NCL 3QFY14 EPS is expected at PKR1.36 – Elixir Research
By: Ujala Adnan,
(+92-21) 3569 4622
Elixir Securities Pakistan (Pvt.) Ltd.
Nishat Chunian (NCL) is expected to announce its 9MFY14 earnings on Monday April 28th, 2014. We expect NCL to post PAT of PKR1.5bn (EPS: PKR7.73) for 9MFY14, down 18% YoY. 3QFY14 EPS is expected to clock in at PKR1.36, down 63% YoY.
Troubled spinning operations to drag core earnings
NCL has a very high reliance on its spinning segment which is facing troubles lately. This is expected to result in slower off-takes and consequently decrease top-line. Margins are expected to remain tight as NCL procured cotton at high rates (during procurement season) while yarn prices fell by 3% QoQ during the 3QFY14 period. Yarn primary margins on the other hand are estimated to have fallen by 4% QoQ during 3QFY14. We have assumed a 45% primary margin during 3Q for NCL.
Lower other income to further dent bottom-line
NCL’s 3QFY14 other income is expected to remain weak despite having realized PKR1.5/sh dividend on its holding in NCPL. This is primarily due to PKR appreciation which is expected to result in exchange losses during the quarter.
Estimates tweaked; maintain HOLD
We have tweaked down our primary margin assumptions for FY15-18 by 1pp to 43% and accordingly revised down our Dec-14 PT by 18% to PKR45/sh. NCL currently trades close to our PT and offers a meager dividend yield of 4%. HOLD!