By: Fortune Securities Limited
We believe Nishat Mills Limited (NML) should no longer be viewed, just as a textile company. With a market capitalization of a mere PKR 36bn, total assets of PKR 101.1bn and a total debt of PKR 18.8bn, NML is a conglomerate with investments in associated companies in the power, cement, banking, and textile industries. These investments have a current market value of PKR 60bn (PKR 10.2bn NPL, PKR 18.8bn DGKC, PKR 3.4bn LPL, PKR 3.0bn PKGP, PKR 19.2bn MCB, PKR 1.0bn NCL). The other half of Nishat Mills’ assets consist of 227,640 spindles, 789 looms, dying machines, processing plants, garment manufacturing machines and an 80MW capacity of electricity generation. The cost of setting up an equivalent factory alone is higher than the market capitalization of the whole company at PKR 36bn. With multiple manifolds of investments in other industries and a collection of state of the art textile manufacturing facilities, Nishat Mills Limited is more than just a textile company.
We are initiating coverage on Nishat Mills Limited (NML) with a June ‘16 target price of PKR 153/share implying an upside of 51% from current levels. The stock also offers a FY16 dividend yield of 4%, taking the total return to 55%.
We expect FY16 earnings to clock in at PKR 4.7bn (EPS: PKR 13.50/share), which is, although, 9% higher than PKR 3.91bn (EPS: PKR 11.13) in FY15, however, 14% lower than PKR 5.51bn (EPS: 15.68/share) in FY14 mainly due to subdued prices of cotton and its derivatives as a result of higher global cotton supplies.