LOLC Securities- Royal Ceramics PLC Interim Update Q4 14/15

Melissa Pereira Thu Jun 25, 2015 9:41 am

Annual revenue increased by 13% compared to the previous year while gross profit margin slightly increased to 30% from 29%. 55% increase in net profits could be attributed to reduction in finance expenses (31%) and increase in profits (114%) of the associate company (LB Finance)……..
……..RCL has performed well in FY15 with 90% YoY PAT growth for equity holders while bringing down operating cost margins and gearing. We believe the energy cost reduction and favorable industry prospects would augur well for the company, particularly considering its monopolistic position in the domestic tile industry. We have revised our forecast upward mainly on LB Finance positive credit growth outlook and maintain our position in growth outlook for tile industry. On the revised growth estimates of the company and reduced hurdle rate, we revise our valuation upward to LKR 167.10, taking a cost of equity of 13.34%. We maintain our recommendation BUY

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