DIST delivered a resilient 2Q FY26 performance, with EPS rising to LKR 0.93 from LKR 0.81 in 2Q FY25, supported by a 4% YoY increase in net revenue. Growth was driven by prior price adjustments following excise duty hikes and a gradual recovery in volumes. Gross revenue increased 11% YoY, partly offset by a 15% increase in direct tax expenses reflecting the expanded revenue base. Margins improved on the back of cost efficiencies, with cost of sales down 16% YoY and administrative expenses 9% (YoY) lower, offsetting higher distribution costs. Gross margin rose to 60% (2Q FY25: 57%), and EBIT margin expanded to 56% from 47%. We expect a continued recovery in spirits volumes, supported by strong brand equity, pricing power, and improving macro tailwinds, including tourism recovery and rising disposable incomes. We have arrived at a target price of LKR 67.00, reflecting improved earnings visibility, and continue to maintain BUY recommendation.