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NML_2QFY20 Result Review, (AKD, Off the Analyst's Desk, Feb 14, 2020)

NML: 2QFY20 Result Review


In its 2QFY20 result, NML reported net profit of PkR968mn (EPS: PKR2.75) vs. PKR2,100mn (EPS: PKR5.97) in 2QFY19, down 54%YoY. The earnings came in 16% lower than our expectations. The deviation was mainly on two counts: i) lower than expected revenue (~8% below our expectations) and ii) weaker than expected margin at gross level (actual 11.07% vs. expected 12.46%), signifying low materialization of translation gains in PKR terms.


Key highlights:

·   Topline grew by a nominal 6%YoY, signifying weak translation of currency gains in final product prices.

·   Margin at gross level contracted 72bpsYoY, suggesting elevated cost pressures

·   Finance cost declined 27%YoY on account of lower borrowing and higher subsidized financing mix.

·   S&A costs grew 6%YoY - in line with revenue growth.

·   Other income declined 66%YoY on lower payouts from portfolio companies and one-off exchange gain recorded in SPLY which created a high base. However, the same was 13% ahead of our expectation possibly due to higher income on loan to subsidiary.


Sequentially, earnings increased by a meager 5%QoQ on seasonally higher other income (up 37%YoY), while core textile earnings declined 34%YoY due to margin attrition (247bpsQoQ) at gross level.   

Nishat Mills Ltd.

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 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.

Umer Farooq

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