Topline Securities hosted a Corporate Briefing Session (CBS) of Gul Ahmed Textile Mills (GATM) today, during which the management discussed the company’s recent financial results and future prospects.
On Pakistan’s GSP Plus status, management commented that current benefits are valid till Dec 2024 and after that it is expected that they will be extended further. Recent trade deal called the Developing Countries Trading Scheme (DCTS) with UK has similar benefits to GSP Plus for Pakistan’s exporters.
GATM management have set a revenue target of Rs150-160bn for FY24 on a consolidated basis. FY23 sales are estimated at Rs147bn.
The increase in minimum wage is expected to have an immediate impact on GATM. However, the company has devised a plan to mitigate this impact by reducing its working capital requirement through a significant reduction in short-term borrowing.
The company plans to reduce short-term borrowing to below Rs30bn by end of FY23. Reduction of further Rs14-16bn in first two quarters of FY24 and free from short-term borrowing and fully self funded in 2 year’s time.
GATM is currently facing pressure on margins due to higher energy costs and lower selling prices due to reduced global demand.
Exporters are facing delays in opening LCs by one to two weeks but are not facing any blanket restrictions.
GATM has a robust order book in terms of volumes, which is expected to remain strong until Jan 2024.
Ideas store retail expansion plans will be executed strategically, involving a combination of reducing or closing certain outlets and opening new ones. Regarding listing of Ideas, management was of the view that this is not a favorable time for listing on stock market with companies trading 2-3 times of their earnings.
Regarding value-added export demand, the management expressed the view that it is closely linked to policy rates in the USA and Europe. They anticipate that the USA will not reduce rates in 2023 but may do so at the beginning of 2024. As a result, they expect demand to start picking up from the 2HFY24
Regarding the share buyback, the management stated that they are unable to disclose any information at the moment.
Polyester is almost 60% of raw material for the company and GATM is one of the largest buyers of the same in the country.
In 9MFY23, average capacity utilization for Spinning, Weaving, and Processing stood at 95%, 89% and 79% respectively.
On a standalone basis in 9MFY23, export sales stood at US$223mn with 85%, 13% and 2% coming from Home Textile, Apparel and Others.
GATM has clear goals of sustainability with organic sourcing, recycling, reduction of hazardous chemicals and women empowerment among others.
Courtesy – Topline Securities