Pakistan Textiles: The Board of Directors of Nishat Chunian Limited (NCL) is scheduled to meet on 25th Feb’16 to declare the financial results for 1HFY16. We expect the company to post NPAT of PKR576mn (EPS: PKR2.40) in 1HFY16 compared to PKR325mn (EPS: PKR1.35) in the corresponding period last year. The expected increase in earnings in 1HFY16 is attributable to i) a slight uptick in sales on account of volumetric growth in the grey cloth category, ii) improvement in gross margins on the back of easing fuel cost pressure (average FO prices declined by 47% in 1HFY16), iii) higher other income realized from subsidiary and iv) decline in finance cost by 27%YoY on account of lower DR. For 2QFY16 alone, the earnings are expected to clock in at PKR684mn (EPS: PKR2.85), up by 21%YoY. In 2QFY16 however, the topline is expected to witness a decline of 4%YoY on account of tapering demand from China. Near term price performance of the textile sector, including NCL, will likely continue to remain under pressure given sectoral headwinds where accounting for changing textile dynamics, we shall update our investment case for NCL and get back to investors post 1HFY16 result.
GATM: 1HFY16 EPS estimated at PKR0.56 The Board of Directors of Gul Ahmed Textile Mills Limited (GATM) is scheduled to meet today to declare the financial results for 1HFY16. As per our expectations, the company will post NPAT of PKR128mn (EPS: PKR0.56) in 1HFY16 compared to PKR252mn (EPS: PKR1.10) in the SPLY, declining by 49%YoY. The downside in earnings is mainly attributable to i) a decline of 10%YoY in the topline owing to the economic slowdown in EU (34% of GATM’s total exports sales) and ii) 27% higher other expenses. On sequential basis however, the sales are expected to increase owing to the seasonal impact of Christmas. Going forward, depressed export volumes and unrecorded GIDC will likely pose threat to the company’s bottom‐line. At our TP of PKR25/sh, the scrip posts a downside of 38% on the last closing‐ ‘SELL’.
By: BMA Capital Management Limited