CRESCENT TEXTILE MILLS LIMITED ‘A capital gain story’ – Pearl Research
By: Pearl Securities Limited
+9221-32466210 Ext: 116
We have been brining to your attention certain textile mills that have significant prospects to increase profitability under the recent endorsement of Pakistan for GSP plus status of trade with European nations. In this report we would like to feature Crescent Textile Mills Limited (CRTM), engaged in a variety of textile manufacturing operations including spinning, weaving and stitching. CRTM has an encouraging sales mix, with exports constituting 63% of total company sales while holding 0.64% of total industry export market share.
Dividend income from group companies to provide assistance:
As a significant portion of the group has focus in the textile industry we can expect any dividend payments to help in elevating overall bottom-line. In FY13, group companies such as Crescent Bahuman, Shams Textile and Crescent Cotton presented significant support to CRTM’s final earnings, providing total dividend income of PKR 120mn, up by 8% YoY. As the textile sector benefits we expect overall better dividend to be enhanced. Overall other income in FY13 grew by 6% YoY, on account of better dividends and greater mark-up on loans.
As the company’s sales mix is largely favorable to exports, along with significant improvement in core operations witnessed in 1QFY14, CRTM appears to be in a good position to benefit under the GSP plus regime. Profitability is expected to remain stressed in 1HFY14 due to lower exports, however consistent gas supply to textile units in the winter season will enable the company to step-up production activities for starting 2H of FY14. CRTM offers 47% upside potential to chase its Target Value of PKR30. Buy