Overview
Lankem Developments is an investment holding group focused mainly on tea plantations and processing, alongside hydro power assets. The latest quarter showed stronger revenue but materially weaker operating performance, leaving the group loss-making after below-operating-line charges.
Price performance
The share closed at LKR 17.50 on 2026-08-07. It fell 10.5% over three months and 27.5% over one year, while the ASPI fell 7.1% and gained 9.5% over those same windows respectively.
The stock sits at 8.3% of its 52-week range, only 6.5% above its low and 40.3% below its high. Recent annualised volatility was 41.2%, which was 3.3% above its own one-year level, while 20-day volume was 84.5% below its 60-day average. The three-month decline occurred without company news in the last 30 days, so the available data does not establish a cause.
Valuation
Valuation remains demanding relative to the sector. The P/E of 43.93 is at the 96th sector percentile, while the P/B of 1.46 is at the 67th percentile; the latter is more understandable alongside full-year ROE of 20.7%.
The dividend yield is 3.4%, at the 63rd sector percentile, but the payout direction is weaker: dividend per share was LKR 1.00 for FY2025 and LKR 0.60 for FY2026. The latest year may be incomplete, so the lower figure alone should not be treated as a confirmed cut.
News and sentiment
Direct coverage is thin: there were no material company articles in the 90-day window, with no positive, negative or neutral items recorded. This leaves the recent share decline without an identified company-specific news catalyst.
The 2025 rights issue was completed and fully subscribed, with a 1:3 ratio and LKR 15.00 issue price; its ex-date was 2025-03-18. A LKR 0.60 interim dividend filing dated 2026-02-06 has no ex-date in the supplied data, while a LKR 0.60 dividend had a confirmed ex-date of 2026-01-30.
Financials
In the quarter ended 2026-03-31, revenue grew 15.5% year-on-year to LKR 1.91 billion, but operating profit fell 46.2% to LKR 90 million. Net loss narrowed by LKR 137 million to LKR 31 million, so the improvement below the operating line did not represent an operating recovery.
Gross margin contracted to 2.0% from 10.4%, operating margin to 4.7% from 10.2%, and net margin improved to negative 1.6% from negative 10.2%. The latest gross margin ranked 6th of 7 comparable March quarters and operating margin 5th of 6, both among the company’s weakest comparable prints.
The comparison is on the same group basis. Owners’ attributable equity was LKR 1.92 billion versus LKR 1.96 billion a year earlier, while shares outstanding increased from 120 million to 160 million following the rights issue. The share-count change means per-share comparisons across this period are mechanically affected.
Risks
The main risk is weak cash conversion alongside volatile operating earnings. At 2025-03-31, total debt was LKR 900 million, equal to 52.0% of owners’ equity; interest cover was 6.81 times and the current ratio was 1.12. Cash conversion was only 0.57 times, meaning reported operating profit did not arrive fully as operating cash.
Minority interests also matter: 50.9% of that year’s group profit belonged to non-controlling shareholders, so group net profit and the earnings attributable to LDEV shareholders describe materially different portions of the business. The tea business faces a mixed sector backdrop, with July auction prices stronger in rupees but year-to-date averages lower in US dollars, while reported labour departures of 143,087 create capacity pressure across plantation exporters.
Outlook
As at 2026-08-08, the next filing for the quarter ended 2026-06-30 is due now, with the exchange-based release window running from 2026-07-28 to 2026-10-26. That filing is the next event capable of showing whether the latest revenue growth has translated into better operating profitability; the supplied data cannot yet answer that question.
The broader backdrop is mixed: interest rates have eased, but fuel-price volatility and inflation pressure remain relevant to costs. For Lankem, the next financial filing matters more than the sparse news flow because it will update the historical 2026-03-31 figures on which the current valuation and earnings assessment are based.