Royal Ceramic's (RCL) net earnings have increased by 124.3%YoY to LKR366.3 mn in 3QFY10 whilst the bottom-line grew by 61.0%YoY during the 9 months to LKR650.1 mn, mainly driven by strong demand and improved sales mix in the sizes of tiles (Bigger tiles tend to have higher margins).
RCL's gross turnover has grown 26.6% YoY to LKR1,550.9 mn on the back of a near 16% increase in sales volumes in 3QFY10 due to increased demand from home builders whilst sales price witnessed a marginal increase during the 9 months. The cost of sales has increased by 19.7% YoY to LKR717.7 mn in 3QFY10 however at a reduced pace than the growth in turnover. Accordingly, RCL's gross margin has improved to 43.4% in 3QFY10 (from 38.5% in 3QFY09).
RCL has recorded an operating profit of LKR459.1 mn in 3QFY10 (up 50.7% YoY) whilst the operating profit margin has grown to 29.6% in 3QFY10 (from 24.8% in 3QFY09).
Despite not having a strong presence in the previously war affected regions, a reconstruction boom in the North and East would drum up the overall economic growth whilst RCL would strongly benefit from the growing demand in the Western and Southern provinces. With the economic conditions improving we project FY10E earnings to reach LKR898 mn (up by 73.4%YoY) and FY11E earnings to reach LKR1,211.4 mn (up by 34.9%YoY).
The share remains very attractive on just 6.0X forecast FY10E net profit and 4.4X forecast FY11E net profit whilst trading at 1.1XPBV. Maintain - BUY
Sri Lanka Equity Analytics
World Trade Centre
Colombo, Sri Lanka
Email: info@srilankaequity.com
Web: www.srilankaequity.com
Monday, February 8, 2010
Subscribe to:
Post Comments (Atom)
0 comments:
Post a Comment