DLADY – Fundamental Analysis (6 Sep 2016)

Excel – Download the analysis file

Latest Financial – Q2 2016 Financial Report (23 Aug 2016)

FY16 Q2 Results Highlight:

  • 1HFY16 revenue grew 4.5% to RM496.5m. 1HFY16 gross profit climbed 12.4% to RM215.5m, propelled by 3ppt expansion in gross margin due to the favorable raw material prices.
    • 1HFY16 PBT growth was milder in comparison (+9.3% to RM96.9m) due to the higher operating expenses (+14.9%) as DLADY has reinvested the savings from raw material costs into brand-building initiatives. As a result, 1HFY16 net profit grew 7.3% to RM70.6m.
  • 2QFY16 revenue was flattish (-1.2%) at RM246.7m. Meanwhile, the gross profit margin was little changed at 43.3% as compared to 43.5% recorded in 1QFY16 as milk powder prices were relatively stable during the period which resulted in marginal decline in 2QFY16 gross profit (-1.6%), in line with the slight drop in revenue.
    • However, 2QFY16 PBT managed to jump by 11.6% to RM51.1m driven by lower operating expenses (-7%) which we think was attributable to the difference in marketing expenses and the gain in derivatives contracts. As a result, 2QFY16 net profit grew 8.3% to RM36.7m, slightly dragged down by the higher effective tax rates of 28.2% (vs 1QFY16: 26.0%).

 

Going Forward:

  • I am positive with DLADY’s future:
    • Its solid fundamentals and strong branding position
    • Aggressive marketing and promotional activities
    • Robust demand of diary product in the long-term as Malaysia’s population is projected to reach 38 million people by 2040 from 30 million currently.
  • In my opinion, fair value of DLADY is from 55 to 62 (Uncertainty Risk: from HIGH to VERY HIGH).
  • I will continue to hold and accumulate this stock for my kids.

At the time of writing, my family members owned shares of DLADY.

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