Pakistan Textile: Soft Commodity prices keep a lid on exports
Latest PBS data shows that the country’s total exports declined 6.3%YoY/3.2%MoM to US$1,842mn in Nov’18. Amongst major groups, both textile and food exports witnessed declines, with respective segment exports falling 1.8%/19.8%YoY to US$1,100mn and US$341mn.
In the textile group, low value added exports recorded broad-based declines, with segment export falling 15%MoM/7.5%MoM to US$250mn, while value added exports registered marginal growth of 2.8%YoY, with segment exports clocking in at US$850mn.
Looking ahead, we expect single-digit growth in textile exports over the medium term, as the sector continues to face elevated pricing pressures emanating from global demand slowdown.
That said, continued GoP’s support in the form export subsidy (i.e. utility tariffs and duty drawbacks) coupled with rupee depreciation (25%CYTD) should ease competitive pressures going forward. We recommend exposure to players (i.e. NML) with diversified earnings mix and focus on value addition.
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