Pakistan textile sector enjoys healthy volumes – FS Research
By: Fahad Irfan,
92 21 5612290-94 Ext 339
Foundation Securities (Pvt) Limited
The strong momentum in Pakistan textile sector exports witnessed in 4QFY13 continued in FY14 as Jul’13 exports broke the US$1.2bn level, highest since Jul’11, depicting 10.81% YoY growth in value terms. A significant shift in orders was seen from Bangladesh where workers’ strikes and rampages have resulted in month long strikes and closures.
We believe that strong volumes and weak rupee would reflect in the top line of textile companies during FY14, especially Nishat Mills. Strong top line growth; however, would not be carried down as significant increase in fuel and power expense may trim down the bottom line. We flag NML as our preferred pick.
Strong volumes experienced by basic textiles: Leading the growth in Pakistan textile sector exports was the cotton yarn segment which experienced a YoY increase of 17% in value terms and 15% in volumetric terms. China’s policy to set a floor price for local purchases of cotton (see our report dated 21st August 2013 for further details) continued to benefit the Pakistani spinners. Cotton cloth exports saw a YoY 15% increase in value terms and 10% increase in volumetric terms.