Company Overview

Valuation Summery
LTL Holdings Limited (LTLH) is a leading player in the
power sector, with diversified operations in power IPO price (LKR) 14.50
generation, Engineering, Procurement & Construction Value per share (LKR) - DCF 19.39
(EPC), and Operations & Maintenance (O&M) services. Discount to the valuation price 33.75%
PE (TTM EPS) – Annualized EPS 18.8x
The company is seeking to raise up to LKR 20 billion
PBV at Pre IPO 1.2x
through its Initial Public Offering (IPO) to further
strengthen its position on the Colombo Stock Exchange Expected dividend yield 8% - 10%
(CSE). Industry Power & Energy
Recommendation Subscribe
Founded in 1980 as Lanka Transformers Limited, LTLH
*Valuation as per the prospectus of the company IPO conducted by NDB Investment
has evolved into a multifaceted conglomerate, Bank Limited and CT CLSA Capital (Private) Limited.
expanding from transformer manufacturing to a broad
range of power sector services. Reorganized in 2023 as
LTL Holdings Limited, the company operates across Sri
Lanka, Bangladesh, India, and Nepal. LTLH’s strategic
expansion into both thermal and renewable energy has
positioned it as a major Independent Power Producer
(IPP) in the region.
02
The issue at Glance
Issuer LTL Holdings Limited

Number and Type of Securities to be Offered 1,379,310,400 Ordinary Voting Shares

Issue Price LKR 14.50 per Share

Total Amount of the IPO LKR 20,000,000,800/-

Objective • Financing of Full Equity Investment in 100MW solar power project (Lakdhanavi Limited
in Rividhanavi (Private) Limited) - LKR 6,047.4 Mn
• Part Financing of Equity Investment in 350 MW Combined Cycle Power Project
(Sahasdhanavi Limited) - LKR 13,502.6 Mn
• Cost of the IPO – LKR 450.0 Mn

Offer Opening Date September 13, 2024

Offer Closing Date October 4, 2024

Earliest Closing Date September 13, 2024

Basis of Allotment 1.50% to unit trusts investors, 5.00% to retail individual investors, 93.50% to non-retail
investors.

CSE Listing To be listed on the Main Board of the CSE

03
 Shareholder Composition
Pre-IPO Post-IPO
Name of Shareholder
No. of Shares % No. of Shares %

Ceylon Electricity Board 1,679,812,854 34.98% 1,679,812,854 27.10%

West Coast Power (Private) Limited 1,344,334,146 28.00% 1,344,334,146 21.70%
Peradev Limited 1,296,063,000 26.99% 1,296,063,000 20.90%
Teckpro Investment Limited 480,983,380 10.01% 480,983,380 7.70%
IPO Shareholders - - 1,379,310,400 22.30%
Total 4,801,193,380 100.000% 6,180,503,780 100.0%

• Non-public shareholding of 4,801,193,380 number of shares will be locked in for a period of 6 to 12 months from
the date of listing depending on the share ownership status.
• IPO shareholding will be classified as the public shareholders with a float of 22.32%.

04
Strengths of LTL Holdings Limited
• Diversified Operations

LTL Holdings Limited has a well-diversified portfolio in the power sector, encompassing power generation (both thermal and
renewable), Engineering, Procurement & Construction (EPC), Operations & Maintenance (O&M), and manufacturing of power
distribution equipment. This diversified structure enhances resilience and provides multiple revenue streams, reducing
dependency on a single business line.

• Contractual Revenue Flows

The company benefits from long-term Power Purchase Agreements (PPAs) and O&M contracts, which ensure a steady cash flow.
The thermal PPAs, in particular, include both capacity and energy charges, providing guaranteed revenue regardless of power
plant dispatch levels. This structure significantly reduces revenue volatility.

• Strong Market Position

LTL Holdings, through its subsidiary Lakdhanavi Limited, is one of the few Sri Lankan companies with substantial thermal power
generation capacity. This dominant market position, combined with regional operations, places the company in a strong
competitive position, especially in the energy sector.

• Experience and Expertise

The company’s management and technical teams have extensive experience in operating large-scale power projects across
multiple countries. This expertise is a key asset in securing and executing future projects, both locally and internationally.

05
Opportunities of LTL Holdings Limited

• Expansion LNG projects will become a major revenue driver catalyst

LTLH’s commitment to developing LNG-capable power plants aligns with the country's goal of generating 70% of
its electricity from renewable sources by 2030. The addition of firm capacity from cleaner fossil fuels supports this
transition. With the completion of the Sobadhanavi power plant, LTLH will increase its installed capacity by 350
MW, contributing to the overall target of 1,000 MW. This development facilitates a higher integration of renewable
energy into the national grid without compromising grid stability, despite the variable nature of renewable energy
sources.
Expansion in Renewable Energy
The IPO proceeds are intended to finance significant investments in renewable energy projects, including the 100
MW solar power project in Siyambalanduwa. This aligns with global and national trends toward increasing the
share of renewable energy in the energy mix, presenting substantial growth opportunities.

• Growth in International Markets

With subsidiaries like Asiatic Electrical & Switchgear in India, LTL Holdings has the potential to expand its footprint
in rapidly growing international markets. This expansion is further supported by India's strong economic growth
and increasing demand for renewable energy.

• Listing Benefits
Upon listing, LTL Holdings will gain access to capital markets, improving its ability to attract foreign investments
and strengthen its financial position. This enhanced capital access can fuel further expansion and innovation.
06
Challenges and Concerns of LTL Holdings Limited
• Financial Risks
The company’s recent financial performance shows a decline in profitability, driven by increased
finance costs and reduced dividend income from its subsidiaries. High leverage and exposure to
currency risks, especially in USD and EUR, pose additional financial risks, particularly in the volatile
economic environment.

• Project Execution Risks

The company faces execution risks related to its ongoing and upcoming projects, including potential
cost overruns and delays. Given the scale of these projects, any significant deviation from the planned
timeline or budget could adversely impact the company's financial performance.

• Regulatory and Market Risks

LTL Holdings operates in a highly regulated environment, and changes in government policies,
especially in the energy sector, could impact its operations. Additionally, fluctuations in energy
demand and competition from other energy providers, particularly in the renewable sector, could
affect future revenue streams. This will be applicable in projects, both locally and internationally.

07
Pear company Analysis
Installed Market Cap TTM PER(x)
Companies Country Power Source Capacity 06 Jun 24 06 Jun 24
(MW) (USD Mn)
Baraka Patenga Power Ltd Bangladesh Thermal 316 27.4 24.5
Khulna Power Company Ltd Bangladesh Thermal 265 89.8 NA
Summit Power Ltd Bangladesh Thermal 976 191.5 NA
United Power Generation & Distribution
Company Ltd Bangladesh Thermal 895 623.7 10.82
Lotus Hydro Power PLC Sri Lanka Renewable 5 3.8 17.5
LVL Energy Fund PLC Sri Lanka Renewable / Thermal NA* 9.4 11.1
Panasian Power PLC Sri Lanka Renewable 22 8.5 34.2
Resus Energy PLC Sri Lanka Renewable 23 6.7 5.4
Vallibel Power Erathna PLC Sri Lanka Renewable 22 20.5 9.3
Vidullanka PLC Sri Lanka Renewable 49 26.8 6.9
WindForce PLC Sri Lanka Renewable 245 87.1 17.0
Median 12.1

Sri Lankan renewable energy companies generally have smaller capacities and market caps compared to Bangladesh’s
thermal power companies. Among Sri Lankan peers, WindForce PLC with 245 MW capacity and a market cap of USD 87.1
million. The median PER is 12.1x, with Resus Energy PLC having the lowest at 5.4x.
For LTL Holdings, this indicates a competitive landscape in Sri Lanka’s renewable sector, where growth potential may be driven by
expanding capacity and efficient operations to capture market share.
08
Growth in Financial Metrics
Revenue growth consistently improves over the years
Revenue - CAGR with 27%
The company achieved consistent
70.00
revenue growth with a CAGR of
60.00 27% from 2020 to 2024, indicating
50.00
40.00
strong expansion. Revenue
30.00 steadily increased year-over-year,
20.00
reflecting the company's ability to
10.00
- grow its top line effectively.
2020 2021 2022 2023 2024

Revenue

Profitability margins were gradually declined with the Capex increments Profitability margins, including GP,
Profitability Margins
EBIT, and PAT, gradually declined
80.00%
over the years due to higher
70.00% CAPEX. The EBIT margin and PAT
60.00%
50.00% margin saw noticeable reductions,
40.00%
30.00%
showing that while revenue grew,
20.00% profits were impacted by
10.00%
0.00% increased investment into the
2020 2021 2022 2023 2024
business.
GP Margin EBIT Margin Profit AfteTax Margin
09
 Income Statement
Period Ended 31 March (LKR Mn) FY2020 FY2021 FY2022 FY2023 FY2024
Financial Year
Revenue 17,510 20,965 40,129 53,785 59,753 End (FY) Basic EPS (LKR) P/E Ratio*
Cost of Sales (9,888) (11,058) (30,788) (36,597) (40,843)
FY2023 2.16 6.71
Gross Profit 7,622 9,907 9,341 17,188 18,910
FY2024 0.91 15.95
Other Income and Gains 6,380 1,647 14,366 8,610 287
*P/E multiple is calculated based on the Share Issue
Distribution Costs (322) (163) (320) (359) (348) Price of LKR 14.50.
Administration Expenses (1,495) (1,960) (1,647) (2,408) (2,492)
Other Operating Expenses (350) (269) (470) (2,309) (2,078) • The income statement reflects strong
(Charge)/Reversal of Impairment - 57 (104) (800) (1,232)
revenue growth, increasing from LKR
17.5 billion in FY2020 to LKR 59.8 billion
EBIT 11,835 9,219 21,166 19,922 13,048
in FY2024, demonstrating a healthy
Finance Cost (1,264) (1,550) (2,134) (6,082) (6,371) growth trajectory. Gross profit also saw a
Finance Income 548 763 1,347 1,889 1,018 consistent rise, reaching LKR 18.9 billion
Profit/(Loss) Before Tax 11,119 8,432 20,379 15,729 7,695 in FY2024, with stable margins around
31%.
Income Tax Expense (1,235) (949) (1,553) (2,496) (1,945)
Profit for the Year 9,884 7,483 18,826 13,234 5,750

• The company effectively managed operating expenses while achieving solid EBIT levels, peaking at LKR 21.16 billion in
FY2022 and settling at LKR 13.05 billion in FY2024. Finance costs increased over the years, which impacted net profit, but
the company-maintained profitability, delivering LKR 5.75 billion in FY2024. The P/E ratio rose from 6.71 in FY2023 to 15.95
in FY2024, reflecting positive market sentiment and confidence in the company's prospects.
10
Statement of Financial Position
As at 31 March (LKR Mn) FY2020 FY2021 FY2022 FY2023 FY2024 Net Assets Value P/BV at Share
Financial Year
per Share (LKR) Offer Price
Non-Current Assets 31,325 32,963 46,561 75,780 86,455 End (FY)
Current Assets 26,609 41,246 75,902 60,154 47,126 FY2023 11.28 1.29

Total Assets 57,934 74,210 122,464 135,934 133,582 FY2024 11.79 1.23

Non-Current Liabilities 5,423 14,368 24,478 24,765 21,976 *Share offer price at LKR 14.50.
Current Liabilities 21,190 21,776 38,836 39,046 37,240
Total Equity 31,321 38,066 59,149 72,123 74,365
Total Equity and Liabilities 57,934 74,210 122,464 135,934 133,582

• The statement of financial position shows steady growth in total assets, rising from LKR 57.9 billion in FY2020 to LKR 133.6
billion in FY2024. Non-current assets increased significantly to LKR 86.5 billion, reflecting long-term investments, while
current assets settled at LKR 47.1 billion in FY2024.

• Equity also grew from LKR 31.3 billion to LKR 74.4 billion, indicating strong financial health. The company managed its
liabilities well, with non-current liabilities decreasing to LKR 22 billion and current liabilities stable at LKR 37.2 billion in
FY2024.

• Net Asset Value (NAV) per share increased from LKR 11.28 in FY2023 to LKR 11.79 in FY2024, with a slight drop in the Price-
to-Book (P/B) ratio from 1.29 to 1.23, indicating the stock remains fairly valued.

• In summary, the company shows solid asset growth, strong equity, and effective liability management, with stable
shareholder value.

11
Key Financial Ratio Analysis
FY2020 FY2021 FY2022 FY2023 FY2024
Revenue Growth 19.7% 91.4% 34.0% 11.1%
GP Margin 43.5% 47.3% 23.3% 32.0% 31.6%
Profit AfteTax Margin 56.4% 35.7% 46.9% 24.6% 9.6%
EBIT Margin 67.6% 44.0% 52.7% 37.0% 21.8%
Debt to Equity 0.8 0.9 1.1 0.9 0.8
ROE 31.6% 19.7% 31.8% 18.3% 7.7%
ROA 17.1% 10.1% 15.4% 9.7% 4.3%
• The financial ratios indicate the company's rapid growth early on, with revenue growth peaking at 91.4% in FY2021 but
slowing to 6.4% in FY2024. Gross profit margins remained stable at around 31-32% in FY2023 and FY2024, showing good
cost control. However, profit after tax margin fell from 56.4% in FY2020 to 9.6% in FY2024, and EBIT margin dropped from
67.6% to 21.8%, reflecting reduced profitability.

• Return on Equity (ROE) and Return on Assets (ROA) also decreased, with ROE down from 31.6% in FY2020 to 7.7% in
FY2024, and ROA from 17.1% to 4.3%, indicating less efficiency in generating returns. Despite these challenges, the
company maintained a stable debt-to-equity ratio around 0.8 to 1.1, reflecting prudent financial management.

• In summary, the company shows stable revenue and cost management, but profitability and efficiency have declined,
highlighting the need for improvements in operational performance.

12
Significance of the IPO

Entry into large-scale renewable

energy aligns with global sustainability
Raising up to LKR 20 billion to finance trends and supports Sri Lanka’s 70%
Listing on the CSE enhances credibility,
key energy projects, including a renewable energy target by
governance, and attracts both local
100MW solar power plant and a 2030.Strengthened Financial Position:
and international investors.
350MW LNG power plant. Enhances the company’s balance
sheet, reducing reliance on debt and
improving creditworthiness.

IPO priced at a discount, offering Positions LTL Holdings as the largest

Projects funded by the IPO are critical
potential for capital appreciation given Independent Power Producer (IPP) on
for meeting Sri Lanka’s growing energy
strong fundamentals and strategic the CSE, with significant growth
needs and ensuring energy security.
expansion. opportunities.

13
Special Notice Published by the LTL
• Following are the on-going as well as the withdrawn cases filed by third parties in respect of the Company and/or its
subsidiaries and/or existing shareholders of LTL Holdings Limited (excluding CEB) and cases disclosed as per the request of
the CSE by its letter dated September 7, 2024.
Current Status
This case does not, in essence, have any relevance whatsoever to the
Case No. CA/Writ/249/2024 Company as the ultimate objective of the Petitioners in the context of
this case appears to be receive shares in Teckpro Investments Ltd and
Peradev Ltd.

Cases CA/Writ/158/2020 and CA/Writ/159/2020 Both cases were dismissed.

The said interim restraining order is still in force. Company wishes to

Case No. CHC/13/2023/CO move to the Court to dismiss this case in the next hearing since the
Company is not an Auditee Entity under the provisions of National Audit
Act of 2018 as per its current shareholding.

Fundamental Rights case bearing No. 198/2024, filed Company would take appropriate action in terms of the law to address any
on July 11, 2024 issues raised in the case and defend itself
Fundamental Rights case bearing No. 254/2024, filed
on September 05, 2024

*There is no significant impact on the Company’s financial position or the profitability, as per the shared notice.
**The Company confirms that it has no knowledge of any other litigation filed against the Company. 15
LTL presence a growth potential with the upcoming
demand for energy gradually growing
• Summery
LTL Holdings Limited is strategically positioned to capitalize on the increasing demand for energy, driven by
its strong foothold in both thermal and renewable energy projects. The company’s upcoming IPO will raise up
to LKR 20 billion, primarily to fund its expansion in renewable energy, including a 100 MW solar power
project and a 350 MW LNG power plant. These investments align with Sri Lanka’s goal of generating 70% of
its electricity from renewable sources by 2030, making LTL Holdings a key player in the nation’s energy
transition.

• Final Thoughts
LTL Holdings exhibits significant growth potential due to its diversified operations, long-term revenue stability
from Power Purchase Agreements (PPAs), and a strong market presence in the power sector. The company's
investments in renewable energy and LNG power plants will not only support the growing energy demand
but also position it as a leading Independent Power Producer (IPP) in the region. However, challenges related
to financial leverage and project execution risks should be closely monitored to ensure long-term profitability.
Based on a thorough evaluation of the IPO prospectus and associated filings, we issue a "Subscribe"
recommendation at the offering price of LKR 14.50 per share.
14
Sales Team
Ifadh I. Marikar [email protected] 94779625679
Samadhi Jayasinghe [email protected] 94773954993
Amila R. Kumara [email protected] 94772070912
Saditha Kaluarachchi [email protected] 94774244526
Brian Rupasinghe [email protected] 94759976694
Ali A. M. Aaqib [email protected] 94770220620

*To Apply for the IPO through Almas Equities, kindly contact our hotline Number or your allocated
investment advisor.