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KTML_Analyst Briefing Takeaways, (AKD Off the Analyst's Desk Nov 23, 2022)

KTML: Analyst Briefing Takeaways

Kohinoor Textile Mills Limited (KTML) held its analyst briefing earlier today, wherein the company management apprised of the following:

• To note, the company posted NPAT of PkR4.7bn in FY22, higher by 72%YoY, on the back of higher revenues during the period. KTML’s revenues in FY22 stood at PkR39.6bn, compared to PkR30bn in the previous year.
• The healthy growth in the topline (up 32%YoY) was attributed to the Spinning unit, which made up ~43% of total revenues during the period, with the segment posting 48%YoY increase in its revenues.
• Gross Margins for FY22 stood at 27.4%, compared to 23.6% in the prior year—attributed to better inventory procurement during the start of the year. Subsequently, the margins have dropped to 24.2% in 1QFY23 due to the high cotton prices prevalent in the market.
• Management apprised that Home Textile volumes were muted during the year, driven by lower demand from export destinations in the face of high inflation and the consequent depletion of disposable income. However, KTML is of the view that orders should start picking up once the stocks held by major retailers in the west deplete during the Holiday season.
• Management has guided towards a slight dip in its sales during FY23, driven by the lackluster order generation in 1HFY23. However, the dip in sales volumes is expected to be somewhat mitigated by a weaker PkR.
• Power mix during the period was skewed in favor of the grid (51% of power mix in FY22) and Natural Gas (26% of power mix). Average power cost during the period stood at PkR15.16/unit, which has since increased to PkR20.92/unit currently. The increase is attributable to the higher gas prices. Furthermore, the company is looking to increase its grid capacity from 5MW currently to 20MW.
• The company’s cotton inventory currently stands at 8,000 bales of local cotton (cover till Dec’22), 7,500 bales of imported cotton (cover till Feb’22) and 2,300 bales of tensile (cover till Mar’23).
• KTML has been relatively better off compared to other players in the industry due to its specialization in the finer count of yarn, which had better demand dynamics as compared to the more-prevalent coarse count. Due to the same reason, the company has not faced the need to layoff its workers, unlike others in the industry.