Distilleries (Sri Lanka's dominant hard liquor manufacturer with investments in diverse businesses) has posted a consolidated net profit of LKR841.4 mn, down by 37.4%YoY in 3QFY10.
DIST's hard liquor business has contributed LKR939.7 mn (down 14.0%YoY) to the consolidated 3QFY10 net profit.
The consolidated 3QFY10 operating profit has dipped by 32.7%YoY to LKR1,160.7 mn whilst the operating margin has improved to 22.8% in 3QFY10 (vs. 17.3% in 3QFY09). Liquor business PBT dipped 14.2% YoY to LKR1,086.8 mn whilst plantation sector PBT grew by an impressive 224% YoY to LKR80.6 mn and the Telecommunication arm posted a loss of LKR132.6mn (vs a loss of LKR112.0 mn).
We forecast FY10E net profit to reach LKR2,802.9 mn (-17.2% YoY) and to grow by 19.5%YoY to LKR3,349.1 mn in FY11E.
Given its proven ability to sustain robust earnings through new acquisitions coupled with the favourable macro environment and cash rich liquor business, the share is attractive at present trading on 10.4X forecast FY11E net earnings and 1.3X PBV. Maintain - BUY
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