First Capital upgrades Hayleys Fabric PLC’s earnings target for FY24 to LKR 2.6bn

Hayleys Fabric PLC is set about on a promising note for FY24 with a better than anticipated performance during the 1QFY24 as it recorded a profit of LKR 901.6 million amidst a soft market environment while displaying a robust QoQ improvement against the earnings of LKR 54.3Mn in 4QFY23, according to First Capital Research.

The researchers at First capital further said: “However, on a YoY basis earnings of Hayleys Fabric fell 44.1% below the 1QFY23 earnings of LKR 1.6Bn owing to the higher base effect. Massive improvement in the GP margin (YoY) by 638bps to 19.3% in during the 1QFY24 has acted as the main catalyst in positive earnings growth. Accordingly, dollar denominated revenue appreciated by 9.3%YoY to USD 45.1Mn amidst higher quantities and higher margins while cost of sales in dollar terms remained broadly unchanged with a minute increase of 1.3%YoY.”

“Thus, gross profit surged higher by 63.1% and recorded at USD 8.7Mn. Nevertheless, LKR topline for 1QFY24 shrunk on a YoY basis amidst exchange rate fluctuations while cost of sales dipped YoY on the same line aiding GP margin to remain strong. During the 1QFY24, fluctuations in the rupee posed challenges to the bottom-line of HAYLEYS FABRIC PLC as finance expense continued to surge high causing a stumbling block to the earnings potential. Since our last report in Jul-23, share price appreciated sharply reaching our FV of LKR 35.0 and LKR 45.0 for FY24E and FY25E, respectively. Accordingly, considering HAYLEYS FABRIC PLC’s strategy to increase margins, expected gradual revival in the apparel industry and with the company substantially surpassing our earnings target for 1QFY24, we have upgraded the earnings target for FY24 to LKR 2.6Bn (previous: LKR 1.6Bn) while FY25 earnings is estimated at LKR 3.6Bn (previous: LKR 2.5Bn) while the target price for FY25 is further upgraded to LKR 65.0.”