Royal Ceramic's (RCL) net earnings have increased by 86.2%YoY to LKR964.3 mn during FY10 whilst the bottom-line grew by an impressive 175.3%YoY during 4QFY10 toLKR314.2 mn. This was mainly driven by strong demand and improved sales mix in the sizes of tiles.
RCL's net turnover has grown 19.0% YoY to LKR4,451.2 mn during FY10 on the back of the remarkable growth seen during the second half of the year. The company has posted a gross profit of LKR2,118.7 mn in FY10 (up 28.9% YoY). Accordingly, RCL's gross margin has improved to 47.5% in FY10 (from43.9% in FY09).
In spite of the increase in administration and distribution expenses RCL has recorded an operating profit of LKR1,225.3 mn in FY10 (up 24.1% YoY) whilst the operating profit margin has grown to 27.5% in FY10 (from 26.3% in FY09).
With the interest rates on the downward trend and reconstruction boom in the North and East drumming up the overall economic growth, the construction industry is expected to witness a turnaround. RCL is one of the prime beneficiaries as a leading player in the Western province and a dominant player in the country with the demand from the home builders and apartment constructions showing signs of strong growth. We project FY11 earnings to reach LKR1,398.2 mn (up by 45.0%YoY).
The share remains very attractive on just 8.0 X FY10 net profits and 5.5X forecast FY11E net profit whilst trading at 1.6XPBV.
Sri Lanka Equity Analytics
World Trade Centre
Colombo, Sri Lanka
Email: info@srilankaequity.com
Web: www.srilankaequity.com
Wednesday, May 5, 2010
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