GSP plus bringing value added textiles in the limelight – FS Research
By: Fahad Irfan,
92 21 5612290 Ext 339
Foundation Securities (Pvt) Limited
In a major positive development for Pakistan’s economy and textile industry, the European parliament approved Pakistan’s request on 5th Nov for more favorable trade regime under Eurozone’s GSP plus system. New regime would be applicable from 1st Jan 2014 and will largely benefit Pakistan’s value added exports to EU as it will effectively remove 11% tariff. According to industry reports, ~USD550-700mn incremental exports to Eurozone would be made in FY14 (4.8% of Pakistan total textile exports or 0.29% of GDP).
We estimate that the immediate benefit to the textile sector would be largely in the form of improved margins, whereas volume growth would be seen after the end of FY14.
We maintain our liking for the textile companies especially Nishat Mills Limited whose focus is on value added segment. Other beneficiaries include Gul Ahmed textile Limited (GATM) and Amtex Limited (AMTEX). NCL would not have substantial benefit from the GSP plus status as 69% of its revenue is coming from basic textiles.