Feroze1888 Mills Limited (FML) announced earnings today for 1QFY22 at PKR 436mn (EPS: PKR 1.16), down by 73% YoY and 50% QoQ, compared to PKR 1,615mn (EPS: PKR 4.29) and PKR 875mn (EPS: PKR 2.32), respectively. This decline in earnings due to higher yarn prices compared to same period last year along with supply chain disruption and higher minimum wage.

Along with the result, company announced right issue of 6 shares for every 100 ordinary shares at a price of PKR 70 per share (PKR 60 per share premium and PKR 10 per share par value).

Result Highlights

· Net sales of the company increased by 13% YoY during 1Q to PKR 11,356mn due to higher export orders on the back of reopening of global economies activities after pandemic along with surge in final product prices.

· During 1QFY22, gross margins settled at 16.25%, up by 1,110bps compared to 27.4% in 1QFY21 on account of increase in local cotton prices along with rise in cost of imported raw material.

· In 1QFY21 other income arrived at PKR 131mn, down by 24% YoY compared to PKR 172mn in SPLY. The decline in other income is owed to company realized exchange gains of PKR 15mn compared to PKR 76mn in same period last year.

· Finance costs escalated by 37% YoY to PKR 147mn in the quarter under review given surge in borrowings to meet capital expenditure and working capital requirement.

Recommendation

· Currently, we have ‘BUY’ call on the stock with a target price of 144.9/share.

Courtesy – AHL Research