2026 corporate earnings forecast to grow 10%- BRS

Bartleet Religare Securities (BRS) has projected that earnings for Sri Lanka’s listed entities will grow by 10% year-on-year to reach LKR 765 billion in 2026. In their January 2026 strategy presentation, the firm set a year-end target for the All-Share Price Index (ASPI) at 23,500 based on a market price-to-earnings (P/E) multiple of 11x, with a further projection of 27,000 for 2027.

The forecast comes amidst a revision of the country’s macroeconomic outlook following the impact of “Cyclone Ditwa.” While the economy recorded a stronger-than-expected real GDP growth of 4.5% in 2025, BRS forecasts a moderation to 3.% in 2026 before recovering to 3.2% in 2027. The brokerage anticipates headline inflation to rise to 5.8% by the end of 2026, slightly above the Central Bank’s 5% target, driven by supply-side disruptions in agriculture.

Addressing the economic trajectory, BRS Senior Research Analyst Maheshi Wattegedara noted that while the overall direction remains positive, volatility is expected in the near term. “The path forward will not be linear,” Wattegedara stated, highlighting the impact of recent weather calamities on supply chains and inflation.

Consequently, the firm expects policy interest rates to remain on an extended pause, with a potential 25 basis point hike in the second half of the year to anchor inflation expectations. The core of the BRS equity strategy relies on a pivot toward the “Construction and Materials” sector, driven by government infrastructure spending and post-disaster rebuilding. The firm has shifted its portfolio allocation to overweight construction materials, industrials, and select consumer stocks, while slightly reducing exposure to the banking sector due to anticipated provisioning pressures in Q1 2026.

Discussing the investment climate, BRS Shalini De Silva stated, “Rebuilding Sri Lanka is now moving to a new phase. As we look ahead to 2026, the focus for investors is shifting from stabilization to selective opportunities.”

A key beneficiary of this shift is the cement industry. Speaking on the outlook for Tokyo Cement, BRS analyst Asela Sandaruwan emphasized the longevity of the projected growth. “This demand will not be limited to one or two quarters but will create a multi-quarter demand cycle for the cement industry,” Sandaruwan said.

Specific stock valuations underpin these targets. BRS set target prices for Access Engineering at LKR 97.00, Tokyo Cement (Voting) at LKR 142.00, and ACL Cables at LKR 154.00. Private sector credit growth is forecast to reach 11% in 2026. On the external front, BRS projects gross official reserves to stabilize at USD 7.7 billion, with tourism earnings expected to hit USD 3.4 billion from over 2.5 million arrivals. (TP)

Source: Daily News