Lion Brewery (Ceylon) PLC (LION) has recorded a 378% YoY growth in net profit to LKR189.9 mn in 3QFY10. This was predominantly driven by the festive season in play during the quarter blended strongly with northern and eastern provinces opening for trade.
We believe a strong revival in demand for soft alcohol/beer would emerge with LION's expansion strategies underpinned by the opening up of the new markets in the war torn provinces, expected surge in tourist arrivals, increase in recreation activity and the expected rise in disposable income inline with the foreseen economic growth. This is evident with LION's 1-3QFY10 performance.
The Indian investment, though had not made any contributions during the 9 month period due to its nature of having a prolonged payback period, holds a lot of potential after being recognized as one of the fastest growing ventures with their moves in establishing strong presence in the vast Indian market.
Backed by LION's quick work in upgrading its logistics in the new regions and successful moves in efficiency enhancements, we revise up our forecast net profit to LKR555.2 mn (up 1,132.1% YoY) in FY10E and LKR669.0 mn (up by 20.5% YoY) in FY11E.
Share is valued on 12.1X forecast FY10E net profit and 10.0X projected FY11E earnings, trading at 1.5X PBV. Maintain BUY
Sri Lanka Equity Analytics
World Trade Centre
Colombo, Sri Lanka
Email: info@srilankaequity.com
Web: www.srilankaequity.com
Wednesday, February 24, 2010
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