Nishat Mills Limited (NML) announced its financial result for 1QFY22 whereby the company declared a highest ever quarterly earnings of PKR 3,291mn (EPS: PKR 9.36) compared to profit of PKR 946mn (EPS: PKR 2.69) in 1QFY21 and profit of PKR 2,278mn (EPS: PKR 6.48) in 4QFY21, respectively. The jump in earnings is attributable to sales and gross margin growth.

Result Highlights

· Net sales for 1QFY22 settled at PKR 24,392mn, up by 53% YoY compared to PKR 15,979mn in SPLY attributable to i) better utilization of plant, ii) addition of new customers, iii) higher selling prices of products, iv) PKR depreciation, and v) rising contribution from value added segment which is a high margin segment of the company.

· Gross margins during 1QFY22 increased by 802bps YoY to 19.45% due to increase in local cotton and international cotton prices resulting in inventory gains. On the other hand, depreciation of PKR also improved gross margins of the company.

· Other income for 1QFY22 increased by 47% YoY to PKR 993mn, owing to dividend income from MCB and exchange gains.

· Finance costs of the company dropped by 3% YoY to PKR 289mn in 1QFY22 attributable to reduction in interest rate.

Recommendation:

· Currently, we have a ‘BUY’ call on the stock with a target price of PKR 162.3/share.

Courtesy – AHL Research