The outlook of Gul Ahmed Textile Mills Limited

AHL Research arranged a conference call with the management of Gul Ahmed Textile Mills Limited (GATM) on 20th Sep’21 to discuss the future outlook of the company.

Brief Takeaways

· Management believes that GATM’s profitability will continue to impress vis-à-vis the industry as it undertook a timely decision to invest heavily in plant and machinery. Company recently inaugurated its new knitwear plant and Spinning plant which should come online in three phases by Oct’21, Dec’21 and May’22.

· Inauguration of plant for Knitwear manufacturing will add more value in the company’s profitability and open more avenues for the company.

· At present, GATM’s spinning profit (stand-alone basis) is the highest in the industry amid induction of a new spinning plant which is very efficient.

· Since outbreak of COVID-19, GATM has received many orders relating to medical products with more orders expected to follow.

· The company is targeting a revenue of over PKR 100bn in FY22 whereas future gross margins are also expected to remain on higher side.

· The future prospects of the company are encouraging because the company’s order books are very healthy for current financial year with the order log book covered till Jun’22. The company has not faced any cancellation of orders to date due to higher freight cost and delay in shipments.

· New textile policy will be beneficial as it will support SMEs and allow consistency in government policies for the next five years.

· The company has cotton inventory for the entire year as it had procured cotton early during the harvesting season.

· GATM is targeting IDEAS IPO in Feb’22 after considering market conditions which will further open up valuations.

· Management believes that e-commerce sales contribution is increasing as contribution has now exceeds over 20% of total retail sales.

· Company is also planning to launch a new e-commerce website or launch an application which will facilitate customers and will further augment e-commerce sales of the company.

· TERF facility has not completely been utilized yet but LCs have been opened. Complete utilization will be near execution of the expansion plans.

· Cotton prices are coming down due to global crop arrival is better and Pakistan is also expecting higher cotton output compared to previous expectations. As a result, local cotton prices are falling.

· Due to strict SOPs in place and limited operational hours, retail revenues were dented by approximately 20%. Management believes, vaccination roll-out and relaxation by government on operational hours will help IDEAS to regain its momentum.

Courtesy – AHL Research

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