Canaccord Genuity says a "stellar" year for chemicals business DGL Group has come undone by a "confusing outlook" statement that referenced meaningful "over-earning" in FY22
Shares in DGL fell 36.1 per cent on Wednesday after it reported a 197 per cent jump in underlying profit after tax to $33.6m. It has since fallen 15.9 per cent from its previous close price of $1.88 to be $1.55 at 12.54pm AEST.
"DGL provided what we regard as an ambiguous outlook, referencing for the first time unquantified 'opportunistic' earnings in FY22 which may not repeat in FY23 and anticipating that 'earnings growth will flatten' this year, phrasing that is open to a wide range of interpretations given EBITDA grew at 133 per cent yoy," Canaccord Genuity analyst Conor O'Prey says.
"We have taken the statement to mean that an approximately flat yoy outturn in EBITDA, before the contributions of acquisitions announced so far in FY23, would be a credible outcome."
Canaccord Genuity has lowered its price target for DGL from $4.20 to $3.05, which Mr O'Prey says reflects a lower earnings multiple in valuation and, together with lower earnings estimates
