Chemical Industries Colombo (CIC) has reported an impressive net earnings growth in 3QFY10 to reach LKR327.2 mn (vs LKR(21.3) mn in 3QFY09).
CIC's 3QFY10 profits have been driven predominantly by the key agriculture and livestock sector (EBIT up 242%YoY) coupled with 658.9%YoY increase in other income (mainly the subsidy payments for fertilizer received from the government) and improved contribution from the construction sector (EBIT up 180% YoY). The consumer and pharmaceutical sector along with the packaging segment has weathered a challenging period where the EBIT contribution from these segments dipped 37% and 5% respectively.
CIC is positioned to successfully gain from the changing macro environment of the country where we believe the company is to benefit significantly from an anticipated revival in the agribusiness sector specially from the previously war torn North.
With the group's plans for growth, retooling of the value chain and diversification of risk, we expect CIC to enjoy a 42.9% growth in earnings to reach LKR583 mn in FY10E and a 32.5% growth in FY11E earnings to reach LKR772.5 mn.
The voting counter trades at 10.4x FY10E earnings (7.9x FY11E) and the non-voting counter trades at 6.5x FY10E earnings (4.9x FY11E) whilst trading at discount to market. On the back of prospects of steady growth along with growth stemming from agriculture in the long term and untapped potential in the North & East, we maintain BUY
Sri Lanka Equity Analytics
World Trade Centre
Colombo, Sri Lanka
Email: info@srilankaequity.com
Web: www.srilankaequity.com
Monday, February 1, 2010
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