Distilleries Company of Sri Lanka [DIST : LKR119.00], the leader in Sri Lanka’s locally manufactured hard liquor market is likely to witness growth in beverage sector earnings led by stable margins and a CAGR of 4% in volume growth. The increased stake in SPEN makes it a significant contributor to the bottom line which is expected to grow at a CAGR of 13% FY13-14E. We assign a target price of LKR191.0 with a total return of 62% with dividends on a 18 month period. BUY - Softlogic Research
Investment in SPEN may boost earnings: DIST increased its stake in SPEN, a leading conglomerate from 28% to 39%. With SPEN’s heavy exposure to the tourism segment we expect earnings to grow by 15% in FY13E and 12% in FY14E boosting DIST’s profit from associate companies to LKR1.8 bn (17% YoY) in FY13E and LKR2.0 bn (12% YoY) in FY14E led the rise in SPEN stake.