EUR 4.56 For Business Accounts Only

JKSB Quarterly Highlights_Tokyo Cement Company PLC (TKYO)_2QFY17

Note:

Strong earnings growth driven by healthy revenue growth & expansion of margins

TKYO reported a healthy revenue growth of 24% YoY for the quarter with the support of a 7% YoY increase in retail selling prices of bagged cement (Rs.870 to Rs.930 per 50kg bag) and a growth in volumes stemming from improved capacity utilisation (vs. 2Q FY16). Consequently, TKYO was also able to expand its GP margin from 21.1% to 24.4% and achieve a strong increase of 43% YoY in gross profits during the quarter. With only a marginal increase in opex, TKYO's EBIT margined widened from 8.6% to 13.5% causing EBIT to grow at a rate of 95% YoY. This significant improvement seen at the EBIT level helped TKYO expand its pre-tax margin from 7.6% to 12.3% and achieve a PBT growth of 99% YoY despite the Rs.48 Mn (+65%YoY) increase seen in net finance costs. Furthermore, a reduction experienced in the effective tax rate from 19.5% to 11.7% augmented TKYO's bottom line growth. As a result, TKYO saw its net margin widen drastically from 6.2% to 10.8% and achieved a steep growth of 118% YoY in earnings.

We project TKYO’s full-year earnings to reach Rs.2.9 bn in FY17E (EPS=Rs.8.68)

During the cumulative period 1H FY17, TKYO saw its earnings increase by 79% YoY to Rs.1.7 bn with the support of healthy revenue growth and expansion of margins. We currently project TKYO's full-year earnings to reach Rs.2.9 bn in FY17E, which translates to PE ratios of 6.9x and 5.8x for the voting and non-voting shares respectively.