NML & NCL_1HFY20 Result Previews, (AKD Daily, Feb 13, 2020)
NML: 1HFY20 Result Preview
NML – low payouts from portfolio companies drag earnings lower: NML is scheduled to announce its 2QFY20 results tomorrow (Feb 14’20), where we expect it to report NPAT of PKR1,154mn (EPS: PKR3.28) vs. PKR2,100mn (EPS: PKR5.97) in 2QFY19, down 45%YoY. The expected decline in bottom-line is due to lower other income (down 66%YoY) – weak payouts from portfolio companies and high base effect as a result of one-off exchange gain in SPLY. Core textile earnings, however, are likely to jump 85%YoY on account of i) topline growth of 15%YoY which is largely driven by higher realized final product prices in PKR terms (i.e. currency translation gains) and ii) slight margin accretion at gross level (67bpsYoY). Sequentially, earnings are likely to increase 25%QoQ, where seasonality gains drive both core (i.e. seasonally higher volumes in value-added segments) and non-core earnings (the reflection of year-end payouts from portfolio companies) higher. Overall in 1HFY20, NML’s headline earnings are estimated to stand 34%YoY lower, reflecting both lower payouts compared to SPLY and high base effect due to large one-off exchange gains in SPLY.
NCL: 1HFY20 Result Preview
NCL – earnings to normalize as one-offs disappear: Previewing 2QFY20F results for NCL, we expect the company to report NPAT of PkR600mn (EPS: PkR2.50) vs. PkR1,166mn (EPS: PkR4.86) in 2QFY19, down 48.6%YoY. The estimated earnings decline is primarily on account of lower other income (-66%YoY) – which was abnormally high in SPLY, courtesy one-off gain on sale of the entertainment business and exchange gain recorded in SPLY. Core textile earnings, however, are likely to increase 31%YoY, on the back of i) topline growth of 5%YoY and ii) YoY margin accretion at gross level (+170bpsYoY). Sequentially, earnings are likely to jump 3.46xQoQ, where seasonality gains drive both core (i.e. seasonal improvement in yarn business) and non-core earnings (reflection of year-end payout from power subsidiary) higher. Cumulatively, NCL’s headline earnings in 1HFY20 is expected to stand 62%YoY lower, reflecting both decline in core earnings (cycle reversal in the low value-added segment) and high base effect due to large one-offs (exchange gains and gain on sale of the subsidiary) in SPLY.
Nishat Mills is engaged in the business of textile manufacturing and of spinning, combing, weaving, bleaching, dyeing, printing, stitching, buying, selling and otherwise dealing in yarn, linen, cloth and other goods and fabrics made from raw cotton, synthetic fiber and cloth, and to generate, accumulated, distribute and supply electricity.
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.
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