Business expansion efforts take Olympic's stock price to about a year high

Infographic: TBS

The share price of Olympic Industries Limited has soared in the past five and a half months and reached about a year high, thanks to the company's endless efforts in expanding its footprint in the bakery industry, which seemed to have boosted investor confidence in the stock. 

In the last trading session on Thursday, the company's shares closed at Tk157.7 each, a 33% increase from Tk118.3 on 16 October 2022. 

The last time its share price crossed Tk157 was on 2 February 2022. 

In the last three years, Olympic Industries has invested around Tk155 crore for product diversification and business expansion. 

EBL Securities, in its equity note on Olympic, said the company has made significant investments for entering various major segments such as instant noodles, dry cakes, soft cakes, chocolate enrobed wafers, filled candies, toffees, toasts and rusks, and savoury snacks. 

These investments clearly point out the company's expansion strategy, reads the equity note.

On condition of anonymity, a researcher at a brokerage firm said earlier that investors deemed Olympic a good fundamental stock. But from 2021 to mid-2022, its share price dropped over 50% owing to a bearish sentiment in the market fuelled by economic uncertainties.

But Olympic's business was not hurt much by the economic crisis. Rather, the company kept on investing in business expansion, even amid the crisis, which helped boost investor confidence, he added. 

Diversification endeavours

Olympic was incorporated as Bengal Carbide Limited in 1979 as a manufacturer of dry-cell batteries. Eventually, the company diversified its product line and launched biscuits and confectionery items in 1996. Then in 2008, it entered the ballpoint pen industry. Currently, Olympic is the largest commercial biscuit manufacturer in Bangladesh.

According to the Bangladesh Auto Biscuit and Bread Manufacturers Association and the Bangladesh Bread Biscuit-O-Confectionery Prostutkarak Samity, Olympic ranks first among its peers with a 22% market share in the snacks industry and around a 25%-30% share in the auto biscuit manufacturing industry.

Areas of concern

At a time when the instant noodles market was already crowded with giants such as Nestle (Maggi), Unilever (Knorr), New Zealand Dairy (Doodles), Pran (Mr. Noodles), and Bashundhara, Olympic too started a noodle production line with an initial capacity to produce 8,316 tonnes. Now, it plans to expand this production line as well and increase the capacity to 19,008 tonnes.

But the revenue contribution from this segment has not been up to the mark. 

In addition, EBL Securities said Olympic's new biscuit line and cupcake manufacturing unit will add only Tk250 crore in the company's annual revenue. 

EBL Securities report also reads that as per a recent media report, Olympic's management has expressed its intention to sell the company, but because of its high price of shares, the parties did not agree. 

Such speculations can undermine investor confidence in the company and create a risk of potential losses, it added.