Nishat Chunian Limited (NCL) announced its 3QFY23 earnings earlier this week, wherein the company posted NPAT of PkR389mn (EPS: PkR1.6) for the quarter, compared to a loss of PkR1.7bn (LPS: PkR7.1) in the earlier quarter. The earnings posted by NCL are substantially higher than our estimates.
* NCL posted revenues of PkR17.4bn during 3QFY23, higher by 21%QoQ and 8%YoY. The growth in the company’s topline is likely being driven by higher local currency recognition of export proceeds. To recall, the currency lost ~25.7% during the period.
* The company was able to increase its gross margins sequentially, from a meager 2% in the previous quarter to 9% in 3QFY23, which was a major driver of earnings during the period. Resultantly, NCL’s gross profit improved by 4.8xQoQ.
* Another boost to earnings came in the form of higher-than-expected other income, wherein the company posted PkR853mn (PkR3.6/sh), higher by 5.1xQoQ and 6.5xYoY. The heightened other income is largely driven by exchange gains during the period.
* Finance costs clocked in at PkR1.5bn, higher by 5%QoQ and 1.2xYoY, despite the increasing interest rate environment in the country. This can be explained by lower than anticipated short-term borrowing requirement during the period.
* In 9MFY23, the company has posted ~PkR1.4bn in losses, compared to PkR6.7bn in profits in the SPLY. The losses so far this year can be attributed to: i) lower export orders and ii) higher cost of doing business due to increased energy costs and raw material costs.
Courtesy – AKD Research