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NCL_Analyst briefing takeaways, (AKD Daily, Nov 25,2021)

AKD Daily

NCL: Analyst briefing takeaways

NCL held its analyst briefing today to discuss FY21 results and future outlook of the company. To highlight, the company reported unconsolidated NPAT of PkR2.2bn (EPS: PkR9.23) in 1QFY22 vs. NPAT of PkR0.5bn (EPS: PkR2.0) in the same period last year. In FY21, earnings stood at PkR5.6bn (EPS: PkR23.3) vs NPAT of PkR0.3bn (EPS: PkR1.11). The company reported consolidated NPAT of PkR2.5bn (EPS: PkR10.5) in 1QFY22 vs. NPAT of PkR0.97bn (EPS: PkR4.04) in the same period last year. In FY21, earnings stood at PkR6.9bn (EPS: PkR28.56) vs NPAT of PkR1.9bn (EPS: PkR7.75).

Key highlights of the briefing were:

  • Total unconsolidated revenue increased by 38.2%YoY to PkR49.3bn in FY21. Export sales clocked in at PkR26.3bn (+39.8%YoY) and local sales clocked in at PkR22.3bn (+37.4%YoY).  Segment wise sales of Spinning/Weaving/Home Textile were PkR27.6/4.5/16.9bn with an increase of 32/6.3/62.5%YoY in FY21.
  • Spinning remains the largest contributor of revenue with 56%, followed by Home Textile 34% and Weaving 9%.  
  • Spinning revenue largely came from domestic/export markets (61/39% in FY21) where major exporting regions were Asia & Africa with 38% while Home Textile revenue largely came from export market (Europe/USA & Canada with contribution of 39/33% in FY21).   
  • Gross margins improved significantly to 22.4/18.2% in 1QFY22/FY21 vs 10.7/11.8% in 1QFY21/FY20, mainly attributable to huge inventory gains in spinning segment (Spinning GMs: 31.3/19.3% in 1QFY22/FY21 vs 6.1/10.8 in 1QFY21/FY20).
  • Finance cost reduced by 34%YoY in FY21 as a result of the company paying off its short term loans while other income saw a huge jump (+90%YoY in FY21) amid PkR depreciation which helped in boosting the bottom line.
  • Moving forward, the company is in process of increasing operational efficiencies of Spinning segment with associated capex of PkR5bn and a major revamping of ring frames and auto cone machines. Moreover, in Weaving segment, new Jacquard Looms have been installed and started working efficiently. In Dyeing and Stitching segments, installation of new stitching production line is in process along with new stitching unit. 
  • Furthermore, management is focused on increasing its online presence and market share of retail business where company is already selling on Amazon US and looking to enter UK, EU and UAE online markets. The company is also planning to increase its retail business overseas with a flagship store in Dubai is expected to be open soon.
  • The management expects spinning revenues to remain strong in 2HCY21 amid the current crop shortage, resulting in higher local yarn margins.
  • The company has its own coal-based power plant of 46MW, whereas, current power needs of the company stands at 33-35MW. Management also mentioned that it has 3-4 month coal inventory (procure at lower rate) for its power generation while it also has alternative sources (gas power engine or government provided subsidized electricity from LESCO) if required.

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Underlying
Nishat Chunian

Nishat (Chunian) Limited. Nishat (Chunian) Limited is a Pakistan-based textile company. The Company is principally engaged in the business of spinning, weaving, dyeing, printing, stitching, processing, doubling, sizing, buying, selling and otherwise dealing in yarn, fabrics and made-ups made from raw cotton, synthetic fiber and cloth and to generate, accumulate, distribute, supply and sell electricity. The Company operates in four business segments, which include Spinning, which produces a range of yarn using natural and artificial fibers; Weaving, which produces a range of greige fabric using yarn; Processing and Home Textile, which is engaged in processing greige fabric for production of printed and dyed fabric and manufacturing of home textile articles, and Power Generation, which is engaged in generating and distributing power. The Company has a spinning production of approximately 75,000 tons of yarn, three million meters of greige fabric in weaving and four million meters of finished fabric per annum.

Provider
AKD Securities Limited
AKD Securities Limited

AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.

AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.

Analysts
Team AKD Research

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