Intermarket Intel - NCL 2QFY18 Result Review: Dividend income lead to sequential earnings growth
- Nishat Chunian Ltd (NCL) announced 2QFY18 NPAT of PRs587mn (EPS: PRs2.44) as opposed to a loss of PRs95mn (LPS: 0.40). This takes the 1HFY18 earnings to PRs492mn (EPS: PRs2.05), down 56% YoY. The result was above expectation owing to better margins.
- On a sequential basis the increase in earnings is largely attributable to dividend income of PRs460mn (EPS impact: PRs1.91) booked in 2QFY18. This was the final cash dividend paid by the subsidiary, NCPL, in 4QFY17. Furthermore, the gross margins increased 3.75 ppt QoQ to 10.1%, owing to PKR depreciation, recovery in yarn price and rebates.
- On a YoY basis, 5% increase in earnings is attributable to (i) 12% YoY growth in topline and (ii) 2.1 ppts YoY higher gross margins. However, 31% YoY lower other income contained the improvement in core earnings.
- We maintain our Neutral stance on NCL at a TP of PRs56.3/sh, offering an upside of 14% on last close.
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.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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