We expect Nishat Mills Limited (NML) to post NPAT of PkR2.2bn (EPS: PkR6.13) in 3QFY22 vs PkR1.9bn (EPS: PkR5.32) in 3QFY21, up by 15.2%YoY. This will take 9MFY22 earnings to PkR7.8bn (EPS: PkR22.1) against PkR3.6bn (EPS: PkR10.37) in 9MFY21, an increase of 113%YoY.

The expected earnings for the quarter are attributable to i) robust export order book where country’s textile exports grew by 25%/3.6%YoY in value/volume terms during 9MFY22 and ii) incessant PkR depreciation against US$ (3.9%QoQ) in 3QFY22. However, we expect gross margins to decline to 12.07% vs 12.67% in 2QFY22 amidst soaring cotton prices both locally (+21.5%QoQ) and globally (+13%QoQ) during the period under discussion.

We have a buy stance on NML with our TP of PkR128/sh providing an upside of 53.5% from last close. The stock is currently trading at FY22/23F PE of 3.3/3.8x vs market PE of 4.5x.

Courtesy – AKD Research