• ASPI target upgraded to 17,000 with potential for further upside
• Cautions investors to consider profit-taking at higher levels

First Capital expects publicly listed company (PLC) earnings to increase by 22% in 2025 with the main index expected to reach 17,000 by year end.

Accordingly, First Capital said that its fair value target for the All Share Price Index (ASPI) has been upgraded to 17,000 with a stronger earnings outlook of 22% for 2025.

It said that Sri Lanka’s resurgence from the crisis continues to remain strong while potentially healthy growth in disposable income improves purchasing power.

“We expect Sri Lanka’s consumer demand to further strengthen, supporting a stronger growth in market earnings,” it added.

However, First Capital said that it is likely to see a possible slowdown in earnings in the upcoming quarters on a year-on-year basis, given the higher base effect while quarter-on-quarter growth may be impacted due to the one-off gains reflected in the results of LOLC, Browns Investment and Brown and Company in the second quarter in the financial year 2025.

Moreover, it said capital gains continue to remain tax-free while withholding tax continues to remain at 15%, while there could be a potential tax on capital gains as the new government attempts to expand tax revenue.

Further, First Capital said that the market fair value target for 2025 is 17,000 as the bull run may take the market beyond this point.

“If ASPI reaches 18,000 with the PER likely to be closer to 12.0x, we believe investors should consider to book profits and increase cash allocation or gradually shift to alternative asset classes,” it added.

First Capital said that ASPI reaches beyond our upper limit of 17,500 and moves towards 18,000 and beyond investors should consider taking profit and reducing exposure towards equity and move to alternative asset classes.