reports
- Naveed Majeed
Sri Lanka: Equity Strategy - Deep Value Unveiled As Hyperinflation Sub...
* 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 ...
JKH.N0000 JOHN KEELLS HOLDINGS PLC
ACL.N0000 ACL CABLES
CARG.N0000 CARGILLS (CEYLON) PLC
CCS.N0000 CEYLON COLD STORES
CTC.N0000 CEYLON TOBACCO
DIST.N0000 DISTILLERIES CO. OF SRI LANKA PLC
LLUB.N0000 CHEVRON LUBRICANTS LANKA PLC
HHL.N0000 HEMAS HOLDINGS
LION.N0000 LION BREWERY
NEST.N0000 NESTLE LANKA
GLAS.N0000 PIRAMAL GLASS CEYLON PLC
- Naveed Majeed
Sri Lanka: Consumer Sector Update 2023 - The Dividends of Recovery
* 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...
- Naveed Majeed
Distilleries Company of Sri Lanka: 1Q FY23 - Strong market position to...
We use a 3-stage DCF model and arrive at a fair value of LKR 22.00/share (+38.4% upside; +55.3% TSR). DIST reported an EPS of LKR 0.81 for 1Q FY23 up 73.9% QoQ (+155.0% YoY). Revenues of LKR 12.6bn were up 30.8% QoQ (+85.7% YoY) mainly as successive price increases offset the impact of declining volumes. We expect short-term demand pressure in 2Q FY23E followed by a pickup in volumes during 2H. EBIT margins of 48.6% were up sharply by 15.1pp QoQ; however, we expect 1) rising raw material cost...
- Naveed Majeed
Distilleries Company of Sri Lanka: 1Q FY22 - FY22E to remain challengi...
We downgrade DIST to a HOLD with a revised target price of LKR 20.00/share (-23.1% to old; +7.5% upside). Including a FY22E dividend of LKR 0.80/share, we derive a total return of +11.8%. DIST reported an EPS of LKR 0.32 for 1Q FY22. Revenues of LKR 6.8bn were down 12.7% QoQ as production was halted and liquor outlets were closed during the quarter. EBIT came in at LKR 2.3bn, with margins up 2.1pp QoQ due to savings on raw materials and one-off charges taken in the previous quarter. Looking a...
- Lakshini Fernando
Sri Lanka: Consumer SL - "Steady as she goes"; a sturdy rebound in 202...
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...
- Naveed Majeed
Distilleries Company of Sri Lanka: Sri Lanka: DIST SL - FY22E to see s...
With minimal changes to our estimates, we maintain our target price at LKR 26.00/share, and including a forecast dividend of LKR 0.80/share, derive a total return of +29.5%. BUY. DIST reported an EPS of LKR 0.44 in 3Q FY21 in line with our estimates. Net revenues came in at LKR 7.5bn, down 1.4% YoY. While localised lockdowns affected volumes in October, volumes saw a strong recovery through November and December, also aided by the absence of a price hike in October 2020. Sourcing of local eth...
Distilleries Co Of Sri Lanka: 1 director sold
A director at Distilleries Co Of Sri Lanka sold 733,323 shares at 24.500LKR and the significance rating of the trade was 56/100. Is that information sufficient for you to make an investment decision? This report gives details of those trades and adds context and analysis to them such that you can judge whether these trading decisions are ones worth following. Included in the report is a detailed share price chart which plots discretionary trades by all the company's directors over the last two...
- Naveed Majeed
Distilleries Company of Sri Lanka: 2Q FY21 - Stable demand and margins...
With demand returning to regular levels, albeit some disruption in the Western Province (WP), and no excise duty increases through the budget, we revise our target price to LKR 26.00/share (previously LKR 22.00/share). Including a dividend of LKR 0.80/share, we derive a total return of +37.4%. BUY. DIST reported a 2Q FY21 recurring net profit of ~LKR 2.6bn, doubling YoY. The earnings improvement was driven by strong volume growth and gross margin improvements from sourcing local ethanol. Whil...
- Mangalee Goonetilleke
Distilleries Company of Sri Lanka: Margin expansion to hold up low vol...
We revise our target price to LKR 22.00/share (previously LKR 17.00/share). Including a dividend of LKR 0.60/share in FY21E, we derive a total return of +21.5%. We revise our rating to a BUY from a HOLD. DIST reported a 1Q FY21 recurring net profit to equity holders of ~LKR 983mn, down ~41.0% YoY. The earnings decline came amidst a ban on alcohol sales during the lockdown period during the quarter. Looking forward, volumes QTD in 2Q FY21E are running flat as per DIST. While daily wage earners...
- Mangalee Goonetilleke
Volumes to recover faster than expected; upgrade to Hold
On the back of the changes to our volume growth expectations, our revised estimates lead us to a DCF valuation based (WACC 12.9%) target price of LKR17.00/share (previously LKR14.00/share). Including a FY21e dividend of LKR0.70/share, we arrive at a total return of -8.5%. As such, we revise our rating to Hold from Sell. Growth in disposable income to drive demand for DIST With the recently announced PAYE tax revisions, we expect consumers to see an expansion in disposable income, which bodes ...
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