NML & NCL_2QFY18 Result Previews
Previewing 2QFY18E result for NML, we expect the company to post unconsolidated profit of PkR2,154mn (EPS: PkR6.13) vs. Pk1,909mn (EPS: PKR5.43) in 1QFY17, registering growth of 13%YoY. The growth in earnings is expected to arise from: 1) 9%YoY uptick in topline driven by weaving & garment segments (+16%YoY/+14%YoY growth expected in respective revenues) and 2) GM accretion (+235bpsYoY) due to recovery in low value added product prices. Sequentially, 2QFY18 earnings are likely to see 3x jump primarily on account of higher other income (+3.2xYoY), with dividend income falling in the second quarter. On a cumulative basis, 1HFY18 earnings are anticipated to rest at PkR2,861mn (EPS: PkR8.14), up 12%YoY on back of higher payout from cement subsidiary and improvement in core earnings (core EPS: PkR0.94 in 1HFY18 vs. PkR0.61 in 1HFY17). Correcting 5.6%FYTD, NML now trades at FY19F PE of 9.3x where our Jun'18 TP of PkR169.5/sh offers an upside of 6.2% from current price level. Accumulate!
NCL is scheduled to announce its 2QFY18 results on Tuesday (Feb 27'18), where we expect the company to post earnings of PkR260.1mn (EPS: PkR1.08) vs. PkR560.18mn in 2QFY17 (EPS: PkR2.33), down 54%YoY. The expected decline in total earnings is attributable to lower dividend income (likely to go down by 69%YoY) from subsidiary company that made up ~60% of earnings in FY17. This is despite expected recovery in core operations (expected core EPS: PkR0.30 in 2QFY18 vs. LPS: PkR0.15 in 2QFY17) primarily attributable to: 1) robust topline growth (+14%YoY due to expanding retail footprint) and 2) GM margin recovery (+80bps on the back of increase in yarn prices). On a cumulative basis, 1HFY18 earnings are expected to clock in at PkR165mn vs. PkR1,125mn in 1HFY17, down 85%YoY. Losing 17% since announcement of export package in Oct'17, we feel that NCL has largely priced in fundamental deterioration. At current price levels, the stock is now trading at an attractive FY19F P/E(x) of 5.04 (vs. historic 3 yr. P/E(x) 10.48), where our SOTP based TP of PkR69.92/sh offers 38% upside. Buy!
Nishat (Chunian) Limited. Nishat (Chunian) Limited is a Pakistan-based textile company. The Company is principally engaged in the business of spinning, weaving, dyeing, printing, stitching, processing, doubling, sizing, buying, selling and otherwise dealing in yarn, fabrics and made-ups made from raw cotton, synthetic fiber and cloth and to generate, accumulate, distribute, supply and sell electricity. The Company operates in four business segments, which include Spinning, which produces a range of yarn using natural and artificial fibers; Weaving, which produces a range of greige fabric using yarn; Processing and Home Textile, which is engaged in processing greige fabric for production of printed and dyed fabric and manufacturing of home textile articles, and Power Generation, which is engaged in generating and distributing power. The Company has a spinning production of approximately 75,000 tons of yarn, three million meters of greige fabric in weaving and four million meters of finished fabric per annum.
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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