

90% 88%

88.5% 87.5% 86.5% 85.5%

2007 2008 LDR 87%

88%

2009

2010

2011E

Sources: Company Annual Report, BRAC EPL Research

Net Interest Income (NII) We project 2011 loan-deposit spread to be 5.1%, higher than the 4-year average of 4.83%. Net Interest Margin (NIM) is projected at 4.54% compared to a 4-year average of 4.21% and 2010 NIM of 4.19%. NIM grew on higher deposit GR and high loan-deposit spread. Deposit rate increments can thus be passed on to borrowers. IBBLs institutional-clients-dominated portfolio enables easier re-pricing of outstanding loans. Given above L&A and deposit GR-we project 2011 NII GR of 29.6% YoYhigher than 2010 NII GR of 24.11% YoY, and 4year CAGR of 24.81%

Deposits GR

Islami Bank Bangladesh Ltd

(DSE: ISLAMIBANK; Bloomberg: ISLAMI:BD)
Figure 5: IBBL Net Interest Income & NIM

Net Interest Income (BDT MM)

16,000
14,000 12,000 4%

5%

8,000 6,000
4,000 2,000

4% 4%

2007 2008 2009 2010 2011E

Net Interest Income (BDT MM)

Sources: Company Annual Report, BRAC EPL Research

NIM (%)

Loan-deposit spreads over 5 years show positive correlation with Inflation rates (annual average). This is a strong signal of IBBLs pricing power and the low susceptibility of their spread income to inflationary pressures. As discussed above, IBBL can pass on higher inflationary costs to its borrowers.
Figure 6: IBBL Loan-Deposit Spread, NIM and Inflation

6.0%
Loan-Deposit Spread & NIM

14%
Avg Inflation Rate

5.0%
4.0%

10% 6% 2% -2% -6% -10% 2007 2008 2009 NIM 2010 2011E

3.0%
2.0%

1.0% 0.0%

Loan-Deposit Spread

Average Inflation Rate

Sources: Company Annual Report, BRAC EPL Research

Given strong NIM in a particularly difficult year for banksIBBLs core earnings driver is clearly its enduring loan-deposit spread and deposit GR. Spread income contributed 66% to 2010 operating income. In fact, we think that over times, NIMs will endure longer for Shariah-compliant banking than for conventional commercial banks.

NIM (%)

10,000

4%

4.60% 4.50% 4.40% 4.30% 4.20% 4.10% 4.00% 3.90% 3.80% 3.70% 3.60%

Islami Bank Bangladesh Ltd

(DSE: ISLAMIBANK; Bloomberg: ISLAMI:BD)
Figure 7: IBBL Operating Earnings Composition

Composition of Operating Income

120%
100% 5% 2%

3% 3%
31%

80% 60%
40%

8% 3% 28%

4% 1% 28%

6% 3% 26%

5% 3%
27%

41%

20% 0%

52%

62%

61%

67%

66%

66%

2006

2007

2008

2009

2010

2011E

Net Interest Income Commission & Fees Investment Income Other Income

Source: Company Annual Report, BRAC EPL Research

Non-Interest Income Non-interest income constitutes 32.17% of IBBLs 2011E Total Operating Income. As per 4-year average, its proportion was 35.72% of Total Operating Income, with investment income at 2.56% and commissions & fees income at 27.00%.
Figure 8: Comparative Analysis of Operating Income Composition
100% 90% 80% 70% 26% 18% 24% 38% 68% 36% 40% 43% 6% 6% 6% 28% 5% 22% 3% 28% 1% 42%

18%

23%

60%
50% 40% 30% 20% 10% 0% Prime Bank National Bank Southeast Bank 32% 24%

29%

35%

Eastern Bank

NCC Bank

Islami Bank Bangladesh

Net interest Income

Investment Income

Fee Income

Other Income

Sources: Company Annual Report, BRAC EPL Research

Islami Bank Bangladesh Ltd

(DSE: ISLAMIBANK; Bloomberg: ISLAMI:BD)
Figure 9: IBBL Non-Interest Income Composition
8,000 7,000 6,000 5,000

BDT MM

4,000
3,000 2,000 1,000 2007 Commission Income 2008 Exchange Gain 2009 2010 2011E Other Income

Investment Income

Sources: Company Annual Report, BRAC EPL Research

Strong Performance in Commission & Fees Income IBBL has the largest trade finance and remittance operations in the sector. We estimate 2011 commission and fees income GR at 37% YoY, compared to 16% YoY in 2010 and 4-year average of 13%. Trade finance is expected to grow 35% YoY, exchange gain 40% YoY, and ATM operations by 50%. Commission income and exchange gains are driven by import, export, and remittance GR which we estimate will grow at 40%, 22%, and 10% respectively by FY12-end.
Figure 10: IBBL Commission & Fees Income Growth

6,000
Commission & Fees Income (BDT MM)

37% 29%

40% 35% 30%

5,000
4,000

25% 16% 20% 15% 5% 10%

3%
GR (YoY)

3,000
2,000

1,000 -

5% 0% 2010 2011E GR (YOY)

2007

2008

2009

Commission & Fees Income (BDT MM)

Sources: Company Annual Report, BRAC EPL Research

However, we expect 2H11 RMG export GR to slightly decelerate on US and Eurozone economic slowdown (accentuated by high base in 2010 which saw 40% GR YoY). IBBLs large RMG exposure (42.30% industrial loans on 31Dec11) is 16.27% expected to translate in downward pressure in fees & commission income. That said these are large RMG clients with the advantage
6

Islami Bank Bangladesh Ltd

(DSE: ISLAMIBANK; Bloomberg: ISLAMI:BD)
of economies of scale. They can take cut on margins and still be competitive vis --vis smaller players. The banks remittance flow grew at a compound rate of 34% over the last 4 years. We estimate 12% growth in remittance flow YoY in 2011. Its primary remittance-generating marketsSaudi Arabia and the UAEare politically stable. In fact, 50% of IBBLs remittance is channeled from the KSA in alliance with Al-Rajhi Bank, a leading Saudi financial institution. IBBL supplies the highest FX to the local market, owing to its substantial dollar inflow from remittance operations. It is expected to profit BDT2470 million from FX gains in 2011. Meager impact of Government borrowing As a Shariah-compliant non-PD, IBBL is not expected to be substantially affected by recent government borrowing. Higher government borrowing (BDT 69.3 billion in July-Sept11, a 23x rise YoY) is not expected to directly affect IBBLs 2011 treasury investment portfolio. However, increased Statutory Liquidity Reserve (SLR) requirements since December 2010 are expected to raise IBBLs treasury investments by 25% in 2011 compared to 4-year compounded GR of 15.75%. We project 4.35% investment yield for 2011 and investment income GR of 23.50% YoY.
Figure 11: Portfolio Investments as % of Deposits (2010)
10%
Portfolio Investment as % of Deposit

9% 8% 7% 6% 5% 4% 3% 2% 1% 0% AB Bank Prime Bank 3.6% 2.3%

8.9%

5.3%

5.2%

1.6% 0.6%

National Bank

Southeast Eastern Bank Bank

City

Islami Bank Bangladesh

Figure 12: IBBL Investment Income

Investment Income (BDT MM)

700 600 500 400 300 200 100 2007 2008 2009 -72% 107% 44%

326%

350%

300%
250% 150% 24% 100% 50% 0%
GR (YoY)

200%

-50%
-100% 2010 2011E

Investment Income (BDT MM)

GR (YOY)

Sources: Company Annual Report, BRAC EPL Research

Islami Bank Bangladesh Ltd

(DSE: ISLAMIBANK; Bloomberg: ISLAMI:BD)
Lower cost-to-income ratio in comparison to historical average Cost-to-income ratio was 31.25% up to 9M11, lower than 4-year average of 38% and 39% in 2010, on improved employee productivity and business restructuring. We expect 2011 cost-to-income to be 32%. IBBLs IT-driven automation expected to lead to significant overhead cost savings.
Figure 13: IBBL Operating Efficiency

40% 39% 38% 37% 36% 35% 34% 33% 32% 31%

2.1%

Cost- to-Income (%)

2.0% 1.9% 1.9% 1.8% 1.8% 1.7% 1.7% 2007 2008 2009 2010 2011E

Cost- to-Assets (%)

2.0%

Cost-to-Income (%)

Cost-to-Assets (%)

Sources: Company Annual Report, BRAC EPL Research

Persistent growth in EPS in spite of macro shocks The year 2011 has been severe on the bank sector. High inflation and government borrowing cut spread income whereas a 44%-market correction eroded portfolio gains from 2010 DGEN appreciation of near-94%. We expect EPS stream and GR to be as follows.
Figure 14: IBBL EPS Trend

700% 600% 500%

EPS (BDT)
400% 300%

87%

6.05
4.43

3.40 2.67 27%

1.43

30%

37%

200% 100% 0%

2% 2007 2008 2009 2010 2011E

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

EPS (BDT)

GR (YoY)

Sources: Company Annual Report, BRAC EPL Research

GR (YoY)

Islami Bank Bangladesh Ltd

(DSE: ISLAMIBANK; Bloomberg: ISLAMI:BD)
financing GR, high NII GR, lower costs, and steady remittance flows. FX gains should also be at historical high levels as discussed in earlier sections. We project 2011 EPS to be BDT6.00, against BDT4.39 in 2010, 36% higher YoY. EPS 4-Year average GR is 29.14% as of Dec10. EPS grew 32% YoY in 9M11. Inflation and IBBLs profit growth EPS growth YoY averaged 29% in 2007-2010. Inflation and net profit growth rates exhibit very weak correlation. Below graph depicts higher net profit YoY growth rate despite rising average inflation rate. Below graphs indicate Inflation to NII GR correlation coefficient (CC) of 0.51. This is unexpected since negative correlation is more common between Inflation and NII GR. Therefore, graph below is testimony to IBBLs considerable pricing power. Meanwhile, inflation to non-interest income CC is -0.07, which though negative is quite low. We conclude that IBBLs profitability is more or less immune to inflationary pressures.
Figure 15: Correlation Between IBBL Income Components & Inflation
16% 70%

12%
Average Inflation Rate
8% 4% 0% -4% -8% -12% 2007 2008 2009 2010 2011E

60%
50% 40% 30% 20% 10% 0%

-16%
-20% Average Inflation Rate GR in Non Interest Income GR in Net Interest Income

-10%
-20%

Figure 16: Inflation and IBBL Net Profit Growth Rate

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

9.9% 7.2%

87.3% 6.7%

10.0% 8.8%

12% 10%
Avg Inflation Rate

Net Profit GR

7.3%

8%
6%

24.5%
2.0%

27.2%

30.1%

36.6%4% 2% 0%

2006

2007

2008

2009

2010

2011E

Net Profit GR (YOY)

Average Inflation Rate

Sources: Company Annual Report, BRAC EPL Research

GR in Incomes (%)

Islami Bank Bangladesh Ltd

(DSE: ISLAMIBANK; Bloomberg: ISLAMI:BD)
Comfortable capital adequacy ratio (CAR) Given that IBBL has been maintaining CAR above regulatory requirement since 2005, we expect the trend to continue. The minimum CAR prescribed by the Bangladesh Bank is 5% for Tier-I and 10% for total capital. IBBL exceeded these minimum ratio thresholds with a Tier-I capital ratio of 7.23% and total capital ratio of 11.06% in 2010. We expect that total CAR will remain around 11.25% in 2011 with Tier-I capital ratio of 8.00%.
Figure 17: IBBL Regulatory Capital Decomposition

12%
Tier-I & Tier-II Capital

10%
8%

4.64%

4.22%

3.83%

3.83%

3.25%

6%
4%

6.54%

6.50%

7.23%

7.23%

8.00%

2% 0% 2007 2008 Tier-I 2009 Tier-II 2010 2011E

Sources: Company Annual Report, BRAC EPL Research

Relatively minor improvement in asset quality We expect 2011 NPL ratio to improve to 1.60% in 2011, lower than 1.77% in 2010 (which was a sharp drop from 2.36% in 2009).
Table 2: Asset Quality

Asset Quality NPLs to total loans and advances Provision for classified loans,MM
Sources: Company Annual Reports Figure 18: IBBL Gross NPL Ratio

2009 2.39% 1134.88

2010 2.36% 125.41

3.5% 3.0%
Gross NPL Ratio

2.93% 2.39% 2.36% 1.77%

1.60%

2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2007

2008

2009

2010

2011E

Gross NPL Ratio

Sources: Company Annual Report, BRAC EPL Research 10

Islami Bank Bangladesh Ltd

(DSE: ISLAMIBANK; Bloomberg: ISLAMI:BD)
Increasing return: ROE and ROA are both increasing We project ROE and ROA for 2011 to be 24.44% and 1.76%, respectively, up from 20.56% and 1.47% in 2010. Higher profitability ratios are driven by high earnings growth and ROA by enduring loan-deposit spread.
Figure 18: ROA and ROE trend

25% 21.2% 20%

ROE & ROA

22.8%

19.9%

20.3%

15% 10% 5%

13.5%

0.8%

1.3%

1.3% 2009 ROA

1.5% 2010

1.6%

0% 2007 2008 ROE 2011E

Sources: Company Annual Report, BRAC EPL Research

IBBL in comparison to leading frontier market banks A quick look at the some of the largest listed banks in frontier markets such as Pakistan, Sri Lanka, Nigeria and Oman indicates how IBBL fares in relation to its frontier market peers.
Table 3: Frontier market banks Frontier Market Banks Country MCAP (USD mn) P/E P/B ROE ROA

Islami Bank Bangladesh Habib Bank National Bank of Pakistan

Bangladesh

358.5

8.8x 7.1x 4.1x 14.1x 10.9x 10.1x 7.9x

1.9x 1.3x 0.6x 2.2x 0.8x 1.4x 0.5x

20.70% 19.20% 14.60% 18% 13.10% 12.60% 7.30%

1.70% 1.90% 1.90% 2% 1.20% 1.60% 1.60%

Pakistan 1,317.10 Pakistan 822.60 711.7 465.4 3,037.20 536.30

Commercial Bank of Ceylon Sri Lanka Banca Transilvania Bank Muscat Access Bank Romania Oman Nigeria

Sources: CapitalIQ, Bloomberg, BRAC EPL Research

With regards to profitability ratios IBBL outperforms most of the leading banks in Pakistan, Sri Lanka, Oman and Romania. Among the 7 tabulated above, IBBL is carrying the median P/E ratio. Considering its ROE (highest among the above banks) and ROA, undoubtedly IBBL has further scope to appreciate in market.

11

Islami Bank Bangladesh Ltd

(DSE: ISLAMIBANK; Bloomberg: ISLAMI:BD)
Figure 18: ROA and ROE trend

25% 20%
ROE (%)
15% Banca Transilvania (Romania)

Islami Bank (Bangladesh)

10%
5%

Comm. Bank of Ceylon (Sri Lanka) Bank Muscat (Oman) Access Bank (Nigeria)

Habib Bank (Pakistan) NBP (Pakistan)

0% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%

ROA (%)
Sources: Company Annual Report, BRAC EPL Research

Rating Our rating considered 2012E EPS and BVPS, 2012-outlook for the banking sector and other related factors. Considering the estimated EPS of BDT 7.70 and BVPS of BDT 34.60 for 2012, we estimate a fair value of BDT 69.00 per share with an OUTPERFORM rating. This fair value implies a 9.0x potential P/E and 2.00x potential P/B of the companys Stock and 30.0% price gain over next 12 months investment horizon.

12

Islami Bank Bangladesh Ltd

(DSE: ISLAMIBANK; Bloomberg: ISLAMI:BD)
Balance Sheet, MM BDT Property & Assets: Cash Balance with Other Banks & F.I Money at call Investment Loan & Advance Fixed Assets Other Assets Total Assets Liabilities & Equities: Liabilities: Borrowing from other banks and F.I Deposits Mudaraba Perpetual Bond Other Liability Total Liabilities Shareholder's Equity: Total Liabilities & Equities 2008 31,330 2,043 7,533 180,054 4,407 1,932 230,879 2009 37,486 834 11,161 214,616 6,512 874 278,327 2010 39,053 7,115 13,471 261,725 6,757 2,664 330,784 2011E 49,250 10,672 17,194 308,836 7,298 3,196 396,445 2012E 52,649 13,340 18,986 379,868 7,881 3,836 476,559 2013E 66,686 15,341 20,884 463,439 8,512 4,603 579,465

3,000 200,343 3,000 13,475 216,819 14,060 230,879

3,000 244,292 3,000 10,929 258,221 20,106 278,327

3,000 291,937 3,000 12,330 307,268 23,516 330,784

3,000 350,325 3,000 14,180 367,505 28,941 396,445

3,000 423,893 3,000 16,307 443,200 33,359 476,559

3,000 517,150 3,000 18,753 538,903 40,563 579,465

Income Statement, MM BDT Interest/Investment Income Interest/profit paid on deposit and borrowing etc Net Interest Income Income from investments in securities/ Shares Commission, Exchange & Brokerage Other Income Total Operating Income Operating Expense Profit Before Provision Provision Pre-Tax Profit Tax Profit After Tax

2008 19,944 12,162 7,782 409 3,337 940 12,467 4,115 8,352 1,604 6,348 3,672 2,676

2009 21,371 13,077 8,294 115 3,437 480 12,326 4,545 7,781 1,263 6,518 3,113 3,405

2010 24,765 14,472 10,293 405 3,997 929 15,624 6,107 9,517 1,114 8,403 4,005 4,398

2011E 31,968 18,626 13,343 548 5,485 959 20,335 7,382 12,953 1,402 11,552 5,545 6,007

2012E 38,651 22,452 16,199 579 6,886 1,353 25,017 9,006 16,011 1,464 14,546 6,910 7,637

2013E 45,269 25,879 19,390 455 8,390 1,471 29,706 10,100 19,606 2,131 17,474 8,300 9,174

GR of Key Financial Indicators Loan & Advances GR Deposit GR Net Interest Income GR Operating Income GR Net Profit GR

2008 24.24% 20.45% 43.01% 45.59% 87.35%

2009 19.20% 21.94% 12.35% 2.14% 27.21%

2010 21.95% 19.50% 24.11% 27.02% 30.12%

2011E 21.00% 23.00% 31.37% 31.49% 36.59%

2012E 23.00% 23.00% 21.26% 23.04% 27.05%

2013E 22.00% 22.00% 18.57% 18.04% 19.34%

13

Beximco Pharmaceuticals
(DSE: BXPHARMA; Bloomberg: BXPHAR:BD)

IMPORTANT DISCLOSURES
Analyst Certification: Each research analyst and research associate who authored this document and whose name appears herein certifies that the recommendations and opinions expressed in the research report accurately reflect their personal views about any and all of the securities or issuers discussed therein that are within the coverage universe. Disclaimer: Estimates and projections herein are our own and are based on assumptions that we believe to be reasonable. Information presented herein, while obtained from sources we believe to be reliable, is not guaranteed either as to accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation of the purchase or sale of any security. As it acts for public companies from time to time, BRAC-EPL may have a relationship with the above mentioned company(s). This report is intended for distribution in only those jurisdictions in which BRAC-EPL is registered and any distribution outside those jurisdictions is strictly prohibited. Compensation of Analysts: The compensation of research analysts is intended to reflect the value of the services they provide to the clients of BRAC-EPL. As with most other employees, the compensation of research analysts is impacted by the overall profitability of the firm, which may include revenues from corporate finance activities of the firm's Corporate Finance department. However, Research analysts' compensation is not directly related to specific corporate finance transaction. General Risk Factors: BRAC-EPL will conduct a comprehensive risk assessment for each company under coverage at the time of initiating research coverage and also revisit this assessment when subsequent update reports are published or material company events occur. Following are some general risks that can impact future operational and financial performance: (1) Industry fundamentals with respect to customer demand or product / service pricing could change expected revenues and earnings; (2) Issues relating to major competitors or market shares or new product expectations could change investor attitudes; (3) Unforeseen developments with respect to the management, financial condition or accounting policies alter the prospective valuation; or (4) Interest rates, currency or major segments of the economy could alter investor confidence and investment prospects.

BRAC EPL Stock Brokerage Capital Markets Group

Sajid Huq Amit Parvez Morshed Chowdhury Ali Imam Khandakar Safwan Saad Aasim Tajwaar Matin M M Shahnewaz Kabir Shawon Farjad Siddiqui Senior Research Analyst Research Analyst Investment Analyst Research Associate Research Associate Research Associate Research Associate sajid.huq@bracepl.com parvez@bracepl.com imam@bracepl.com safwan@bracepl.com tajwaar.matin@bracepl.com shahnewaz@bracepl.com farjad.siddiqui@bracepl.com 01755 541 254 01730 357 154 01730 357 153 01730 357 779 01730 727 913 01730 727 918 01730 727 924

Institutional Sales and Trading

Delwar Hussain (Del) Head of Institutional Sales and Trading del.hussain@bracepl.com 01755 541 252

BRAC EPL Research www.bracepl.com 121/B Gulshan Avenue Gulshan-2, Dhaka-1212 Tel: +88 02 881 9421-5 Fax: +88 02 881 9426 E-Mail: research@bracepl.com