By: Pearl Securities Limited
In this report we would like to highlight Ghani Glass Limited (GHGL) for improving fundamentals and a strong growth outlook. Growing demand of glass products, resilient cost control measures and recent capacity expansion justify a closer look at GHGL. The firm has had an exceptional start to FY15 where all round operational improvement lifted final earnings by 76% YoY in 1Q FY15. Performance is expected to be maintained in 2Q and derive strong half year results.
To benefit from increasing demand in the Pharmaceutical industry, GHGL has installed a new production line at the Karachi facility which has production capacity of 130 tons of glass per day or 500 bottles per year. We believe this is one of the main reasons for strong Top-Line appreciation in 1Q FY15. New production capability will continue to compliment sales in coming terms.
Strong sales growth in 1Q FY15 shows growing demand of glass products, largely in the construction and pharmaceutical sectors. Sales are expected to stay strong in coming terms. Additionally, notable reduction OPEX and growing profit from associates will continue to compliment operations. Increase in local sales would be of greater benefit in terms of profit retention which can be expected in 2H FY15 and so on. Currently the scrip is trading at discount at 25% as against our Target Value of PKR 92.