Sharp drop in realized prices weighed on textile exports during May’19

As per the latest statistics released by Pakistan Bureau of Statistics (PBS), Pakistan’s textile exports during the month of May’19 were recorded at USD1.19bn, down 1% YoY. On a sequential basis, however, textile exports rose 4% MoM.

Continuing its trend of past few months, basic textile exports (yarn, cloth, raw cotton etc) dropped by a hefty 15% that was partially offset by 5% YoY increment in exports of value added products during May’19.

Readymade garments and knitwear led export growth in value added segment during May’19 recording expansion of 14% and 10%, respectively, followed by 4% and 3% increase in exports of bedwear and towels. A granular analysis of export numbers reveals that the bulk of this growth was led by robust volumetric expansion (2%-42%) mainly led by garments (42%) and knitwear (38%).

On the other hand, realized prices for value added products tanked sharply (6–21%). We attribute the contraction in realized prices to (i) exporters passing on part of devaluation benefit to overseas customers and (ii) weak macro situation in major export destinations.

Basic textile categories continued poor export performance of previous months and recorded steep contraction in both volumes (12%–20%) and realized prices (6%). This is largely due to global economic concerns and is being faced by other export competitor countries.

On a cumulative basis, Pakistan’s 11MFY19 textile exports remained flat at USD12.3bn, where 9% YoY drop in basic textile exports offset 3% YoY increase in value added segment exports.

We maintain our overweight stance on the textile sector and maintain Nishat Mills Limited (NML) as our top pick within BMA textile space. Our conviction on the scrip is premised on its (i) low leverage & favorable debt composition, (ii) key beneficiary of subsidy on RLNG, (iii) diversified top line, and (iv) attractive investment portfolio. (Courtesy, BMA Capital Management Ltd.)

Sharing is caring

Leave a Reply