Ayala: revenue up 9.6% but profit down 36.4% – margin normalised after a strong year-ago base

On 30 September Ayala Corporation released results for the third quarter of 2026. Revenue came in at PHP 85,865.6 mn, up 9.6% year on year, operating profit at PHP 12,345.5 mn and net profit at PHP 17,854.1 mn. Net profit nevertheless fell 36.4% year on year and the net margin dropped from 35.9% to 20.8%, because the year-ago quarter was unusually strong. Our conclusion: the share is fairly valued – the portal model puts upside to fair value at -7%. Our view: the share is fairly valued; upside on the portal model -7%.

Our view: is there upside

Our view in numbers

Key takeaways

— Revenue grew 9.6% year on year, but growth slowed from 10.4% a quarter earlier

— Net profit fell 36.4% on a high year-ago base, not because the business deteriorated

— The 20.8% net margin is a return to normal from 35.9% a year earlier

— Leverage of 34.26x net debt to trailing EBITDA keeps the valuation in a narrow range

— A trailing dividend yield of 1.73% is modest and offers no cushion

— On the portal model the share trades 7% above fair value

Key figures, PHP bn

Revenue grew 9.6% year on year, but growth slowed from 10.4% a quarter earlier

In the third quarter of 2026 revenue reached PHP 85,865.6 mn, up 9.6% year on year. This is the second consecutive quarter of double-digit or near-double-digit growth: in the second quarter revenue rose 10.4%.

The slowdown from 10.4% to 9.6% is modest, but it interrupts the acceleration seen from 0.9% in the first quarter of 2026 to 10.4% in the second. For a company of this size a one-percentage-point difference does not change the picture, but it shows that the second quarter's momentum was neither a one-off spike nor sustained at full strength.

Operating profit for the quarter was PHP 12,345.5 mn. It came in below the second quarter's 12,551.3 mn even though revenue was almost flat, which means costs grew slightly faster than revenue and operating leverage did not work in this quarter.

Net profit fell 36.4% on a high year-ago base, not because the business deteriorated

Net profit for the third quarter of 2026 was PHP 17,854.1 mn against 28,084.9 mn a year earlier – a fall of 36.4%. Revenue over the same period grew 9.6%, so the profit decline is not driven by a shrinking business.

The reason lies in the comparison base. In the third quarter of 2025 net profit was unusually high: 28,084.9 mn on revenue of 78,316.4 mn, a margin of 35.9%. In the preceding and following quarters profit was noticeably lower – 15,241.4 mn in the second quarter of 2025 and 25,769.0 mn in the fourth. The third quarter of 2025 stands out from that series.

The current 17,854.1 mn is comparable to the first quarter of 2026 (17,030.8 mn) and the first quarter of 2025 (17,773.7 mn). In other words, profit has returned to the company's normal level rather than fallen below it.

The 20.8% net margin is a return to normal from 35.9% a year earlier

The net margin in the third quarter of 2026 was 20.8% against 35.9% a year earlier. A fall of 15 percentage points looks sharp, but it reflects a high base rather than deteriorating operating efficiency.

Operating profit for the quarter was 12,345.5 mn on revenue of 85,865.6 mn, an operating margin of about 14.4%. The gap between operating and net profit of 5,508.7 mn comes from financial and other items that the company does not disclose in the provided document.

For comparison, in the first quarter of 2026 net profit was 17,030.8 mn on revenue of 81,658.2 mn, a margin of about 20.9%. The current 20.8% almost exactly matches that figure, confirming that this quarter is normal rather than weak.

Leverage of 34.26x net debt to trailing EBITDA keeps the valuation in a narrow range

Net debt at the latest annual balance-sheet date was PHP 677,681.1 mn. The ratio of net debt to trailing twelve-month EBITDA is 34.26. That is a high level and limits the company's freedom in capital allocation.

Trailing twelve-month EBITDA was 19,781.2 mn on revenue of 271,800.0 mn. With such a base even a small change in operating profit moves the ratio significantly. In the fourth quarter of 2025 EBITDA was negative (-9,755.7 mn), which distorts the annual figure.

The trailing EV/EBITDA multiple is 51.82, reflecting both high debt and a low EBITDA base. The trailing P/E is 5.82, which looks low but is explained by one-off items in profit that the company does not disclose.

A trailing dividend yield of 1.73% is modest and offers no cushion

The trailing twelve-month dividend yield is 1.73%. With a market capitalisation of 347,433.8 mn, that corresponds to payouts of about 6,010 mn at the current price.

For a company with this debt load and a capital-intensive business, the dividend is not the main argument for the share. A yield of 1.73% is below what risk-free instruments offer and does not compensate for the risk associated with the debt.

The company does not disclose its dividend policy or plans for the current year in the provided document. Based on actual payments, the yield remains below 2%, which does not provide meaningful support for the share price.

On the portal model the share trades 7% above fair value

On the portal model, which compares EBITDA growth with a target multiple and market capitalisation, the share's upside to fair value is -7%. That means the current price is slightly above what fundamental dynamics justify.

The trailing P/E is 5.82, below many emerging-market companies, but this is explained by one-off items in profit. EV/EBITDA is 51.82, which looks high because of the low EBITDA base and large debt.

Return on equity (ROE) is 8.49%, which is low for a company trading with this debt load. The combination of low ROE and high EV/EBITDA limits the share's upside.

Valuation on the latest reported figures

Bottom line

The strong side of the report is revenue growth of 9.6% and net profit returning to a normal level of about 17.9 bn. The weak side is the 36.4% profit decline on a high year-ago base and high debt with a net debt to EBITDA ratio of 34.26. The key question for a holder is whether the company can sustain revenue growth and reduce leverage. Our conclusion: the share is fairly valued – the portal model puts upside to fair value at -7%. Our view: the share is fairly valued; upside on the portal model -7%.