BMA Textile universe is estimated to undergo an impressive jump in revenue and profitability to PKR 78Bn (↑48/5% YoY/QoQ) and PKR 6.6Bn (↑25/2% YoY/QoQ), respectively for the quarter ended Mar’22, primarily on the back of rising textile exports (Jan-Mar’22 Exports: USD 4.9Bn, ↑24% YoY), strong demand from the retail segment and hefty inventory gains. Talking about individual companies, NML, ILP & GATM are expected to post earnings of PKR 6.1/2.4/3.7 per share respectively in QEMar22, ↑15/23/35% YoY respectively.
We do not expect interim pay-outs from these companies, however, remain bullish on the sector on account of rising textile exports amid conducive policy environment.
NML: NML is expected to announce PAT of PKR 2.2Bn (EPS: PKR 6.1) in 3QFY22 (↑15% YoY, ↓7% QoQ), taking overall profitability in 9MFY22 to PKR 7.8Bn (EPS: PKR 22.1, ↑113% YoY). The YoY improvement in earnings is expected on the back of strong core operations due to higher sector exports (↑24% YoY in QEMar22) and PKR depreciation of 2% during Jan-Mar’22. Moreover, inventory gains are also expected to boost profitability given the fact that the company procured cotton at ~PKR 15k/maund compared to current market prices of ~PKR 20k/maund. Finance cost is expected to increase by ~47/25% YoY/QoQ on account of rising short term debt (↑80% since Jun-21) and higher interest rates.
ILP: ILP is expected to post PAT of PKR 2.1Bn (EPS: PKR 2.4) in 3QFY22 (↑23/6% YoY/QoQ). Resultantly, overall profitability in 9MFY22 is expected to surge to PKR 6.9Bn (EPS: PKR 7.6, ↑43% YoY). We expect major impetus to come from the hosiery segment that is a direct beneficiary of rising exports. Note that cross border revenue constitutes ~90% of overall revenues for the company. ILP is also expected to benefit from exchange gains as PKR depreciated by ~2% in the past quarter. Finance costs are expected to increase by ~92/13% YoY/QoQ on the back of rising debt levels, despite subsidized financing through TERF and LTFF.
GATM: GATM is expected to post a PAT of PKR 2.3Bn (EPS: PKR 3.7) in 3QFY22 (↑35/7% YoY/QoQ) pulling profitability in 9MFY22 to PKR 5.6Bn (EPS: PKR 9.2, ↑64% YoY). We expect exports, which constitute ~65% of total sales mix of the company to continue to keep earnings momentum strong in the near term. Other income is also expected to rise on the back of exchange gains and higher income from fixed investments. Major revenue growth is expected to stem from the value-added segment in lieu of sizable order backlog from the company’s major exporting markets (USA & EU). Finance costs are expected to increase by ~95/10% YoY/QoQ due to greater leverage (↑6% since Jun-21) and higher interest rates.
Courtesy – BMA Capital Management Ltd.