In 1H2013, CTC reported profits of LKR4.3bn (+10% YoY) despite a c.7% YoY decline in volumes. Improving net revenue margins (23.5% in 1H2013 vs. 23% in 1H2012) supported by an upward price revision in Oct 2012 (LKR2/stick) led to a 10% growth in profitability. The recent LKR3/stick price hike in July 2013 which was 81% higher than the LKR1.65/stick levy increase is likely to drive net revenue margins* to 24% for 2013E. CAL revises 2013E profit to LKR8.9bn (+9% YoY) from our previous estimate of LKR8.5bn (+4% YoY) taking into account the recent price revision and an overall volume decline of 8 YoY%. CAL maintains a SELL on CTC based on declining sales volumes and an 85% premium to CAL's fair value of LKR649.
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