NML & ASTL 4QFY17 Result Preview
​Previewing 4QFY17E result for NML, we expect the company to post unconsolidated NPAT of PkR1,537mn (EPS: PkR4.37) vs. PkR1,356mn (EPS: PkR3.86), registering an uptick of 10%YoY/1.78xQoQ. The earnings improvement is expected from both core operations (gross margin expected to widen by 116bpsYoY) and sequentially higher payout from business portfolio companies (+10%YoY growth). With anticipated topline growth (+10%YoY), NML core business profitability is likely to see some recovery (expected +0.5x YoY) primarily due to improving gross margin (+116bpsYoY) emanating from better capacity utilization in garment segment. On a cumulative basis, FY17E unconsolidated earning is expected to stand 6%YoY lower at PkR4,626mn (EPS: PkR13.16) vs. PkR4,923mn (EPS: PkR14.0) in FY16. Factors driving FY17E earnings lower include: 1) 147bpsYoY reduction in gross margin emerging from weak textile fundamentals and 2) lower than expected payout mainly due to power subsidiaries liquidity issues. Accompanying results, we also expect NML to pay full year dividend of PkR5.5/share. NML has returned 9.6%MTD on news regarding payment of pending incentive claims. Our SOTP based TP of PkR185.3/share offers 10% upside. Accumulate!
We expect ASTL to post NPAT of PkR296mn (EPS: PkR1.0) in 4QFY17E vs. NPAT of PkR357mn (EPS: PkR1.20) in 4QFY16, down 17%YoY/12%QoQ. The decline in earnings is likely on account of gross margin contraction by 3.67pts, resulting from rebound in scrap steel prices (+3%YoY) and soft re-bar prices amid increasing competition. On a cumulative basis, FY17 EPS is expected to stand at PkR3.76 vs. FY16EPS of PkR4.31, a decrease of 13%YoY. Despite volume led uptick in revenue (+11%YoY), factors like higher scrap steel prices (+15%YoY) and depressed re-bar prices (-4%YoY) are expected to push earnings lower. However, reduction in finance cost (-24%YoY) and lower effective tax rate (19%YoY in FY17 vs. 27%YoY in FY16) are likely to render some support to earnings. Along with the result announcement, we also expect full year dividend of PKR1.5/sh. Gaining 70%CYTD, ASTL's price performance has been a function of announced expansions. At our TP of PkR106/sh, we currently have a Neutral stance on the scrip. That said, room for upside remains upon incorporation of the second expansion of 270k tons (awaiting project details).
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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