JKSB: Quarterly Highlights_Teejay Lanka PLC (TJL)_3QFY19
TJL continued its momentum recording its fifth consecutive QoQ earnings growth, (+29.48%), while PAT for the quarter grew by 12% YoY to Rs.551Mn. Revenue grew by 28% for 3QFY19 to Rs. 8,481Mn as a result of expansions in the Indian and Sri Lankan plants which contributed to 14% of topline growth. The steep depreciation of the rupee alongside price increases implemented during the quarter continued to support growth in revenues. The increase in yarn prices coupled with higher utility costs in Sri Lanka and India continued to compress margins from 13.08% to 12.26% during 3QFY19. The strong growth in PPE (+20.95%) resulted in a higher depreciation charge during the year which narrowed EBIT margins from 8.79% to 8.27% during the quarter concluded. PAT for the quarter grew by 12% despite a significant increase in finance expenses (+306% YoY) due to exchange rate losses recorded during the quarter. Trade receivables for the 9M period increased (+28.90 YoY) due to strong order book from European and American markets.
We currently project TJL’s full year FY19E earnings to reach Rs.1,830mn with a reduction in yarn prices in 4QFY19E alongside steady topline growth. The continued focus on wastage management and process re-engineering will enhance EBIT margins for the forecasted period. At the current price of Rs. 29.50, TJL trades at an FY19E P/E of 11.3x which is at a premium to the manufacturing sector in our coverage universe.
•JKSB is one of 15 founding members of the Colombo Stock Exchange with roots in share trading dating back to 1896, and is a subsidiary of John Keells Holdings PLC (JKH), the largest listed entity on the Colombo Stock Exchange with a market capitalization of US$ 1.3bn.
•JKSB’s core client base is Foreign Institutional Investors, Local Institutions and HNWI’s
•JKSB has a co-branded Research tie up with CIMB and a Research Referral agreement with Credit Suisse, along with trade execution relationships with several other global and regional securities firms.
•JKSB’s trade execution partners include Credit Suisse, CIMB, Merrill Lynch, Exotix, Daiwa, Convergex, Deutsche Asia Securities and Morgan Stanley
•JKSB is a research contributor to Bloomberg on ‘KEEL’
•The JKSB Research Universe covers 72 stocks across 15 sectors, with most Research efforts focused on approximately 45 of the more liquid counters.
•The JKSB Universe constitutes 67% of total market cap and approximately 80% of turnover at the CSE.
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