* As hyperinflationary dynamics begin to subside, the residual effect has unveiled a large dislocation in valuations of listed domestic players. * Steep price increases taken by domestic firms have been more than enough to offset a decline in volumes over 2022, resulting in strong revenue and earnings growth to new highs, despite a deteriorating macro picture. With the expansion in bottom line to new highs, it is our view that valuations need to adjust accordingly with the risk premium ...
* Steep price increases taken by domestic retail and consumer firms in 2022 were more than enough to offset a decline in volumes, resulting in strong revenue and earnings growth. * We saw a similar outcome unfolding in Turkey last year, where hyperinflation in the country led to record revenue and earnings growth for supermarket chains and consumer companies. * Recent electricity tariff and PAYE tax increases are negative headwinds for overall consumption in the near-term, but mode...
We use a 3-stage DCF model and arrive at a fair value of LKR 860.00/share (+23.8% upside; +37.5% TSR). CTC reported an EPS of 17.94 for 2Q CY22 down 19.7% QoQ (-14.2% YoY). Revenues of LKR 10.1bn were up 10.7% QoQ (+31.6% YoY); we forecast further revenue growth in 2H CY22E as recent price increases offset a decline in volumes. EBIT margins were down sharply by 9.7pp QoQ (-19.0pp YoY) due to FX losses taken on revaluation of foreign currency payables. With currency stabilisation, we expect a ...
We downgrade CTC to a HOLD with a revised target price of LKR 1,005/share (-19.6% to old; +5.6% upside). Including a dividend of LKR 80.00/share for CY21E, we derive a total return of +14.0%. CTC reported an EPS of LKR 20.90 for 2Q CY21, coming above our estimate of LKR 17.49 for the quarter. Net revenues came in at LKR 7.7bn, down 8.2% QoQ due to the impact of travel restrictions imposed to contain the 3rd wave. EBIT came in at LKR 6.3bn, with margins up 3.0pp QoQ due to savings on raw mater...
Following slight adjustments to our estimates, we maintain our target price of LKR 1,250/share. Including a CY21E dividend of LKR 96.00/share, we arrive at a total return of +39.2%. BUY. CTC reported EPS of LKR 20.92 for 1Q CY21, coming below our estimate of LKR 24.22/share for the quarter. Gross revenues picked up as demand recovered under a more normalised operating environment. Looking into CY21E, we expect the rebound in economic activity and income levels to continue to support CTC’s vol...
We expect the consumer sector to see a steady recovery, supported by a gradual rebound in economic activity and income levels. The sector looks to provide more sustainable long term growth, rather than growth fueled by government concession to consumers. From a macro perspective, consumer demand and spending are slated to increase on the back of historically low interest rates and low consumption taxes. A domestic focused economic growth agenda would support higher labor demand, particular...
We roll over our valuations to CY21E and maintain our target price at LKR 1,250/share and derive a total return of +32.4%. BUY. CTC reported an EPS of LKR 19.29 in 4Q CY20, coming in below our estimates. Gross revenues were down 18.1% YoY, with localised lockdowns impacting demand and distributors stocking less inventory for the quarter. In CY21E, we expect volumes to benefit from a low base in 1H CY20 while stable prices are a key positive. However, rising raw material costs due to currency ...
With demand returning to regular levels, albeit with some disruption in the Western Province, and no excise duty increases through the budget, we revise our target price to LKR 1,250/share (previously LKR 900/share). Including a DPS of LKR 85.00 in CY21E, we derive a total shareholder return of +39.1%. Hence, we revise our rating to a BUY from a HOLD. Earnings came in better than our estimates at LKR 4.9bn (+9.3% YoY), mainly driven by a 21.0% volume growth YoY. While there is some disruption...
We maintain our target price at LKR 900/share and including a dividend of LKR 69.00/share, we derive a total shareholder return of -0.1%. Hold. Earnings came in line with our estimates for 2Q CY20 at LKR 3.1bn, down 33.8% YoY. With the government implementing a ban on tobacco sales during the lockdown period and low demand post-lockdown, volumes were down 38.0% YoY for the quarter. The quarter also saw interest income drop by ~58.0% which added to the earnings decline. In 3Q CY20E, volumes ...
With the impact on tobacco sales from the lockdown, we revise our target price to LKR 900/share (previously LKR 1,225/share). Including a dividend of LKR 71.00/share, we derive a total shareholder return of +5.5%. As a result, we revise our rating to a Hold from Buy. Earnings came in below our estimates for 1Q CY20 at LKR 3.9bn, down 3.2% YoY. Due to the impact of price increases in March 2019, and low sales due to the Covid-19 lockdown, which began mid-March, volumes declined by 13.0% YoY. H...
With a boost to consumer spending, we expect a demand recovery for CTC products. On a positive note, as disposable income increases, consumers prefer to switch to legal and branded products. In addition to the impact from PAYE tax revisions, we believe that the proposed removal of NBT and the VAT reduction could also considerably reduce the tax burden for CTC. Currently, c75.0% of the gross revenues are paid as taxes which include excise duties, VAT and NBT. Given that there has been no expla...
Ford Equity International Research Reports cover 60 countries with over 30,000 stocks traded on international exchanges. A proprietary quantitative system compares each company to its peers on proven measures of business value, growth characteristics, and investor behavior. Ford's three recommendation ratings buy, hold and sell, represent each stock’s return potential relative to its own country market.. The rating reports which are generated each week, include the fundamental details behind...
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