Overview
Diesel & Motor Engineering (DIMO) is a diversified automotive and engineering group spanning vehicle distribution and after-sales, tyres and tools, construction and material handling equipment, agriculture inputs, and electro-mechanical and biomedical projects. The key change is operational recovery: FY26 returned to profit on a much larger top line, while the balance sheet ended the year highly geared with weak cash generation.
Price performance
As of 2026-08-07 the share closed at LKR 1,500. Over three months it fell 11.7% versus the ASPI’s -7.1%, while it sits 42.3% below its 52-week high. Notably, operations improved as the latest quarter’s operating margin rose 8.5 points, so price and operations have diverged recently.
Valuation
At today’s price DIMO trades on 8.71x earnings versus the sector median 12.51x. P/B is 0.84, placing it near the bottom of the sector (4th percentile). ROE for FY26 is 9.7%. The dividend has stepped up: FY26 DPS was LKR 50 versus LKR 5 in FY24.
News and sentiment
Coverage over the last 90 days was modest with 5 material items, skewing positive (3 positive, none negative, 2 neutral). The last 30 days were unusually quiet. A final dividend of LKR 40 went ex on 2026-07-03. DIMO also announced an 18MW solar addition, expanding its renewables footprint.
Financials
Latest quarter (to 2026-03-31) margins firmed year-on-year: gross margin was 18.1% vs 19.8% a year ago, operating margin 4.3% vs -4.2%, and net margin 1.6% vs -6.0%. This marks a clear swing back to profitability at the bottom line, though gross margin remains low against its own history.
Risks
Balance sheet leverage is the primary risk: total debt was LKR 47.49 billion, equating to 289% of owners’ equity. Interest cover is thin at 1.46x. Liquidity is tight with a current ratio of 1.04. Earnings quality was weak with cash conversion at -2.93x and free cash flow of -LKR 14.72 billion. Sector conditions are also challenging, with a 47% fuel price jump in July pressuring costs and demand.
Outlook
As at 2026-08-07 the next results (quarter ended 2026-06-30) are due, with the exchange’s latest-by date 2026-10-26. That print will show whether revenue momentum and the margin recovery carried into FY27 and whether working capital unwound to improve cash conversion. Easing market rates as at this date are consistent with some relief to finance costs if borrowing structures allow.