Grain Elevators could grow revenue by 10.4 pct: SC Securities

Ceylon Grain Elevators

July 29, 2015 (LBO) – Ceylon Grain Elevators PLC (GRAN.N), Sri Lanka’s largest operator in the poultry industry, could grow revenue by 10.4 percent and net profit by 12.2 percent annually in the next four years, according to a research report by SC Securities.

Rising consumer demand due to revised public sector salaries and higher per capita income should drive the top line. The surge in tourist arrivals may also contribute to stronger consumer demand for its products, the brokerage said.

“We expect the price ceiling imposed on a Kg of chicken to be lifted in the forth coming period, with this the large scale broiler farms would ramp up the production triggering more demand for feed and DOC,” they said.

Ceylon Grain Elevators and its subsidiaries manufacture feeds under the Prima and Farmer’s Choice brands. They operate poultry breeder farms and engage in processing, packaging and retailing of poultry and other meat products.

One of its subsidiaries is Three Acre Farms PLC (TAFL.N).

Among the downside factors, the stockbroking firm noted that a depreciation of the rupee increases costs as more than 50 percent of raw materials are imported.

The re-banning of food maize importation could also drive maize prices up, while outbreaks of disease could affect its stock of day old chicks.

SC Securities gives the share a 12-month price target of 70 rupees. The company closed at 63.60 rupees, up 2.25 percent, on Wednesday.

SC Securities currently has a ‘buy’ recommendation for the stock.