Overview
Tokyo Cement is a leading Sri Lankan cement and building materials producer with nationwide distribution and ancillary renewable energy assets. The latest prints show operating progress but a softer bottom line: operating profit improved year-on-year while net profit declined, with finance costs and tax taking a larger share of results. The board maintained an upward dividend path, and the latest payout has already gone ex.
Price performance
As of 2026-08-07 the voting line closed at LKR 84.00. The share fell 13.4% over three months versus the ASPI’s -7.1%, and is down 24.3% over six months versus -10.6% for the index. It trades 27.6% below its 52-week high. Recent volatility is quieter than its own one-year norm and turnover is thinner than its 60-day average.
Valuation
At LKR 84.00, TKYO trades on a P/E of 14.4 (79th sector percentile) and P/B of 1.15, with ROE at 8.1%. The dividend yield is 5.7% (88th percentile in its sector). The payout has been rising, with DPS at LKR 2.5 in FY2026 versus LKR 2.0 in FY2024.
News and sentiment
Coverage has been routine: 4 material items in the last 90 days (1 positive, 3 neutral, none negative). The most notable disclosure was a first and final dividend of LKR 2.5 per share (ex 2026-08-05, payable 2026-08-24). There has been no company-specific news in the last 30 days.
Financials
Latest quarter (to 2026-06-30): margins softened year-on-year. Gross/operating/net margins were 31.6%, 7.3% and 4.0% against 31.0%, 8.5% and 5.3% a year earlier. Operating profit rose year-on-year, but net profit fell as finance costs and tax continued to weigh below the operating line.
Full year to 2026-03-31: revenue grew, but net profit fell 25.4%, compressing profitability at the group level. The gap between operating and net outcomes has been persistent across recent quarters.
Risks
The primary risk is cash generation and funding. Cash conversion was just 0.29x in FY2026 and free cash flow was LKR -3.41 billion, indicating profits did not arrive as cash.
Leverage and servicing capacity are the next concern: gearing stands at 50.1% of owners’ equity and interest cover is 3.06x, leaving less room for shocks. Liquidity is tight, with a current ratio of 1.13. Dividend sustainability bears watching given an 81.5% payout ratio.
Outlook
The next catalyst is the September quarter result for the period ending 2026-09-30, expected between 2026-10-28 and 2027-01-26. As at 2026-08-07, market rates have been easing; whether that translates into a lighter finance charge and better cash conversion will be clear in that filing. Near term, the declared LKR 2.5 dividend is due for payment on 2026-08-24.