D&L targets $1-B market cap by 2016

Food ingredient and specialty plastics additive manufacturer D&L Industries aims to hit a market capitalization of about $1 billion in two years alongside its aspiration to join the roster of Philippine blue chips.

During the company’s stockholders meeting on Monday, D&L chief finance officer Alvin Lao said D&L was continuing to innovate on its suite of products. “New products continue to be a significant contributor to growth in the past as well as in the future,” Lao said.

About 12 percent of the D&L’s staff was involved in research and development.

“We’re growing faster than the Philippine economy because we’re continually coming up with a lot of new products which are high-margin,” he said.

From an initial public offering price of P4.30 in 2012, D&L’s share price has surged to P9.79 as of Monday’s close, giving it a market capitalization of about P32.68 billion ($750 million).

In a chat with reporters after the stockholders meeting, Lao said the market was now trading D&L like a consumer stock compared to its early days in the stock market when it was traded comparable to manufacturing peers.

When it debuted on the stock exchange in 2012, Lao noted that D&L was trading at a price to equity (P/E) multiple of 11 times, which meant that investors paid 11 times the amount of money it was making. Today, however, D&L is trading at 20 times P/E or closer to the valuation of consumer stocks.

“It looks like investors are starting to price us not as a manufacturing company but as a high-growth company, also closer to a consumer company,” Lao said.

Over 70 percent of D&L’s revenues serve the food sector, thereby serving mainly consumer companies. The balance of 30 percent goes to industrial clients but whose end-products likewise service consumers like appliances or cars or mostly durable goods.

“At the end of the day, if we can maintain our growth then our P/E should naturally reflect the high growth,” Lao said.

Moving forward, D&L sees itself benefiting from a resurgence of Japanese manufacturing interest on the Philippines.

While it may be a tall order to hit $1 billion in market capitalization this year, Lao said this may be plausible within two years.

For 2014, D&L sees its recurring net profit rising by mid- to high-teen levels.

In the first quarter, D&L Industries posted a 20-percent year-on-year growth in net profit to P377 million as all business segments expanded alongside the growing economy. With the recovery in commodity prices, coupled with the strong growth momentum in volume, year-to-date consolidated revenues increased by 34 percent year-on-year.