Ceylon Tobacco (CTC) has posted a net profit of LKR2,020.6 mn in 4Q2009 (up 59.9% YoY) whilst total earnings for 2009 are also up by a strong 49% YoY to LKR4,112.6 mn .
Earnings have been driven by a sharp 10.5% YoY growth in net revenues to LKR12,353.9 mn, supported by a shift into high margin brand/product mix along with the company's focus on effective cost rationalisation where the company has been able to cut down its cost base by a significant 17.6% YoY during the year 2009 .
We forecast 2010E net profit to grow by a conservative 6.1% to LKR4,367 mn whilst projecting 2011E net profit to increase by a further 5.3% to LKR4,600 mn on the back of the company's continued focus on improving its brand mix coupled with successful cost rationalization exercises.
The share is attractive on 9.3X forecast 2010E net profit and 8.8X projected 2011E net earnings. Further given the historical dividend payout ratio of a near 95%, we believe the share would continue to be a key dividend play in the Colombo bourse - Maintain BUY
Sri Lanka Equity Analytics
World Trade Centre
Colombo, Sri Lanka
Email: info@srilankaequity.com
Web: www.srilankaequity.com
Tuesday, February 2, 2010
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