Earnings Report /

Olympic Industries: Q2 FY20 – Earnings led by strong revenue growth; raise TP

    Auneea Haque
    Auneea Haque

    Research Associate

    IDLC Securities
    2 February 2020
    Published byIDLC Securities

    Revenue soared by 17.2% as recent biscuit launches were strong; high selling expense era continues. Olympic posted Q2 FY20 revenue of BDT4.0bn against BDT3.4bn in the same quarter of the previous year, surpassing our expectations. Olympic has recently launched a number of biscuits, getting a positive response. We believe, these new biscuits mostly contributed to achieving this striking revenue growth. Additionally, there has been an array of new launches by Olympic last year from wafers, toffee and bakery product lines which tend to have affected sales positively. Promotional activities further facilitated top-line progression. In Q2 FY20, selling expense as a percentage of sales increased by c147bps to 13.6% from 12.1% in Q2 FY19. Olympic’s H1 FY20 revenue stood at BDT8bn, up by c15% yoy and beating our expectations by c5%. Hence, we have increased our revenue growth forecast to 13% yoy from 10% yoy for FY20 and 12% CAGR from 10% CAGR over the next four years.

    NPAT grew by 12% yoy. Olympic posted Q2 FY20 NPAT of BDT493mn (EPS of BDT2.47) up by c12% yoy. This takes H1 FY20 earnings to BDT1,051mn, up by c14% yoy. We have revised our NPAT growth upward over the next four years from 12% CAGR to 14% CAGR, consistent with our revenue growth estimates. Our EPS forecast for FY20 remains at BDT10.4.

    Reiterate Hold with a raised TP of BDT200 (previously BDT180), suggesting an ETR 6.0%. Olympic is currently trading at 18.7x 2020e PE, which is 22.4% lower than one-year median PE of 24.1x and 43.5% lower than five-year median PE of 33.1x. Our upgraded TP of BDT200 implies 19.2x 2020f PE and 2.4x 2020f EV/Sales. We recommend Hold.