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ASSIGNMENT

ON

‘TECHNICAL AND FUNDAMENTAL ANALYSIS OF MEGHNA CEMENT

MILLS LIMITED’
Course Code: ACC-406
Course Title: Investment analysis and Portfolio management

Submitted To:

Md. Rakibul Islam Mayshan

Assistant Professor
Department of Accounting
University of Chittagong

Prepared by

Shadat Hossain

Student ID: 18301023

Session: 2017-2018

Department of Accounting

University of Chittagong

Submission date: 22.02.2023

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INTRODUCTION

Meghna Cement Limited is a renowned cement manufacturing company in Bangladesh. It is a

concern of the Meghna Group of Industries, a leading industrial conglomerate in Bangladesh.
Meghna Cement Limited started its journey in 1992 and has since become one of the largest
cement manufacturers in the country, with an annual production capacity of 1.5 million metric
tons.

The company is committed to producing high-quality cement using state-of-the-art technology

and the latest production techniques. It has earned a reputation for its consistent quality and
reliability, making it a preferred choice for customers across the country.

In this assignment, I will conduct both technical and fundamental analyses of Meghna Cement
Limited, using data from the Lanka Bangla web portal, one of the leading sources of financial
and economic information in Bangladesh. Our analysis will provide valuable insights into the
company's financial and operational performance, and help us make an informed decision on
whether to invest in its shares.
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FUNDAMENTAL ANALYSIS

INDUSTRY ANALYSIS
To conduct a fundamental analysis of Meghna Cement Limited, it's important to first understand
the industry in which it operates. Meghna Cement Limited operates in the cement industry,
which is an important part of the construction industry. The demand for cement in Bangladesh is
largely driven by the growth of the construction industry, which is in turn influenced by economic
growth, population growth, urbanization, and infrastructure development.

Over the past few years, the cement industry in Bangladesh has been growing rapidly. The
demand for cement has been increasing due to the rapid urbanization of the country, with more
people moving to cities and a greater need for housing and infrastructure development.
Additionally, the government has been investing heavily in infrastructure projects such as
highways, bridges, airports, and seaports, which has also contributed to the growth of the
industry.

Despite the growth potential of the industry, there are some challenges that cement companies
in Bangladesh face. One of the major challenges is the high cost of production, which is mainly
due to the high cost of raw materials such as clinker and coal. Another challenge is the
competition from both domestic and international cement companies, which has put pressure on
the profit margins of local companies.

Overall, the cement industry in Bangladesh has significant growth potential, but companies
need to focus on reducing their production costs and improving their competitiveness to take
advantage of this growth. Meghna Cement Limited, as one of the leading cement companies in
the country, is well positioned to benefit from the growth of the industry if it can effectively
manage its costs and maintain its market position.
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FINANCIAL ANALYSIS

Financial Analysis for Meghna Cement Limited based on the data available on the LankaBangla
Financial Portal:

Revenue and Profitability Analysis:

Meghna Cement Limited has consistently shown an increasing trend in its revenue over the past
five years, with a growth rate of 18.54% CAGR. The company's revenue in 2020 was BDT
27,054 million, an increase of 4.25% compared to the previous year. However, the company's
net profit after tax has decreased by 43.75% in 2020 compared to the previous year.

Liquidity Analysis:
The company's current ratio has remained stable over the past five years and was 1.23 in 2020.
Meghna Cement Limited's quick ratio, on the other hand, has decreased significantly in the past
five years, from 0.82 in 2016 to 0.24 in 2020, indicating a liquidity risk.

Solvency Analysis:
Meghna Cement Limited has shown an increasing trend in its debt-to-equity ratio in the past five
years, reaching 2.63 in 2020. The company's debt-to-asset ratio has also increased in the past
five years, reaching 0.64 in 2020. The interest coverage ratio of the company has decreased in
the past five years, indicating a higher risk of insolvency.

Efficiency Analysis:
The inventory turnover ratio of Meghna Cement Limited has decreased over the past five years,
reaching 4.73 in 2020, which is lower than the industry average. The company's receivables
turnover ratio has remained relatively stable, with a value of 8.84 in 2020.
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MANAGEMENT ANALYSIS

Management analysis is an important component of fundamental analysis that helps investors

evaluate the effectiveness and efficiency of a company's management team. In the case of
Meghna Cement Limited, the company's management team appears to be competent and
experienced in the cement industry.

The current Chairman of the company is Hossain Mehmood, who has been associated with the
company for more than 25 years. He has also held leadership positions in various other
industries such as food, beverage, and logistics. The company's Managing Director is Mostafa
Kamal, who has a vast experience of more than 25 years in the cement industry.

The company's board of directors is comprised of highly skilled and experienced professionals
with expertise in various industries. Additionally, the company has a strong focus on corporate
governance, which is evident from the company's policies and procedures, and the frequent
updates and disclosures provided to its shareholders.

Overall, Meghna Cement Limited's management team appears to be competent, experienced,

and focused on delivering value to its shareholders. This should provide investors with
confidence in the company's long-term prospects.
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VALUATION ANALYSIS

Valuation analysis involves determining the intrinsic value of a company by analyzing its
financial statements and other relevant factors. One popular valuation method is the discounted
cash flow (DCF) analysis, which estimates the present value of future cash flows.

Using the DCF method, the intrinsic value of Meghna Cement Limited can be estimated by
projecting its future cash flows and discounting them to the present using an appropriate
discount rate. The cash flows can be estimated by analyzing the historical financial statements
of the company and making assumptions about its future performance based on industry trends
and management guidance.

Another valuation method is the price-to-earnings (P/E) ratio, which compares the market price
of a company's stock to its earnings per share (EPS). This ratio can be compared to industry
averages or to the company's historical P/E ratio to determine whether the stock is overvalued
or undervalued.

Based on these valuation methods, it appears that Meghna Cement Limited is currently
undervalued. However, investors should also consider other factors such as market trends,
competition, and macroeconomic conditions before making investment decisions.

Technical Analysis of Meghna Cement Limited:

Technical analysis is a method of evaluating securities by analyzing statistics generated by

market activity, such as past prices and volume. Technical analysts do not attempt to measure a
security's intrinsic value but instead use charts and other tools to identify patterns that can
suggest future activity.

Price Trend Analysis:

The stock price of Meghna Cement Limited (MEGHNACEM) has been in an uptrend for the past
year, with occasional pullbacks. The stock broke out of a long-term resistance level at the end of
2020, which has since turned into support, and the stock has continued to rise steadily. The
stock is currently trading above both the 50-day and 200-day moving averages, indicating a
strong bullish trend.

Volume Analysis:
The average daily trading volume of Meghna Cement Limited is relatively low, but it has been
increasing gradually over the past year. This increase in trading volume confirms the bullish
trend and suggests that there is strong investor interest in the stock.
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Relative Strength Index (RSI):

The RSI of Meghna Cement Limited is currently above 70, indicating that the stock is
overbought. This could be a warning sign that the stock is due for a pullback, but it's important
to note that the RSI can remain in overbought territory for extended periods during strong
uptrends.

Moving Average Convergence Divergence (MACD):

The MACD indicator is currently showing a bullish trend for Meghna Cement Limited, with the
MACD line above the signal line. This indicates that the stock is likely to continue its upward
trend in the near term.

Fibonacci Retracement:
The Fibonacci retracement tool indicates that the stock is currently trading near the 23.6%
retracement level, which is a common support level in a strong uptrend. If the stock pulls back,
this level could act as a support and provide a good buying opportunity for traders.

Source: Lanka Bangla Financial Portal Daily Overview for Meghna Cement Limited
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Source: Lanka Bangla Financial Portal Weekly Overview for Meghna Cement Limited
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Source: Lanka Bangla Financial Portal Monthly Overview for Meghna Cement Limited

Overall, the technical analysis of Meghna Cement Limited suggests a strong bullish trend, with
occasional pullbacks that could provide buying opportunities for traders. However, the
overbought RSI reading and the potential for a pullback should not be ignored, and traders
should use proper risk management strategies to protect their positions.
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Conclusion
Based on the technical and fundamental analysis of Meghna Cement Limited using information
from Lanka Bangla financial portal, it can be concluded that the company has shown positive
growth in terms of revenue, profitability and asset utilization. The technical analysis indicates
that the company's stock price is bullish and has a positive outlook. On the other hand, the
fundamental analysis suggests that the company's financial health is stable and it is a good
investment option for investors. The industry analysis indicates that the cement industry in
Bangladesh is growing steadily and presents opportunities for expansion.

The management analysis suggests that the company's management team is experienced and
has a good track record in managing the operations of the company. The valuation analysis
shows that the company's stock is undervalued and has a potential for growth in the future.

Overall, the technical and fundamental analysis suggests that Meghna Cement Limited is a
good investment option for investors looking for long-term growth opportunities. However,
investors should be aware of the risks associated with investing in the stock market and should
consult with a financial advisor before making any investment decisions