{"id":327216,"date":"2024-03-22T00:45:43","date_gmt":"2024-03-21T16:45:43","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=327216"},"modified":"2024-03-22T00:45:45","modified_gmt":"2024-03-21T16:45:45","slug":"stock-in-focus-dl-industries-inc-dnl-22-march-2024-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-dl-industries-inc-dnl-22-march-2024-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: D&L Industries Inc. (DNL) – 22 March 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>22 March 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 8.10<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
<\/div>\n\n\n\n

We increase our target price (TP) for D&L Industries (DNL) by 16% from Php7.00 to
Php8.10 as we roll our valuations to our 2024 EBITDA of Php5.6 billion on a
10-year EBITDA CAGR estimate of 14.2%. We are more bullish for DNL due to a low
base, easing macro environmental factors, and the contribution of the Batangas
plant. DNL is also trading at a discount with a PE of 14.9x, lower than its 5-year
historical Price-Earnings (P\/E) ratio of 23.9x. Our Target Price offers a decent share price upside of 19.8%.<\/p>\n\n\n\n

<\/div>\n\n\n\n

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

DNL records lower net income<\/h3>\n\n\n\n

DNL recorded 2023 net income of Php2.3 billion, 31% lower year-on-year (y\/y), below consensus and our in-house estimates. Ex-batangas plant expenses, net income would have been Php3.0 billion, only 15% lower y\/y. Consolidated sales were 23% lower to Php33.5 billion. Gross profit was 6% lower to Php5.7 billion despite a 3.1ppts margin expansion to 17.1% owing to lower topline. Operating income was 12% lower to 3.6bn despite a 1.3ppts margin improvement to 10.7% owing to lower revenues.<\/p>\n\n\n\n

Revenues fall on lower pricing and commodities volume<\/h3>\n\n\n\n

Inflationary pressures coupled with DNL\u2019s unique product pricing structure of passing on both high and low raw material costs to its customers were the main contributors to last year\u2019s subdued topline. Overall demand was soft last year with
blended volumes down by 11%, mainly on the commodities side, on inflationary
pressures. Meanwhile, easing global raw material prices led to lower product
pricing, which trickled down to tempered revenues.<\/p>\n\n\n\n

Margins recover<\/h3>\n\n\n\n

On the upside, as prices of raw materials ease and the product mix leans back to the
High Margin Specialty Products (HMSP) over the Low Margin Commodity Products
(LMCP) at 62:38, the 9% growth in HMSP volume is offset by the 24% decline in
LMCP volume, resulting in an 11% decline in blended volume. However, this is still a
net gain for the company as HMSP push up blended margins by 3.1ppts to 17.1%.<\/p>\n\n\n\n

Batangas plant operations started in 2H 2023<\/h3>\n\n\n\n

Excluding the Batangas plant expenses, FY23 earnings would have only been 15%
lower y\/y. However, we see significant contribution from the Batangas plant already
despite operating only from the 2H23 as the earnings in 4Q23 with the Batangas
plant contribution is higher than without it (NI: Php503mn; NI ex-Batangas:
Php656n) We believe that the plant will be a significant boost in the company\u2019s
overall sales, exports and bottomline as it already contributes positively despite its
operations not yet at full utilization.<\/p>\n\n\n\n

<\/div>\n\n\n\n

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