Interloop Limited (ILP) announced its 2QFY22 results today

Interloop Limited (ILP) announced its 2QFY22 results today reporting below expected earnings of PKR 2.0Bn (EPS: PKR 2.26), ↑33/↓27% YoY/QoQ respectively. Along with the result, the company announced an interim dividend of PKR 2.0/sh. Key highlights of the result are summarized below:

Topline of the company clocked in at PKR 20.0Bn (↑50/4% YoY/QoQ) in 2QFY22, taking 1HFY22 revenues to PKR 39.3Bn (↑49% YoY).

However, gross margins of the company clocked in at ~24% against our expectations of ~28% due to higher than expected cost of sales. The increase in costs can be attributed to higher raw material prices and other input costs.

Other expenses increased by ~73% YoY to clock in at PKR 395Mn. Admin expenses and distribution costs also witnessed an increase of ~54/37% YoY respectively. This can be attributed to higher freight charges as exports constitute ~90% of ILP’s revenues.

Finance costs surged by ~76% on a YoY basis mainly due to higher lending rates as SBP increased policy rate by 275bps to 9.75%. To note, ILP’s debt constitutes of ~60% debt at subsidized rates due to TERF & LTFF whereas the remaining debt is linked to KIBOR.

Going forward, we expect margins to remain range bound between 22-25% as the textile sector will face higher energy costs on account of rise in gas tariff by the govt. for 3 months. However, revenues are expected to continue their upward trajectory as order books are filled for the near future.

We have a ‘BUY’ call on the scrip with a Dec-22 TP of PKR 96/sh.

Courtesy – BMA Capital Management Ltd.

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