Pakistan Textiles_Strong cotton output to augment sector's profitability, (AKD Daily, Oct 04, 2021)
AKD Daily
Pakistan Textiles: Strong cotton output to augment sector’s profitability,
- International cotton prices remained strong throughout 1QFY22, hovering around USc112/Ib with an increase of 10%QoQ in 1QFY22 taking cumulative CYTD increase of 32.6%. We expect international prices to ease in the coming months where potential higher production in key areas likely to offset increase in demand.
- Cotton prices have started receding, down 4%MoM to currently hover around PkR14,393/maund but still at historically highest levels. However, the recent arrival of 3.85mn cotton bales (+2.0xYoY) for the mill use casts positive overtures on cotton production outlook where the current production target is set at 8.5-9.0mn bales for FY22. The same should result in containing import bill where last year raw cotton imports stood at 4.9mn bales vs. avg. 3mn bales pa. historically — potentially translating in to savings of US$842mn.
- Local yarn margins currently stand at PkR247.2/kg or (+64%) vs PkR176.2/kg or (+60%) in FY21, due to robust demand outlook of textile products.
- Textile sector performance has remained sluggish (FYTD return: -ve 1.8%) despite significant positive developments supporting earnings outlook. Hence, we maintain our bullish stance on the sector where NML (TP: PkR132/sh – 48% upside) stands as our top pick with the current price offering core operations virtually free.
AKD Research
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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