piramal glass ceylon plc (glas.n) - 1q2013/14 interim ...€¦ · ltd, rockland distilleries ltd,...

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Equity Research Division

19th July 2013 Piramal Glass Ceylon PLC – 1Q2013/14 Interim Update

Asha Phillip Securities Ltd

“High electricity cost & stagnant liquor market hampered the top line margins”

Revenue dropped by 5% in 1Q2013/14 y-o-y

Revenue witnessed a drop of 5% 1Q2013/14 mainly owing to the escalated

demand in the Liquor & Aerated water segment coupled with the sharp

decline in export sales.

Export sales weakened at a faster rate

GLAS’s export market is mainly centralized with India which accounts more

than half of its export revenue. With the devaluation of Indian rupee,

exports to India have become quite competitive while experiencing a drop

in sales volume. This resulted to record a drop of 15% in export sales from

LKR 360 Mn to LKR 307 Mn during 1Q2013/14.

Domestic sales too dropped marginally

Domestic sales which approximately account 75% of total revenue also

witnessed a marginal drop of 2% from LKR 932Mn to LKR 916Mn due to the

low demand from the liquor segment. The local liquor sector which registers

more than 50% of the total domestic sales of the company seems stagnant

with the imposed taxes, affecting negatively towards the demand for glass

bottles from GLAS’s top customers such as Distilleries Lanka PLC, ID Lanka

Ltd, Rockland Distilleries Ltd, Lion Brewery PLC etc. The developing trend

for canned-bear will also affect adversely towards the demand for glass

bottles from beer market.

Piramal Glass Ceylon PLC (GLAS.N) - 1Q2013/14 Interim Results Update

Sector: Manufacturing

Market Price(LKR) 6.00

Issued Quantity 950,086,080

Market Capitalization(LKR) 5,700,516,480

52 Week

High (LKR) 7.00

Low (LKR) 4.90

Public Holding 43.54%

Foreign Holding 28.05%

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2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

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60.00

80.00

100.00

120.00

140.00

160.00

19-Jul-12 19-Sep-12 19-Nov-12 19-Jan-13 19-Mar-13 19-May-13

Vol ('000) GLAS MFG ASPI

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Electricity cost hike pressured the cost structure

The electricity cost hike executed from last April has resulted an adverse

impact on the company’s cost structure which escalated by 3% y-o-y despite

the dip in sales volume. Energy cost including Furnance Oil, Electricity & LP

Gas collectively account approximately LKR 150Mn per month, representing

around 40% of the total cost structure of the company.

GP margins narrowed further

GP margins recorded a drastic dip from 28% to 21% y-o-y. We expect the

margins for FY2013/14E would be further pressured due to the slowing sales

growth together with the escalated energy cost. Further, Overall GP

margins witnessed a drop from 30% in FY2011/12 to 28% in FY2012/13.

Selling proceeds of the non-operating land to retire borrowings

GLAS concluded a sale of 10 acres of its 21 acre land in Rathmalana during

June 2013 for a consideration of LKR 355 Mn , realizing a profit of LKR 297Mn

for the 1Q2013/14. The selling price per perch was recorded as LKR 222Mn

whilst its cost recorded as LKR 37k. Moreover, the company announced its

plan on disposing the balance 11 acres to Ideal Motors at a consideration of

LKR 415 Mn during the 3Q2013/14. The expected profit from this transaction

is accounted to LKR 351Mn whilst the entire proceeds will utilize to retire the

part of the debt.

Acres Sales Value Profit Buyer

1st Part Sold in June 10 355,000,000 297,000,000 Prime Land

2nd Part Expect to sell in November 11 415,000,000 351,200,000 Ideal Motors Limited

Top 5 Shareholders No. of Shares % Holding

Piramal Glass Limited 536,331,880 56.45%

Employees Provident Fund 90,317,140 9.51%

Mr. M M Udeshi 41,238,021 4.34%

CITI Bank NY S/A forward International

Dividend Fund 20,000,000 2.11%

Mr. G. Dangampola & Mrs. N.P. Dangampola 10,280,007 1.08%

LKR Mn 1Q2012/13 1Q2013/14

Revenue 1,293 1,223

Growth % -5%

Cost of Sales (935) (961)

Gross Profit 358 262

GP Margins 28% 21%

Profit on Disposal of Investment Property - 297

Operating Profit 207 424

Finance Cost (59) (54)

After Tax Profit 144 358

Growth % 149%

Quarterly Performance

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Outlook – FY2013/14

Finance cost to save by approximately 27%

Company utilized the property sales proceeds of LKR 355 Mn to repay part

of its debt during 1Q2013/14. Further, we expect the debt burden will further

relax, owing to retiring debt using expected property sales proceeds of LKR

415Mn in November 2013.

Newly captured Australia & New Zealand market will reap benefits towards

the year end.

We expect the export sales to recover towards the end of FY2013/14E with

strong penetration in Australia & New Zealand. Hence, the overall sales for

FY2013/14E are expected to be grown at a marginal 3% y-o-y. Further, the GP

margins are expected to be narrowed further to 26% in FY2013/14E amidst

the pressure on energy cost.

Post-Tax Profit to grow at 82% whilst recurring earnings to drop by 8%

Net earnings to grow at 82% to LKR 1.3Bn with the sizable LKR 648Mn

property disposal profit. However, the normalized earnings will witness a

drop of 8% y-o-y to LKR 672 Mn mainly owing to the slower topline growth

coupled with the upward pressure on energy cost which will result a

depressed GP margin y-o-y.

Dividend payout to maintain at a similar level

Company maintained an average 28% payout ratio for FY2012/13, declaring a

divided of LKR 0.38/- . Going forward, we expect the company will maintain

the similar payout level in FY2013/14E in the absence of any major CAPEX

plans.

LKR Mn FY2012/13 FY2013/14E

Total Borrowings 2,244 1,492

Finance Cost 257 187

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Historical Financials & Outlook

LKR Mn FY2009/10 FY2010/11 FY2011/12 FY2012/13 FY2013/14E

Revenue 3,519 4,163 5,197 5,501 5,598

YoY Growth % 18.3% 24.8% 5.8% 2%

Cost of Sales (2,619) (2,898) (3,660) (3,952) (4,127)

Gross Profit 899 1,265 1,537 1,549 1,471

GP Margins 25.6% 30.4% 29.6% 28.2% 26.3%

Profit on Disposal of Investment Property - - - - 648

Operating Profit 520 898 914 1,026 1,581

Finance Cost (581) (306) (221) (257) (187)

After Tax Profit (61) 579 685 725 1,320

Recurring After Tax profit 672

No of Shares 950

Recurring EPS (0.06) 0.61 0.72 0.76 0.71

Market Price (17th July 2013) 6.00

PER 8.5

Target PER 11.0

PE based Target Price 7.79

Total Equity 2,215 2,509 3,246 3,629 4,580

NAV per share 2.33 2.64 3.42 3.82 4.82

Taraget PBV 1.70

PBV based Target Price 8.20

Dividends payout ratio 28%

Dividends per share - - 0.30 0.38 0.39

Dividend Yeild 6.5%

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DISCLAIMER: This research is not in compliance with the regulations as per; Rule 2.2.5 of section 2 of the Colombo Stock Exchange - Stock Broker Rules since this is not a

comprehensive document. This document has been prepared and issued by Asha Phillip Securities Ltd, on the basis of publicly available information, internally developed data and

other sources believed to be reliable. While every effort has been made to ensure that the data quoted and used for the research behind this document is reliable, there is no guarantee

that it is correct. Asha Phillip Securities Ltd, nor any Director, Officer or employee accept no liability whatsoever in respect of any errors or omissions. This document is a piece of

economic/Financial research and is not intended toconstitute investment advice, nor to solicit dealing in securities or investments. Asha Phillip Securities Ltd may act as a Broker in

the investments which are the subject of this document or related investments and may have acted upon or used the information contained in this document, or the research or

analysis on which it is based, before its publication. Asha PhillipSecurities Ltd, Its Directors, Officers or Employees may also have a position or be otherwise interested in the

investments referred to in this document. This is not an offer to sell or buy the investments referred to in this document.

Research Division

Thakshila Hulangamuwa Pasindu Perera Lasantha Senanayake

Vice President- Business Development Manager – Research Research Analyst

[email protected] [email protected] [email protected]

0094 113070494 0094 112429109

Nishantha Warnakulasuriya – Trainee Research Analyst

mailto:[email protected]



piramal glass ceylon plc (glas.n) - 1q2013/14 interim ...€¦ · ltd, rockland distilleries ltd,...

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