Richard Pieris and Company - Capital TRUST PIERIS AND COMPANY PL… · Capital TRUST Securities (Pvt) Ltd RICH Page | 4 The Sector is responsible for cultivating, processing and selling

Capital TRUST Securities (Pvt) Ltd RICH Page | 1

Richard Pieris and Company

Earnings Review – BUY | Rs. 9.90 | July 2017

Case for Investment

Strong brand image: RICH is one of the strongest conglomerates in Sri

Lanka that operates in fastest growing sectors such as FMCG, finance,

logistics and manufacturing furniture & rubber products.

One of the largest corporate rubber plantations in Sri Lanka: Aggregate

rubber production of the group accounts for 6.4% of the national production

with an annual rubber production of approx. 3,800mt.

Improvement in commodity prices: Increase in commodity prices such as

tea, rubber and oil palm reinforce the profit margins of the plantation

segment.

Depreciation in domestic currency: This affects favourably to the earning

from exports.

Convenient supermarket chain: Arpico supermarket is one of the largest

and well established super market chains in Sri Lanka; operates as Super

Centres, showrooms and daily outlets with ample parking.

Innovativeness: The retail chain deployed a dedicated taxi service

exclusively for their shoppers for the first time in a supermarket chain in Sri

Lanka.

PLEASE SEE APPENDIX 1 FOR IMPORTANT DISCLOSURES

Target Price RICH.N0000

Target Price LKR.12.50

Upside Potential 26%

Investor Guide FY15 FY16 FY17 FY18E FY19E

Revenue (LKR mn) 37,802 43,019 49,149 56,133 63,521

YoY Growth 9% 14% 14% 14% 13%

Net Profit - EH (LKR mn) 1,652 2,148 3,170 4,367 4,984

YoY Growth 17% 30% 48% 38% 15%

EBIT (LKR mn) 3,104 3,955 5,290 6,661 7,500

YoY Growth 11% 27% 34% 26% 13%

Gross margin 23% 25% 26% 26% 26%

Operating margin 8% 9% 11% 12% 12%

Net margin 4% 5% 5% 8% 9%

ROE 17% 20% 25% 30% 30%

ROA 4% 5% 6% 9% 9%

EPS (LKR) 0.82 1.05 1.56 2.14 2.44

NAV (LKR) 4.87 5.34 6.35 7.21 8.12

PE (x) 9.0 6.9 5.3 4.6 4.1

PBV (x) 1.5 1.3 1.3 1.4 1.2

DPS (LKR) 0.25 0.50 1.10 1.10 1.10

Dividend Yield 3% 7% 13% 11% 11%

Dividend Payout 30% 48% 71% 61% 56%

A Member of the Colombo Stock Exchange

Foreign Broker-Dealer of

Maybank Kim Eng Securities USA Inc.

Foreign Broker-Dealer of

Maybank Kim Eng Securities USA Inc.

Key Data

Sector Industrial

CSE ticker RICH.N0000

Bloomberg ticker RICH SL Equity

Shares in issue 2,035mn

Public holding 42.92%

52wk High - Low LKR 10.20 - 7.00

Annual Volume 78.4mn

Current MPS LKR 9.90

Market Cap LKR 20.1bn

Market Cap USD 0.1bn

Major Shareholders – 31st

Mar 2017

Skyworld Overseas Holdings Ltd 25.37%

Camille Consulting Corp. 15.57%

HSBC International Nominees Ltd-SSBT- Deutsche Bank

11.06%

Sezeka Limited 8.57%

Employees Provident Fund 8.35%

Top 20 shareholders 88.09%

Foreign ownership* 71.76%

*As at 04th May 2017

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Capital TRUST Securities (Pvt) Ltd 42, Sir Mohammed Macan Markar Mawatha, Colombo 03, Sri Lanka +94 112 174 174 www.capitaltrust.lk

[email protected]

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Quarter Performance

Net earnings up significantly by 152%YoY on increase in revenue in 4QFY17

Net profit (Equity holders) for the quarter increased notably by 152%YoY to LKR

890mn in 4QFY17 compared to LKR 354mn recorded in the comparative year;

mainly driven by the increase in revenue.

Revenue was up by 18%YoY to LKR 12.8bn in March quarter 2017 from LKR

10.9bn in the comparative year supported by revenue improvements in rubber,

plastic & furniture, financial services and plantation sectors.

The share of profit of associate, AEN Palm Oil Limited contributed LKR 17.2mn

with a notable growth of 31%YoY compared to LKR 13.1mn reported in the

comparative year underpinned by the increase in global palm oil prices.

Further RICH has managed to reduce their operating expenses from LKR 2.2bn to

LKR 2.1bn with a decline of 1%YoY and 5%QoQ which was mainly driven by other

operating and selling & distribution expenses.

RICH managed to maintain their profit margins during the quarter; net profit margin

and operating margin remained unchanged at 7% and 11% respectively. However

the gross margin declined slightly from 27% to 26% due to increase in cost of

sales.

Financial Year 2017 Performance

For the full year 2017 the group reported a profit LKR 3.2bn with a significant

growth of 48%YoY compared to LKR 2.1bn reported in the comparative year.

The profit growth was mainly supported by the improvement in revenue by

14%YoY from LKR 43bn to LKR 49bn reported in FY17. Retail sector continued to

be the top contributor to the group turnover with a 50% contribution.

Share of profit of an associate improved notably by 131%YoY to LKR 83mn giants

LKR 36mn as a result of rising palm oil prices.

Profit margins improved during the quarter where net margin was up from 5% to

6%. Gross margin and the operating margin were up from 25% and 9% to 26% and

11% respectively.

Increase in palm oil prices contributed positively to improve the associate profit

from LKR 36mn to LKR 83mn during the year with a significant growth rate of

131%YoY.

Sector Review

Retail Segment

The Retail Sector of the Group is represented by Richard Pieris Distributors

Limited, Arpimalls Development Company (Pvt) Limited, RPC Retail Developments

Company (Pvt) Limited, RPC Real Estate Development Company (Pvt) Limited and

Arpico Interiors (Pvt) Limited.

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Segmental Revenue Contribution

Rubber Tyre

Plastic and furniture Retail

Financial services Other services

Plantations

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Turnover Gross margin Net Margin


The Sector is responsible for operating the well-known Arpico Supercentres,

Superstores, Arpico Daily outlets and an Island wide network of showrooms.

Arpico owns approximately, 21 Super Centres, 17 showrooms and 23 daily outlets

island wide.

The exclusive rewards which given through Arpico Privilege Cards and other

promotional campaigns such as facilities and provides 25% discount for array of

products has given the opportunity for Arpico to penetrate the market in an

attractive way. There were approximately 500,000 members registered under the

scheme by the end of last year.

During the year retail segment reported an operating profit of LKR 1.7bn with a

growth of 12% compared to the profit of LKR 1.5mn reported in previous year. The

segment reported a profit of LKR 457mn in 4QFY17 with a growth of 24%YoY

against the LKR 368mn made in the comparative year.

The operating profit margin has slightly increased from 7% to 8% in 4QFY17 while

for the full year it was unchanged at 7%.

During the year, the Value Added Tax change from 11% to 15% affected the

growth rate of revenue and operating profit of the segment.

Retail segment reported revenue of LKR 24.7bn in FY17 with an increase of

13%YoY compared to LKR 21.9bn reported in the comparative period. For the firth

quarter 2017 retail segment reported revenue of LKR 5.9bn with a growth of

7%YoY against LKR 5.5bn reported in 4QFY16.

Future outlook

Retail segment may continue the growth momentum in FY18E to record a revenue

growth of 15%YoY to reach LKR 28.3bn (FY19E – LKR 32.5bn, +15%)

underpinned by the expansion of outlets and innovating shopping experiences.

The segmental profits forecasted to grow by 11%YoY to LKR 1.9bn in FY18E

compared to LKR 1.7bn reported in the comparative year. It may report a profit of

LKR 2.1bn with an upside of 12%YoY in FY19E. The profit margin expected to

remain the same level at 7%.

The company opened up two super centres in Kohuwala and Kurunegala in last

financial year. This will further drive the segmental profits to a healthy position in

forthcoming years.

Further, the newly launched dedicated taxi service exclusively for Arpico shoppers

also may help the company to enhance their customer base.

Moreover, the initiatives that have taken to reduce the energy costs of the company

in an environmentally friendly way by installing roof top solar panels on large format

retail stores would improve the profit margins in the future.

Plantation Segment

The sector comprises of three public quoted regional plantation Companies namely

Kegalle Plantations PLC, Namunukula Plantations PLC and Maskeliya Plantations

PLC. The group owns 54 planation estates covering 32,097 hectares.

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Revenue Growth

3 year CAGR of 20%


The Sector is responsible for cultivating, processing and selling of high grown, mid

grown and low grown tea, rubber, oil palm, coconut, cinnamon, rambutan and other

crops. Richard Pieris Group is the largest tea and rubber producer in the country.

During last financial year Kegalle, Namunukula and Maskeliya plantations together

produced 11.6mn kg of Tea, 5mn kg of Rubber and 20mn kg of Palm oil with a total

revenue contribution of LKR 7.8bn to the Group.

Last financial year was a challenging year for the plantation sector due to extreme

weather conditions, removal of fertilizer subsidy, wage hike and ban on weedicides

affected negatively to the performance of the sector.

Nevertheless, contribution from tea, rubber and palm oil industry towards the

overall performance has increased during the year subsequent to the upward price

movements.

However, the production cost in tea sector has increased due to the rise in labour

cost coupled with lower productivity.

The demand for natural rubber from the key buyers in the international and

domestic markets has reduced as they are shifting to substitutes such as cheaper

synthetic rubber. This has resulted in lower prices from natural rubber and

continued to obstruct the growth of crepe rubber.

On the positive note, the removal of sanctions imposed on Iran will enable to

improve the tea exports. Iran was the third largest tea exporting country from Sri

Lanka before the sanctions were imposed.

The segment reported revenue of LKR 2.1bn with a growth of 19%YoY in 4QFY17

compared to LKR 1.7bn reported in the comparative year. This segment is the

second largest revenue contributor to the group’s revenue with a contribution of

18%. Price increases in Tea, rubber and palm oil has contributed positively to the

segmental performance. Plantation segment reported a profit of LKR 349mn during

the quarter with a significant growth of 304%YoY against the loss of LKR 171mn

reported in 4QFY16.

For the full year the segment reported a profit of LKR 799mn against the loss of

LKR 186mn reported in the comparative year. Revenue was up by 15%YoY to LKR

8.8bn from LKR 7.6bn.

Hefty profit improvements in Namunukula plantation by 496%YoY to LKR 402mn

and Kegalle by 145%YoY to LKR 330mn during FY17 have contributed positively

to the planation segment earnings. Namunukula plantation is the second largest oil

palm producer of the country while Kegalle plantation is one of the largest rubber

producers in the country.

Below are the details of the three plantation companies

Plantation Estates Land Extent (hectares) Revenue Contribution

Kegalle 17 estates in Kegalle, Kurunegala and Badulla

9,757 Rubber 63% Tea 31% Coconut & other crops 6%

Maskeliya

Maskeliya owns 18 teas estates; high grown tea estates in Maskeliya and Talawakelle while estates in Bandarawela. For Uva tea sector

10,561 The average annual production of tea is 8.7mn kg

Source: Index mundi

Source: Forbes & Walker Tea Brokers market report

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Namunukula Namunukula has 19 plantations in Kalutara and Galle and Matara district.

Tea - 2,301

It has 05 major Plantation crops; Tea, Rubber, Oil Palm, Coconut & Cinnamon

Rubber – 1,911

Palm Oil - 2,042

Other Crops – 1,515

Total – 7,769

Future outlook

Plantation segment may record revenue of LKR 10.1bn in FY18E with an incline of

15%YoY compared to the previous year. Increase in palm oil, tea and rubber prices

may favourably affect the top-line of the segment.

Further, depreciation of the local currency against export destinations may also

positively impact to the segmental turnover.

Namunukula Plantations plans to further expand the oil palm cultivation. An extent

of 900 hectares will be planted during next four years targeting at a total extent of

3,000 hectares cultivation in oil palm by year 2020.

Further Kegalle plantations has made plans for a crop diversification Programme

and accordingly planting of oil palm has been commenced in an extent of 36.45

hectares on Mabopitiya, Parambe & Ilwana divisions during 2017/2018 season.

They will further continue to cultivate more than 45 hectares which will improve the

profitability of the plantation segment.

The segment may report a profit of LKR 861mn in FY18E with a growth of 8%YoY

over the profit of LKR 799mn reported in the last financial year. Foreign exchange

gains, increasing commodity prices and strong cost management systems will

enable them to post healthy profits in coming year.

However, an agreement was signed between plantation unions and plantation

companies in October 2016 to increase the minimum wage from LKR 620.00 to

LKR 720.00 with a LKR. 140.00 productivity incentive for harvesting the minimum

estate/divisional norm. This will pressurize the margins due to high /labour costs.

The company has planned strategic initiatives to further drive the growth of exports

mainly to USA as a step to revive the plantation sector of the company through

establishing new market segments.

Tyre and Rubber segments Tyre

The Tyre sector of the Group comprises three Companies, namely Richard Pieris

Tyre Company Limited, Arpidag International (Pvt) Limited, and Richard Pieris

Rubber Compounds Limited.

Richard Pieris Tyre is the pioneer and leader in tyre re-treading in Sri Lanka and

also the sole agent for the world famous ‘Nexen’ and Birla brands in Sri Lanka.

Arpidag International (Pvt) Limited, and Richard Pieris Rubber Compounds Limited

act as supportive companies to Richard Pieris Tyre by supplying pre-cured tread,

cushion gum, cement, other related materials and customized mixing facilities.

The segment reported revenue of LKR 670mn in 4QFY17 with a marginal decline

of 1%YoY compared to LKR 680mn turnover recorded in 4QFY16. Tyre segment

reported a profit of LKR 88mn with a decline of 40%YoY in 4QFY17 against the

Source: Index mundi

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profit of LKR 140mn reported in the comparative year. Reduction in vehicle imports

and the competitive market environment affected the top-line of the segment.

For the full year tyre segment reported revenue of LKR 4.3bn with a marginal

decline of 2% and the segmental profit was LKR 547mn in FY17 against LKR

608mn profit reported in FY16.

The changes in import duty structure and currency fluctuation have adversely

affected the tyre trading business.

However on the positive side, the relatively low raw material prices in the

commodity market and the group’s investment in firewood boilers have facilitated to

improve the gross margins.

Rubber

The Rubber Sector of the Group is represented by four companies namely Richard

Pieris Exports PLC, Richard Pieris Natural Foams Limited, Arpitalian Compact

Soles (Pvt) Limited and Micro Minerals (Pvt) Limited.

Products such as Natural Latex Foam Mattresses, Pillows, Rubber Mats for

Industrial and Domestic Use, Jar Sealing Rings, Small Moulded Products and other

Specialised Rubber Products under the rubber segment.

The segment reported revenue of LKR 1.0bn in 4QFY17 with a growth of 27%YoY

compared to LKR 809mn turnover recorded in 4QFY16. A profit of LKR 192mn

reported in 4QFY17 with an incline of 24%YoY compared to the profit of LKR

155mn reported in the comparative year.

For the full year tyre segment reported revenue of LKR 4.4bn against LKR 3.6bn

reported in FY16 with a growth of 20%YoY. The profit was up by 29%YoY to LKR

839mn compared to LKR 648mn reported in the comparative year.

Unsettled situations in international markets and the devaluation of Yuan reduced

the commodity prices which supported the export companies to reduce the cost.

Further slower movement in rubber prices continued to reinforce the margins while

depreciation of Sri Lankan Rupee strengthens the top line of the segment.

Scarcity of raw materials such as ball-clay is a challenging factor in the mineral

product processing business of the group. Due to the highly challenging

environment, the Micro Minerals (Pvt) Limited market share also was threatened

with the entry of new local competitors at very low offer.

Future outlook

Tyre

The segment may witness a slowdown in FY18E due to the currency fluctuation,

changes in customs tariffs and the competition.

Tyre segment may report a profit of LKR 579mn in FY18E with a gain of 6% while it

may strengthen in FY19E reporting a profit of LKR 585mn. Revenue may improve

marginally by 1%YoY to LKR 4.3bn in FY18E.

Strategic steps taken on several new promotions and price negotiations to improve

the trading segment while other special promotional activities initiated to improve

the re-treading will benefit the company in the future.

Source: Department of Motor Traffic

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Rubber segment profit movement

CAGR of 38% in last 3 years


Further, Arpidag Hybrid Tyre which was introduced to the market in 2015 will also

contribute favourably to the segmental performance in long term. The special

feature of extra mileage of the newly launched tyres will help to penetrate the tyre

market.

The company has expanded their footprint in North and East regions and looking

forward to further penetrate the market through competitive pricing, product

development and innovativeness.

The efficient raw material sourcing coupled with above factors has given the

opportunity to be competitive against the extremely challenging low cost Chinese

radial tyres and other imported brands.

The company continued to export treads to the international market and seeks for

further expansions.

Rubber

Rubber segment may post a profit of LKR 1bn in FY18E with a gain of 25%YoY

supported by 20%YoY growth in revenue. Revenue of LKR 5.2bn may report in

FY18E and LKR 5.7bn in FY19E.

Continuous focus in product differentiation and process improvements will help the

company to boost the top line and the overall profitability. The energy audits carry

out by the company in order to sustain energy efficiency also a key factor to

continue the profit margins.

Further continuous investments in automation have supported to be more

competitive in the price sensitive markets.

Production capacity of Richard Pieris Natural Foams Limited was increased by

investing in a new tunnel to support the company’s expansion plan.

Moreover the joint venture company, Davos SPA’s successful entry to the Chinese

market also will favourably contribute to the earnings in the future while the foot

print in Vietnam and Bangladesh market will strengthen the top line of the segment.

Arpitalian Compact Soles (Pvt) Limited; a joint venture between Richard Pieris

Exports PLC and Davos SPA have taken steps to develop new profile sheets to the

Indian market, development of new colours and designs for China & India while

development of new finishes for the Spain market.

Further, Micro Minerals (Pvt) Limited also has expanded their product base in order

to overcome from the challenging situation of the industry.

The demand for rubber products are expected to improve in next couple of years

with the strong ties re-stored with western countries.

Relatively improved disposable income of the population will enable the company

to capture the market for their value added and innovative products.

Plastic and furniture Segment

The Plastics and Furniture sector of the Group, is represented by Arpitech (Pvt)

Limited, RPC Polymers (Pvt) Limited, Plastishells Limited, Richard Pieris Rubber


Products Limited, Arpico Durable (Pvt) Limited and the Arpico Furniture Distributors

Pvt Limited.

Products such as Water Tanks, Polyurethane Foam Mattresses, Cushions &

Sheets, PVC Pipes & Fittings, Moulded Plastic & Expandable Rigid Polystyrene

Products, Wooden, Panel and PU Furniture, Water Pumps, CFL Bulbs produces

under the plastic and furniture segment.

The segment reported revenue of LKR 2.4bn in 4QFY17 with a notable increase of

45%YoY compared to LKR 1.6bn turnover recorded in 4QFY16. A profit of LKR

179mn reported in the fourth quarter 2017.

For FY17 the segment reported a profit of 1.1bn with a decline of 20%YoY

compared to the profit of LKR 1.4bn reported in the comparative year. Revenue

was up by 5%YoY to LKR 8.2bn from LKR 7.8bn reported in the same period in the

previous years.

The manufacturing plants of furniture operations which were expanded recently are

nearly running at its fullest capacity due to the high demand.

Future outlook

Plastic and furniture segment may post a profit of LKR 1.2bn in FY18E with a

growth of 13%YoY. Revenue of LKR 9.1bn may report in FY18E with a growth of

10%YoY and LKR 10.0bn, +12%YoY in FY19E.

The rigifoam operations are mainly services the fisheries industry. The complete

lifting of the fish export ban imposed by EU in June 2016 will boost the Sri Lankan

fisheries industry as well as the group rigifoam business in coming years.

Sri Lanka’s Fish exports to the EU accounts for more than 65% of the total fish

exports. Sri Lanka was the second largest exporter of fresh and chilled swordfish

and tuna to the EU.

The introduction of hybrid tanks allows the water tank operations to dominate the

market. During last financial year, a new blow moulding machine was purchased by

the company to meet the increased demand. This will enable to enhance the

production capacity and cater to the required demand.

The plastic sector is further looking into possibilities of penetrating into South Asian

markets.

Financial services Segment

The financial services segment reported a profit of LKR 270mn in 4QFY17 with a

significant growth compared to LKR 57mn reported in the comparative year.

Revenue grew considerably by 48%YoY to LKR 760mn during the quarter

compared to LKR 513mn reported in 4QFY16.

The segment reported a profit of 525mn during the full year 2017 with a growth of

132%YoY compared to LKR 227mn reported in the previous financial year. The

revenue was up by 52%YoY during the period to LKR 2.7bn.

Other services segment generated a profit of LKR 305mn while the revenue was

up marginally by 4%YoY to LKR 37mn. For FY17 the segment reported a profit of

LKR 1.3bn with a growth of 8%YoY compared to the profit of LKR 1.2mn reported

in the comparative year.

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The segments responsible for products and services such as Real Estate,

Insurance, Freight Forwarding, Stock Broking, Margin Trading and Financial

Services.

RPC Logistics the company engages in services such as airfreight, sea freight,

sea freight consolidation, customs brokerage, transhipment and door-to-door cargo

services has obtained agencies from reputed suppliers for colour sorter machinery

and for LCD lighting from China. This enabled the company to enhance the

revenue streams.

Arpico insurance business also doing well with a total branch network of 26 in eight

major geographical areas. The company further looking into expand the branch

network in order to cover entire country.

The strategic acquisition of Chilaw Finance by Richard Pieris Finance Limited has

given opportunity to reach to the North-Western provinces.

However, the stock markets all over the world were facing really tough situation

throughout last year with challenging global economic outlook coupled with China’s

devaluation of their currency, Yuan. This volatility of global markets impacted on

Colombo stock exchange as it still passing through a challenging period. The ASPI

declined by nearly 7% as at mid-October 2016. The situated affected the group

securities business during the course of the period.

Future outlook

The financial services segment may post a profit of LKR 594mn in FY18E with a

growth of 13%YoY while the other services segment may report a profit of LKR

1.3bn.

Revenue may up by 50%YoY to LKR 4.0bn in FY18E and LKR 4.8bn in FY19E.

Other services segment may report revenue of LKR 3bn in Fy18E with a growth of

10%YoY. The increase in interest rates, upward momentum in the Colombo stock

exchange and expansion of branch network would improve the segmental top line.

Further, the acquisition of Chilaw Finance will eventually benefit the company with

a large customer base and to reach untouched areas. Richard Pieris Finance

Limited is expecting to further penetrate into other parts of the country to attract

business opportunities. The company aims to be in the top five financial services in

Sri Lanka by 2025.

Future Outlook of RICH

We have estimated a profit of LKR 4.4bn in FY18E with a profit growth of 38%YoY.

The growth may mainly supported by the strong top line and management in

operating expenses.

Revenue projected to increase by 14%YoY to LKR 56.1bn in FY18E (FY19E - LKR

63.5bn, +13%).

The Group is exposed to currency risk on sales, purchases and borrowings,

primarily in USD, and also in EURO, Singapore Dollars and Pound Sterling

especially with regard to trade related transactions. The imported materials are

mainly billed in USD; EUR and SGD.

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5,000

FY

14

FY

15

FY

16

FY

17

FY

18

E

LK

R M

illi

on

s

Group profit movement

Profits Growth


Therefor the depreciation of Rupee can cause damage to the group’s earnings.

However, RICH uses Hedging such as natural hedging, SWAP, contracts etc. in

order to mitigate those risks.

Profit margins may merely improve as net margin and operating margin may

advance from 6% and 11% to 8% and 12% respectively in FY18E while net margin

may remain unchanged at 26%.

We believe that the company may maintain the same dividend of LKR 1.10 which

translates to a dividend pay-out ratio of 51%.

Valuation

RICH is currently trading at a PE of 6.3x which is trading well below to the industrial

sector PE of 13.0x. The counter is trading at a PBV of 1.5x.

Using the discounted cash flow method we have arrived to an attractive price

valuation of LKR 12.50 for the share with an upside of 26%.

Considering the potentials of operating segments, positive earnings prospects and

attractive multiples we believe that the counter will perform well in the future.

Hence, we recommend BUY.

Relative Valuation

PE(x) PBV(x) ROE

ASI 11.5 1.3 12%

Industrial Sector 13.1 1.1 9%

RICH 6.4 1.6 25%

12.5

11.9

10.2

9.9

7.0

DCF

Historical PBV

52wk High

Current MPS

52wk Low


Stock Market Performance

ASI RICH

6M 10% 22%

12M 8% 21%

YTD 9% 22%

Summary Income Statement

Continuing operations FY14 FY15 FY16 FY17 FY18E

Revenue

34,699,111

37,802,243

43,018,502

49,149,395

56,132,668

Cost of sales

(26,683,905)

(29,125,486)

(32,427,560)

(36,373,136)

(41,541,125)

Gross profit

8,015,206

8,676,757

10,590,942

12,776,259

14,591,543

Other operating income

575,064

818,571

980,964

1,071,660

1,291,051

Selling and distribution expenses

(1,737,793)

(2,030,788)

(2,648,983)

(2,887,625)

(3,087,297)

Administrative expenses

(3,994,359)

(4,297,747)

(4,929,390)

(5,614,365)

(6,062,328)

Other operating expenses

(50,991)

(63,284)

(38,230)

(55,470)

(72,424)

Operating profit

2,807,127

3,103,509

3,955,303

5,290,459

6,660,546

Finance costs

(922,062)

(811,166)

(826,092)

(955,768)

(721,175)

Finance income

389,584

244,304

233,759

383,695

393,287

Share of profit of an associate

27,902

42,299

35,944

83,028

106,136

Profit before tax from continuing operations

2,302,551

2,578,946

3,398,914

4,801,414

6,438,794

Income tax expense

(643,970)

(747,009)

(1,137,461)

(1,237,426)

(1,686,070)

Profit for the year from continuing operations

1,658,581

1,831,937

2,261,453

3,563,988

4,752,724

Discontinued operations

Loss after tax for the year from discontinued operations (2,396) (3,457) (3,536) (5,018)

(6,253)

Profit for the year 1,656,185 1,828,480 2,257,917 3,558,970

4,746,471

Attributable to:

Equity holders of the parent 1,417,215 1,652,092 2,147,685 3,170,095

4,366,753

Non-controlling interests

238,970

176,388

110,232

388,875

379,718


Summary of Financial Position

FY14 FY15 FY16 FY17 FY18E

Assets

Non-current assets

16,113,650

18,632,853

19,981,669

21,684,962

21,384,522

Property, plant and equipment

13,709,173

15,277,433

15,944,669

17,114,482

18,379,852

Current assets

16,462,737

19,450,377

23,593,348 28,244,173 29,855,237

Inventories

3,860,578

4,431,970

4,642,937 5,621,019 6,247,874

Trade and other receivables

4,049,366

4,754,827

4,981,158 6,333,659 6,140,267

Cash and short-term deposits

6,016,739

4,081,425

4,206,004

4,467,603

4,042,020

Total assets

32,576,387

38,083,230

43,575,017

49,929,135

51,239,758

Equity and liabilities

Equity

10,758,449

12,343,825

13,285,301

15,545,398

17,850,622

Equity attributable to equity holders of the parent

8,607,935

9,912,404

10,872,728

12,931,203

14,727,908

Non-controlling interests

2,150,514

2,431,421

2,412,573

2,614,195

3,122,714

Non-current liabilities

7,948,683

10,664,131

10,743,391

11,893,747

10,888,739

Current liabilities

13,869,255

15,075,274

19,546,325 22,489,990 22,500,398

Total liabilities

21,817,938

25,739,405

30,289,716

34,383,737

33,389,136

Total equity and liabilities

32,576,387

38,083,230

43,575,017

49,929,135

51,239,758


APPENDIX 1

Disclaimer

This information and opinion contained in this report have been complied by our research department from sources

believed by it to be reliable and in good faith, but no representation or warranty, express or implied is made as to their

accuracy, completeness or correctness. All opinions and estimates contained in the document constitute the

department’s judgment as of the date of this document and are subject to change without notice and are provided in

good faith but without legal responsibility.

This report is not, and should not be construed as, an offer to sell or a solicitation of an offer to buy any securities.

Capital Trust Securities (Pvt) Ltd. (the company) or persons connected with it may from time to time have an

investment banking or other relationship, including but not limited to, the participation or investment in commercial

banking transactions (including loans) with some or all of the issuers mentioned therein, either for their own account or

the account of their customers. Persons connected with the company may provide or have provided corporate finance

and other services to the issuer of the securities mentioned herein, including the issuance of options on securities

mentioned herein or any related investment and may make a purchase and/or sale, or offer to make a purchase and/or

sale of the securities or any related investment from time to time in the open market or otherwise, in each case either

as principal or agent.

This report may contain forward looking statements which are often but not always identified by the use of words such

as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an

event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions.

Such forward looking statements are based on assumptions made and information currently available to us and are

subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in

any forward looking statements. Readers are cautioned not to place undue relevance on these forward looking

statements. Capital Trust Securities expressly disclaims any obligation to update or revise any such forward looking

statements to reflect new information, events or circumstances after the date of this publication or to reflect the

occurrence of unanticipated events.

Exchange rate fluctuations may affect the return to investors. Neither the company nor any of its affiliates, nor any

other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or

the information contained therein.

Capita TRUST Securities (Pvt) Ltd, their respective affiliate companies, associates, directors and/or employees may

have investments in securities or derivatives of securities of companies mentioned in this report, and may make

investment decisions that are inconsistent with the views expressed in this report.

Capital TRUST Securities (Pvt) Ltd, it’s directors, officers, consultants, employees, associates or business partner, will

not be responsible, for any claims damages, compensation, suits, damages, loss, costs, charges, expenses, outgoing

or payments including attorney’s fees which recipients of the reports suffers or incurs directly or indirectly arising out

actions taken as a result of this report.

TRADING DIVISION BOARD OF DIRECTORSTushan Wickramasinghe (011)-2174184 0777-313456 Moksevi Prelis (Chairman)Dakshana Gooneratne (011)-2174194 0777-360492 Tushan Wickramasinghe (Managing Director/CEO)Lawrence David (011)-2174164 0777-289331 Methmal Senivirathne (CFO)M J M Husni (011)-2174102 0773-219503Sandesh Jayakody (011)-2174103 0773-733273Nilantha Perera (011)-2174104 0777-715970Saliya Gamagedera (011)-2174108 0773-219506Asanka Perera (011)-2174109 0773-291847Suneth Fernando (011)-2174174 0773-633533Shanmugasharma Rakesh Sharma (011)-2174117 0777-536877Rasika Vidanalage (011)-2174119 0777-536898Thilina Yahampatharachchi (011)-2174131 0773-219502Sajee Perera (011)-2174113 0777-287941Shehan Mendis (011)-2174134 0777-305684Chamila Fernando (011)-2174121 0777-536887Dilshard Hameed (011)-2174132 0773-142242Danushka Arambegedra (011)-2174122 0777-270867Laxman Ratnayake (011)-2174116 0777-287948Sulochana Fernando (011)-2174124 0773-219501Asoka Dharmatilaka (011)-2174174 0773-865300

KANDY BRANCHArjuna Wilbawa (081)-2205 486 0773-291846Mohomed Faizan (081)-2205 491 0777-840256FAX (081)-2201050

KURUNEGALA BRANCHDammika Senarathne (037)-2223 861 0777-560699FAX (037)-2220859

NEGOMBO BRANCHSanjeewa Perera (031)-2228470 0773-291848Narada Abeysinghe (031)-2228473 0773-833997FAX (031)-2227894

MATARA BRANCHJagath Rathnayake (041)-2236204 0773-758304FAX (041)-235644

CUSTOMER SERVICE DIVISIONPrashani Perera (011)-2174167 0773-167777 CAPITAL TRUST RESEARCH (PVT) LTD

Charitha Gunasekere (011)-2174140 0773-865301Melani Nawaratne (011)-2174190 0777-270839Ruvini Kaushalya (011)-2174141 0777-270922

ACCOUNTS DIVISIONMethmal Senivirathne (011)-2174110 0777-766727Ranjini Jayawardena (011)-2174142 0773-596336Subani Wimalarathne (011)-2174143 0772-015882 CAPITAL TRUST CREDIT (PVT) LIMITEDKumari De Alwis (011)-2174144 0772-015886 (011)-2174153 0775-754078

DOCUMENTATION DIVISIONN.M.A Navaratne (011)-2174150 0777-287931 CAPITAL TRUST FINANCIAL (PVT) LIMITED

(011)-2174123

TELEPHONE : (011)- 2 174 174 HOTLINE : (011)- 2 174 175 FAX : (011)- 2 174 173 E MAIL : [email protected]

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