Nishat Mills Limited (NML) recorded unconsolidated earnings of Rs1.26bn (EPS: Rs3.6) in 4QFY22 compared to earnings of Rs2.28bn in 4QFY21 (EPS: Rs6.5). This takes FY22 earnings to Rs10.3bn (EPS: Rs29.3).

The result came lower than expectations, due to higher than expected effective tax rate of 52% for 4QFY22. Higher effective tax rate was due to super tax imposed on dividend income.

We estimated gross margins of 14% for 4QFY22, however actual gross margins clocked in at 12%, with major deviation coming from higher than expected cost of sales.

Cost of sales increased by 67% YoY to Rs27.9bn due to cotton procurement at higher rates of close to Rs16-17k per maund as per our channel check, as compared to cost of ~15k per maund for 3QFY22.

Revised RLNG rate of US$9/MMBTU was applicable in 4QFY22 as opposed to US$6.5/MMBTU in 4QFY21 which resulted into lower margins. Around 60% of NML’s energy requirement are fulfilled through RLNG.

Sales in 4QFY22 increased by 58% YoY, however remained flat QoQ to Rs31.5bn, which is mainly attributable to increased sales in multiple segments including Spinning and Weaving. Also, Dyeing and Garment segments, whose revenue stream got affected during Covid has also seen recovery. 

Other income increased by 71% YoY to clock in at Rs1.58bn which is mainly driven by dividend income from associates and exchange gains.

Distribution expenses increased by 76% YoY to stand at Rs1.5bn due to higher transportation costs.

Courtesy – Topline Securities