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NML_FY19 Result Review, (AKD, Off the Analyst's Desk, Sep 19, 2019)

NML in its FY19 results reported NPAT of PkR5,859mn (EPS: PkR16.66) vs. PkR4,097mn (EPS: PkR11.65) in FY18, up 43%YoY. The earnings growth was driven by both i) other income (+26%YoY) beefed up by one-off exchange gains and ii) core earnings (+2.4xYoY) though it remained below our expectations. 

Key highlights of FY19 result:

·         Topline grew by solid 18%YoY driven by both higher realized prices in PkR terms and higher volumes

·         Margin at gross level jumped 173bpsYoY, benefiting from the up cycle tailwinds.

·         Below the line expenses remained well under control (S&A as % of sales: 6.1% in FY19 vs. 6.5% in FY18).

·         Other income soared 26%YoY primarily on account of one-off exchange gains, though payouts from portfolio companies were 10%YoY lower.

·         Finance cost jumped 68%YoY driven both by interest rate hikes and higher working capital needs.

In 4QFY19, NML posted NPAT of PkR1,722mn (EPS: 4.90) vs. PkR1,332mn (EPS: PkR3.79) in 4QFY18, up 29%YoY. The earnings jump was primarily on account of higher other income, up 90%YoY, which was driven by higher materialization of dividend income and one-off exchange gains. Core textile earnings were poor during the quarter, with the company posting net loss of PkR0.5/sh vs. net profit of PkR0.95/sh at core level.

Key highlights of 4QFY19 result:

·         Topline registered a growth of 8%YoY on account of higher realized prices in PkR terms

·         Margin at gross level declined 178bpsYoY – likely hit by margin contraction in lower value added segments

·         Finance cost jumped 90%YoY driven both by interest rate hikes and higher working capital needs.

Accompanying results, the company announced a final cash dividend of PkR4/sh, which was below our expectation of PkR5.5/sh. This is likely due to higher financing needs (both CAPEX and WC), as evident from today’s announcement of PkR4.09bn.

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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