{"id":322542,"date":"2023-04-05T01:01:51","date_gmt":"2023-04-04T17:01:51","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=322542"},"modified":"2023-04-05T01:01:53","modified_gmt":"2023-04-04T17:01:53","slug":"stock-in-focus-dl-industries-inc-dnl-5-apr-2023-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-dl-industries-inc-dnl-5-apr-2023-by-ap-securities\/","title":{"rendered":"Stock in Focus: D&L Industries Inc. (DNL) – 5 Apr 2023 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>DNL<\/td><\/tr>
Company Name<\/strong><\/td>D&L Industries Inc.<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>5 Apr 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 11.30<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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At our Target Price of P11.30\/share, we continue to recommend a BUY on DNL due to its significant upside of 43.6% to its last traded price. Moving forward, we expect margins to continue to improve and CAPEX to further trend downwards as its Batangas Plant nears completion.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

DNL\u2019s 2022 net income performed at par with our estimates (103%) but exceeded consensus expectations (110%). Q4 net income dipped slightly on a sequential basis, but this was due to slight adjustments which were made to the Q3 unaudited results. Overall, these adjustments had no impact on the cumulative full year figures.<\/p>\n\n\n\n

Topline saw growth of 41% YoY, although as expected, this would continue to normalize downwards in Q4 as the decline in commodity prices allowed management to reel in most of the prior price increases that were made. In exchange, this now enabled the sales mix to shift back in favor of the high margin specialty products (HMSPs). While the 51% full year revenue contribution of HMSPs was still lower than FY21\u2019s 57%, this would continue to improve QoQ, with Q4 showing a much better split of 53 to 47. As a result, margins for the segment would hit 25.1% towards the end of the year, 4.7ppts higher than what we saw in Q1. This would allow total gross margins to clock in at 14.0%, 70bps higher than our forecasted 13.3%.<\/p>\n\n\n\n

Despite the improvements shown, we note however that the high margin segment continues to face headwinds when it comes to expanding its volumes. Volumes for the year were down by 3%, with Q4 showing an even more pronounced decline of 13%. This was due mainly to the challenges which DNL\u2019s customers from the food service industry continued to encounter. <\/p>\n\n\n\n

Moving forward, we note that the start of the Batangas Plant\u2019s operations will provide stimulus to growth as it would further increase export capacity. However, risks of rising interest rates and slower economic expansion may continue to impact food service demand. In addition to volumes, we also noticed that DNL\u2019s OPEX was above our expected levels, and was another hurdle that prevented earnings from registering an outperformance.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>