EUR 4.46 For Business Accounts Only

Earnings Review Teejay Lanka PLC - Q1FY2018

Turnaround in the price of key raw material input of yarn and the improvements in economic conditions in key markets a look forward to event for the industry. The economic effects in key markets affecting demand growth is an important factor in the assurance of sustainable demand conditions. Further the increase in yarn cotton prices, a double digit growth, in the recent past had a major impact to the industry as a whole and will have a bearing on the profitability going forward as well. Management expectations for the price of yarn are the current stable prices, albeit at higher levels, will see a gradual reduction over the next few quarters which will bode well for the industry. The leveraging of the recently reacquired GSP plus status of Sri Lanka will also be an important competitive feature of the industry to further the industry opportunity and productivity.

 

We are of the view the current price of the group offers a long term potential for return with the potential recoveries in the industry’s key markets and the turnaround in the cotton yarn prices. As such we estimate a price target of LKR 44.00 for TJL, and therefore carry a BUY recommendation on the counter at its current price levels.