Intermarket Pulse: NML: Higher fuel prices to offset currency-led margin accretion
- We maintain our Neutral stance on NML with a rolled over Jun’19 TP of PRs181/sh. Our new EPS estimates for FY18/19/20F are PRs16.2/14.6/13.7 (down 10% on average from our previous estimates) upon incorporating higher fuel cost.
- We expect core earnings to grow strong hereon (5yr CAGR: 12%), led by utilization of excess capacity of the Garments facility and product prices down the value chain to follow uptrend in international cotton prices. Note that 50% of NML’s revenues are accounted for by Home Textiles and Garments (value added segments).
- Going forward, core earnings are expected to account for approximately 50% of PBT over our investment horizon vs. 30% in last 3yrs. Meanwhile, we await further clarity on NML’s venture with Hyundai Motors to incorporate the same in our estimates. That and extension of GoP’s Exports Package could be major upside triggers.
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.
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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