The management of Nishat Chunian Limited (NCL) held a corporate briefing session today to discuss the FY21 financial results and future outlook on the company’s strategy going forward.
Highlights:
· Nishat Chunian Limited (NCL) declared a PAT of PKR 5,599mn (EPS: PKR 23.32) in FY21, significantly up by 21x YoY from PKR 265mn (EPS: PKR 1.11).
· The company recorded net sales of PKR 49,284mn in FY21, up by 38% YoY compared to PKR 35,667mn in FY20. This was mainly due to a surge in export orders and higher cotton prices resulting in a massive increase in final product prices.
· Gross margins of the company increased by 641bps YoY to 18.20% during FY21 compared to 11.79% in FY20. The jump in gross margins was due to a massive increase in yarn margins on the back of rising raw cotton prices.
· Spinning sector of the company performed exceptionally well as yarn exports increased by 39% YoY and overall yarn volumes increased by 26%.
· Company is planning to install new Auto-Coro machines in spinning segment and has further plans to revamp existing ring frames and Auto-Coro machines at a total capital outlay of PKR 5.0bn. This BMR activity will improve efficiency and augment the margins of the company.
· Weaving division’s exports increased by 30% YoY while total volumetric growth arrived at 6%. Margins of the weaving segment are also on a rising trend. Management believes the addition of the new state of the art jacquard machines will allow NCPL to tap into a new market.
· Home textile exports increased drastically by 86% YoY. However, margins of the home textile segment were nosedived given the increase in raw material prices and lag in an increase of prices, hurting the profitability of the home textile segment.
· Company is also planning to increase home textile capacity by adding new dyeing and stitching units which will allow NCPL to capture a growing market.
· On the retail business front, the company has 9 retail outlets in Pakistan and further planning to increase retail outlets not only in Pakistan but also planning to open retail outlets in Dubai which will increase exports. Furthermore, the company is also planning to increase online business by setting up an online registered business store on Amazon.
· The company expects sales to witness double-digit growth in FY22 while margins remain upbeat given rising commodity (cotton) price which will improve gross margins of the company.
· The management expects the Board of Directors to maintain a higher payout ratio in upcoming years.
Courtesy – AHL Research