NML has invested PkR524mn in Nishat Sutas Dairy and further investment outlay of PkR426mn in FY22

NML held its analyst briefing today to discuss FY21 results and future outlook of the company. To highlight, the company reported unconsolidated NPAT of PkR3.3bn (EPS: PkR9.36) in 1QFY22 vs. NPAT of PkR0.9bn (EPS: PkR2.69) in the same period last year. In FY21, earnings stood at PkR5.9bn (EPS: PkR16.8) vs NPAT of PkR3.5bn (EPS: PkR9.97). The company reported consolidated NPAT of PkR4.2bn (EPS: PkR11.91) in 1QFY22 vs. NPAT of PkR1.2bn (EPS: PkR3.52) in the same period last year. In FY21, earnings stood at PkR9.9bn (EPS: PkR28.15) vs NPAT of PkR6.4bn (EPS: PkR18.07).

Key highlights of the briefing were:

· Total unconsolidated revenue increased by 17.3%YoY to PkR71.4bn in FY21. Export sales clocked in at PkR46.4bn (+2.2%YoY) and local sales clocked in at PkR18bn (+84%YoY). Segment wise sales of Spinning/Weaving/Home Textile/Garments were PkR16.7/17.3/29.1/8.4bn with an increase of 44.6/12.2/6/28.6%YoY in FY21.

· Process & Home textile remains the largest contributor of revenue with 41%, followed by Weaving 24.2%, Spinning 23.3% and Garments 11.5%.

· Home Textile revenue largely came from export markets (77% in FY21) where major exporting regions were Europe 33% and Asia & Africa with 32.7% while Weaving revenue also came from export market 64% where major regions were Europe/Asia & Africa with contribution of 48/12% in FY21.

· Finance cost reduced by 22.2%YoY in FY21 as a result of the company paying off its short term loans while other income increased by 23.7%YoY in FY21 amid higher dividend income (+33.2%YoY in FY21) which helped in boosting the bottom line.

· Moving forward, the company is in process of increasing capacities of Spinning/Weaving where it added 130 looms which took total looms capacity to 920 looms. For terry segment, the company looks to increase capacity to 35towels/day – 40towels/day.

· The management expects spinning revenues to remain strong in 2HCY21 amid the current crop shortage and robust local downstream demand, resulting in higher local yarn margins. To note, company has already procured 70% of cotton required for FY22 at lower rates whereas total requirement stands at 475-500K bales for FY22.

· The current power needs of the company stands at 42-45MW where management also mentioned that it has enough coal (procure at lower rate) for its power generation while it also has alternative sources (government provided subsidized electricity from grid) if required.

· The company has invested PkR524mn in Nishat Sutas Dairy Limited and indicates further investment outlay of PkR426mn in FY22.

 

AKD Research

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