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ILP - FY23 Analyst Brifing Takeaway, (AKD Off the Analyst's Desk Oct 27, 2023)

AKD, Off the Analyst's Desk ILP - FY23 Analyst Brifing Takeaway Kot Addu Power Company Limited (KAPCO) conXXInterloop Ltd (ILP) held its analyst briefing yesterday to inform the investors about their key performance indicators, results for FY23 and their outlook. Company posted a PAT of Rs20.17bn (EPS: PkR14.39) in FY23 in contrast to a PAT of Rs12.3bn (EPS: PkR8.82) in SPLY. The major upturn in the company’s topline was primarily due to the exceptional growth of export sales volumes alongside rapidly depreciating domestic currency. • Despite global inflation and falling apparel industry demand, the company managed to increase its topline owing to its diverse client portfolio that is not bound or concentrated in a specific geographical region. • The company is targeting a topline of US$550mn in FY24. Furthermore, the management is expecting to hit the mark of US$700mn by FY26 by transforming into a full family clothing business. • The company’s annual cotton requirement stands at 150k bales, and currently has a stock coverage until Jan'24. They source cotton and rayon for hosiery and denim from domestic and international markets in a cost-effective ratio. During FY23, the raw material mix stood at 60%/40% for local/imported, respectively. Overall, company expects the local mix to increase amidst expectations of a bumper crop this year. • The company’s new expansion towards their under-performing apparel division (25mn garments capacity plant in South Punjab) is set to begin operations in the ongoing quarter. This project also includes the addition of 10MW of renewable energy through biomass boilers, increasing renewables share in the energy mix from 4% to 6% in FY24. • In addition to the apparel plant that is nearing completion, management is considering addition of another plant to its hosiery collection. The said proposal is currently under review, and a final decision is expected by end CY23. • The company's annual energy requirement stands at 28MW, while mix has primarily been reliant on Gas/RLNG, captive and WAPDA. However, they have recently become more reliant on WAPDA's grid due to higher cost of RLNG (removal of RCET) and attractive incentives offered in the form of rebates on incremental load. • The company is expected to exceed the efficiency and price improvement target of 2025-26, as the company offered hosiery and denim at US$6.3/dozen and US$10.25/unit, respectively in FY23. • Company’s weighted average interest rate on long-term borrowings is >12%, and for short-term is around 12%. Furthermore the management highlighted that they hedge their finance cost through EFS. AKD Research