{"id":326367,"date":"2024-01-16T18:01:45","date_gmt":"2024-01-16T10:01:45","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=326367"},"modified":"2024-01-16T18:01:46","modified_gmt":"2024-01-16T10:01:46","slug":"stock-in-focus-dl-industries-inc-dnl-16-jan-2024-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-dl-industries-inc-dnl-16-jan-2024-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: D&L Industries Inc. (DNL) – 16 Jan 2024 by RCBC 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>RCBC Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>16 Jan 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 7.00<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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We set a target price (TP) of Php7.00 for D&L Industries (DNL) based on our Discounted Cash Flow (DCF) valuation rooted in a 10-year EBITDA CAGR estimate of 11.4%. Despite the challenging year wrought with low demand, and high operating and interest expenses, we are still optimistic of DNL mainly on rebasing and the boost on operations of the Batangas plant. DNL is also trading cheaply on a PE of 13.8x, lower than its 5-year historical PE of 22.9x and its peers\u2019 average PE of 18.9x. Our Target Price offers a decent share price upside of 10.1% and a total return potential of 13.5%, including our 2024 dividend yield of 3.4%.<\/p>\n\n\n\n

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

Sequential recovery<\/p>\n\n\n\n

Despite the challenging market on impact of high inflation and cautious consumer sentiment, we have seen a sequential recovery with 3Q 2023 net income (ex-Batangas plant) growing 11% q\/q to Php866.0 million. Growth was on the back of demand picking up with volumes for High Margin Specialty Products (HMSP) increasing 11% quarter-on-quarter (q\/q) and Low Margin Commodity Products (LMCP) rising 23% q\/q. 3Q 2023 consolidated revenues increased 9% to Php8.5 billion q\/q.
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Room for growth <\/h3>\n\n\n\n

We believe that there are still considerable upsides for DNL with (1) the onset of
Batangas plant operations, and (2) the implementation of an increase in biofuel blend
from 2% to 3%. While expenses on the newly-opened Batangas plant further plunged DNL\u2019s 9M 2023 earnings, the gains from the additional manufacturing capacity and \u201cpack-at-source\u201d manufacturing model will slowly boost earnings from 2024 and in the long-run as the plant opens fully and demand rebounds. <\/p>\n\n\n\n

The plant also sits on a 26-ha property in a Special Economic Zone in Batangas and should support DNL\u2019s export business. On the other hand, the increase in biofuel blend to 3% effective mid-2024 will also provide more advantage to DNL as one of its units, Chemrez, is the country\u2019s largest coco-methyl ester (CME) producer, which is needed for the biofuel blend.<\/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>