Report
EUR 4.36 For Business Accounts Only

Intermarket Pulse: NCL: Triggers have aligned; upgrade to Buy

  • We upgrade our stance on NCL to Buy with a Jun’19 TP of PRs63/sh. Our new EPS estimates for FY18/19/20F are PRs8.70/7.55/7.46 (up 9% on average from our previous estimates). We foresee firm international cotton prices coupled with 9%+ PKR depreciation since Dec’17 to boost earnings going forward.
  • The recently released USDA report suggests a decline in global cotton stocks to 82.7mn bales by the end of MY19, lowest since MY12. This has led to international cotton and yarn prices to rally 10%YoY and 15%YoY in 3QFY18 respectively. Hence, this is earnings positive for NCL, which derives 55% of its revenues from Spinning.
  • Meanwhile, lower dividends from NCPL may result in core earnings to form 70% of bottom line on average over FY18-22F (vs. 40% in FY17). The PKR depreciation has led the scrip to rally by 17.7% since Dec’17; our TP offers 21% upside on last close indicating the rally could still continue.       
Underlying
Nishat Chunian

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.

Provider
Intermarket Securities Limited
Intermarket Securities Limited

​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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