Looking for a clear direction : HOLD
CIC is a diversified company with a majority exposure to agriculture. With the top line forecasted to grow tamely at 1.6% three-year CAGR, CIC is attempting to realign strategy by shedding some of the loss making units. While we are positive of the efforts’ medium term results, we are concerned about the working capital financing CIC is likely to endure caused by the delay in the Government payment of the fertilizer subsidy. A DCF based valuation suggests a Target Price (TP) of LKR 48. CIC trades at 10.3x PE ratio in FY 2015E after a forecast loss in FY 2014E. We feel with the uncertainty of the subsidy payments coupled with the thin margins of the key business segments and the low forward ROEs, these forward trading multiples are not a bargain. We recommend HOLD.
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BRS Equity Research | Bartleet Religare Securities (Pvt) Ltd, Sri Lanka
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