Royal Ceramics Lanka PLC (RCL) posted a 37.5 per cent year on year (YoY) growth in Q2 FY 16 bottom line, resulting in a recurring Earnings Per Share (EPS) of Rs. 6, a Bartleet Religare report said. “The growth in tiles, sanitary ware and aluminum sector volumes, coupled with the group’s cost saving initiatives, aided in a 2 per cent increase in earnings before interest, taxes, depreciation, and amortization (EBIT) margin to 19 per cent and 6 per ent increase in Gross Profit Margin to 37.6 per cent. Its topline grew 8.2 per cent YoY to Rs. 5.91 billion.”
According to the report, RCL’s Market Price of the Share (MPS) has dropped 9 per cent post-budget on panic selling as concerns over a reduction in import duty and removal of tile and sanitary ware from the BOI negative list was signaled. “The total import duty has risen by 5 per cent and the removal from the negative list would barely affect RCL volumes. The reduction in corporate tax from 28 per cent to 15 per cent would boost RCL’s net earnings from FY 2017E onwards.”
The company is also geared to supply to the mid to long term demand in the local construction industry, with several capacity expansions taking place. The company has already signed up for several construction projects (Hotels and condominiums) in the pipeline. RCL entered into a joint venture this month with Pakistan’s leading premium brands retailer SFnZ & Co. Ltd to expand into Pakistan “This move would also create a market for RCL’s excess stock, during times of a slowdown in domestic demand,” the report said.
“The proposed reduction in corporate tax from 28 per cent to 15 per cent would bode well for RCL and we estimate a saving of Rs. 4000 million to FY 2017E bottom line.” The industry continued to be protected by the government with total import duty increasing further by 5 per cent to 85 per cent. The import cess remained at 35 per cent while general duty, NBT and PAL in-creased further by 2 per cent each and 2.5 per cent respectively, the report said. According to industry sources, the local tile market has seen a commendable growth of 10 per cent so far this year, so Lanka Floor tiles PLC, also under the some group may shed some market share due to competition, it added.
According to the report, RCL’s Market Price of the Share (MPS) has dropped 9 per cent post-budget on panic selling as concerns over a reduction in import duty and removal of tile and sanitary ware from the BOI negative list was signaled. “The total import duty has risen by 5 per cent and the removal from the negative list would barely affect RCL volumes. The reduction in corporate tax from 28 per cent to 15 per cent would boost RCL’s net earnings from FY 2017E onwards.”
The company is also geared to supply to the mid to long term demand in the local construction industry, with several capacity expansions taking place. The company has already signed up for several construction projects (Hotels and condominiums) in the pipeline. RCL entered into a joint venture this month with Pakistan’s leading premium brands retailer SFnZ & Co. Ltd to expand into Pakistan “This move would also create a market for RCL’s excess stock, during times of a slowdown in domestic demand,” the report said.
“The proposed reduction in corporate tax from 28 per cent to 15 per cent would bode well for RCL and we estimate a saving of Rs. 4000 million to FY 2017E bottom line.” The industry continued to be protected by the government with total import duty increasing further by 5 per cent to 85 per cent. The import cess remained at 35 per cent while general duty, NBT and PAL in-creased further by 2 per cent each and 2.5 per cent respectively, the report said. According to industry sources, the local tile market has seen a commendable growth of 10 per cent so far this year, so Lanka Floor tiles PLC, also under the some group may shed some market share due to competition, it added.
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