Determinants of Profitability in Indian Public Sector Banks Word - Copy
Sector Profitability flat during 2QFY18...Sector Profitability flat during 2QFY18 During 2QFY18, our...
Transcript of Sector Profitability flat during 2QFY18...Sector Profitability flat during 2QFY18 During 2QFY18, our...
April 3, 2018 REP‐057
Pakistan Equity| Textile| Sector Update
Textile Sector Profitability 2QFY18Textile Sector Profitability 2QFY18Sector Profitability flat during 2QFY18
Shankar TalrejaACh k @ li k
Best Local Brokerage HouseBrokers Poll 2011 14 2016 [email protected]
Tel: +9221‐35303330Topline Securities, Pakistan www.jamapunji.pk
Brokers Poll 2011-14, 2016-17
Best Local Brokerage House 2015-16
Sector Profitability flat during 2QFY18
l l (h Pakistan Te tile Sector Sample CompaniesDuring 2QFY18, our textile sector sample (havingmarket cap of at least Rs1bn, representing 87% of totalmarket cap) witnessed rise of 10% YoY to Rs148bn in itsrevenue mainly on the back of 1) export package
Pakistan Textile Sector: Sample Companies
S.No Symbol M. Cap (Rsmn) Profit After Tax (PAT Rsmn) YoY(%)02‐Apr‐18 2QFY18 2QFY17
1 NML 55,806 2,203 1,499 47%2 SAPT 33,461 75 805 ‐91%3 FML 22,608 500 588 ‐15%
%revenue mainly on the back of 1) export packageannounced by Govt. of Pakistan and 2) currencydevaluation of 5% in Dec 2017.Fall in PKR/USD value coupled with export package
4 KTML 21,549 863 1,550 ‐44%5 SFL 17,719 229 267 ‐14%6 GATM 15,939 524 182 188%7 NCL 12,501 795 302 163%8 IDYM 8,867 138 419 ‐67%9 MSOT 6,504 278 185 50%10 ADMM 6 239 150 14 NMFall in PKR/USD value coupled with export package
provided some respite to the industry GP margins withaugmentation of 1ppts to 15% during 2QFY18 vs. 14%in 1QFY18 and 2QFY17 each. However, a narrow down
10 ADMM 6,239 150 14 NM11 GADT 6,748 244 23 NM12 FZCM 4,380 108 299 ‐64%13 MEHT 3,851 82 385 ‐79%14 SURC 4,876 98 134 ‐27%15 CRTM 2,522 67 43 55%16 FASM 3 192 142 112 27%
analysis says, cost curtailments, and higher spinningsegment sales amid better yarn prices were key reasonsfor few companies to advance their margins.
16 FASM 3,192 142 112 27%17 CTM 2,072 (141) 1 NM18 ZAHID 2,910 166 60 175%19 DINT 2,237 35 (23) NM20 BHAT 2,085 99 74 33%21 TOWL 1,481 110 62 77%22 KML 1,896 93 87 7%
Moreover, profitability of the textile sector remainedstagnant at Rs7bn during 2QFY18, despite of thegrowth in revenues and gross margins. The pressure on
fit bilit tt ib t d t i i fi t
,23 BTL 1,962 99 70 42%24 JKSM 1,571 11 9 16%25 SUTM 1,205 20 16 26%26 RCML 1,643 67 18 265%27 REWM 1,017 64 15 335%28 GLAT 1,732 1 (13) NM
Honda Atlas Cars (HCAR) 2
profitability was attributed to increase in finance costof the sample by ~29% YoY.
Pakistan Textiles
29 ANL 6,866 (17) (18) ‐9%30 PRET 1,079 44 21 111%
256,515 7,147 7,188 ‐1%Source: Topline Securities, Company Accounts
Sector Profitability flat during 2QFY18
Relative to KSE100 index, textile sector performance remained subdued by 13% (KSE100 return ‐2% FYTD vs.15% of textile) despite the export relief package given by the Govt. Underperformance of textile sector could beattributed to 1) liquidity crunch arising out of delayed receipts of rebates amount, 2) higher cost of production( i l i ) d i l d 3) l d i i l f(mainly energy prices) compared to regional peers and 3) lower cotton production in last few years.
Future Outlook: Textile manufactures in their budget proposal to government have requested to decrease cost ofdoing business primarily through decrease in electricity tariff in line with regional players. Similarly, manufacturesh l d f 1) i l l di f d 2) i i f d b k d i d 3)have also proposed for 1) timely release pending refunds, 2) continuation of draw back duties and 3)reduction/elimination of custom duties on import of synthetic yarn and Polyester stable fiber (PSF).
Key Risks may stem from 1) unavailability of raw material, 2) volatility in commodity prices & 3) further rise in/ l i i hpower/electricity charges.
Textile Sample Companies Income Statement Highlights Rsmn 2QFY18 2QFY17 YoYSales 147 652 134 510 10%Sales 147,652 134,510 10%Gross Profit 21,579 18,547 16%Other income 2,431 3,717 ‐35%Finance cost 3,703 2,871 29%Profit before tax 10,112 10,673 ‐5%
Honda Atlas Cars (HCAR) 3Pakistan Textiles
, ,Profit after tax 7,147 7,188 ‐1%Source : Company Accounts, Topline Research
Sector Profitability flat during 2QFY18
Pakistan Textile Sector: Sample Companies AnalysisPakistan Textile Sector: Sample Companies Analysis
S.No Symbol Company NameM. Cap(Rsmn)
Sales (Rsmn)
Gross Profit (Rsmn)
Gross Profit Margin (%)
02‐Apr‐18 1QFY18 2QFY18 2QFY17 QoQ YoY 1QFY18 2QFY18 2QFY17 QoQ YoY 1QFY18 2QFY18 2QFY17 QoQ Δ1 NML Nishat Mills Ltd 55,806 19,958 20,146 19,231 1% 5% 3,311 3,435 2,927 4% 17% 17% 17% 15% 0% 2%2 SAPT Sapphire Textile 33,461 7,930 7,796 6,976 ‐2% 12% 1,400 1,197 673 ‐14% 78% 18% 15% 10% ‐2% 6%3 FML Feroze 1888 22,608 5,224 4,747 4,214 ‐9% 13% 909 882 811 ‐3% 9% 17% 19% 19% 1% ‐1%, , , ,4 KTML Kohinoor Textile 21,549 10,112 10,945 10,736 8% 2% 2,798 2,929 3,554 5% ‐18% 28% 27% 33% ‐1% ‐6%5 SFL Sapphire Fiber 17,719 7,357 5,566 6,362 ‐24% ‐13% 1,115 1,163 933 4% 25% 15% 21% 15% 6% 6%6 GATM Gul Ahmed 15,939 9,458 11,942 10,499 26% 14% 1,837 2,432 1,921 32% 27% 19% 20% 18% 1% 2%7 NCL Nishat (Chunian) 12,501 13,330 12,638 11,433 ‐5% 11% 1,820 2,158 1,611 19% 34% 14% 17% 14% 3% 3%8 IDYM Indus Dyeing 8,867 7,210 7,580 7,227 5% 5% 793 569 937 ‐28% ‐39% 11% 8% 13% ‐3% ‐5%9 MSOT Masood Textile 6,504 5,718 6,916 5,955 21% 16% 875 930 861 6% 8% 15% 13% 14% ‐2% ‐1%10 ADMM Artistic Denim 6,239 2,135 2,059 1,598 ‐4% 29% 221 190 68 ‐14% 177% 10% 9% 4% ‐1% 5%11 GADT Gadoon Textile 6,748 6,520 6,421 6,072 ‐2% 6% 379 418 219 10% 91% 6% 7% 4% 1% 3%12 FZCM Fazal Cloth 4,380 8,184 8,016 6,215 ‐2% 29% 814 797 587 ‐2% 36% 10% 10% 9% 0% 0%13 MEHT Mehmood Tex 3,851 4,294 4,222 3,973 ‐2% 6% 264 317 247 20% 29% 6% 8% 6% 1% 1%14 SURC Suraj Cotton 4,876 2,157 2,724 2,186 26% 25% 130 243 136 87% 79% 6% 9% 6% 3% 3%15 CRTM Crescent Textile 2,522 2,410 2,906 2,723 21% 7% 192 328 147 71% 123% 8% 11% 5% 3% 6%16 FASM Faisal Spinning 3 192 2 681 2 944 2 600 10% 13% 272 303 266 11% 14% 10% 10% 10% 0% 0%16 FASM Faisal Spinning 3,192 2,681 2,944 2,600 10% 13% 272 303 266 11% 14% 10% 10% 10% 0% 0%17 CTM Colony Mills Ltd 2,072 3,469 3,920 3,161 13% 24% 302 323 353 7% ‐9% 9% 8% 11% 0% ‐3%18 ZAHID ZahidJee Tex. 2,910 2,352 2,335 2,029 ‐1% 15% 243 239 137 ‐1% 75% 10% 10% 7% 0% 4%19 DINT Din Textile 2,237 2,042 2,266 1,908 11% 19% 56 205 88 266% 132% 3% 9% 5% 6% 4%20 BHAT Bhanero Tex. 2,085 1,479 2,055 1,631 39% 26% 186 241 184 30% 31% 13% 12% 11% ‐1% 0%21 TOWL Towellers Limited 1,481 621 770 800 24% ‐4% 91 104 146 15% ‐29% 15% 14% 18% ‐1% ‐5%22 KML Kohinoor Mills 1,896 2,752 2,687 2,909 ‐2% ‐8% 368 425 432 15% ‐1% 13% 16% 15% 2% 1%, , , , % % % % % % % % %23 BTL Blessed Tex. 1,962 2,389 2,410 2,035 1% 18% 215 252 198 17% 27% 9% 10% 10% 1% 1%24 JKSM J.K.Spinning 1,571 2,408 2,142 2,298 ‐11% ‐7% 172 182 139 6% 31% 7% 8% 6% 1% 2%25 SUTM Sunrays Textile 1,205 1,066 1,133 1,152 6% ‐2% 73 118 72 61% 65% 7% 10% 6% 4% 4%26 RCML Reliance Cotton 1,643 989 1,050 897 6% 17% 141 140 79 0% 77% 14% 13% 9% ‐1% 5%27 REWM Reliance Weav 1,017 3,334 3,120 2,584 ‐6% 21% 245 317 251 29% 26% 7% 10% 10% 3% 0%28 GLAT Glamour Textile 1,732 592 721 612 22% 18% 7 21 12 193% 81% 1% 3% 2% 2% 1%
Honda Atlas Cars (HCAR) 4Pakistan Textiles
29 ANL Azgard Nine 6,866 3,574 3,877 3,172 8% 22% 585 553 442 ‐5% 25% 16% 14% 14% ‐2% 0%30 PRET Premium Tex. 1,079 1,663 1,600 1,321 ‐4% 21% 137 167 115 22% 45% 8% 10% 9% 2% 2%Total Sample of 30 companies 256,515 143,407 147,652 134,510 3% 10% 19,950 21,579 18,547 8% 16% 14% 15% 14% 0.7% 0.8%Source: Topline Securities, Company Accounts, PSX
Sector Profitability flat during 2QFY18
Pakistan Textile Sector: Sample Companies AnalysisPakistan Textile Sector: Sample Companies Analysis
S.No Symbol Company NameOther Income
(Rsmn)Finance Cost
(Rsmn)Profit Before Tax
(Rsmn)Profit After Tax
(Rsmn)1QFY18 2QFY18 2QFY17 QoQ YoY 1QFY18 2QFY18 2QFY17 QoQ YoY 1QFY18 2QFY18 2QFY17 QoQ YoY 1QFY18 2QFY18 2QFY17 QoQ YoY
1 NML Nishat Mills Ltd 413 646 572 57% 13% 1,662 421 405 ‐75% 4% 408 2,655 2,168 551% 22% 1,655 2,203 1,499 33% 47%2 SAPT Sapphire Textile 181 105 997 ‐42% ‐89% 454 505 381 11% 33% 433 100 697 ‐77% ‐86% 137 75 805 ‐46% ‐91%3 FML Feroze 1888 ‐ ‐ ‐ NM NM 23 20 16 ‐9% 32% 468 444 449 ‐5% ‐1% 432 500 588 16% ‐15%4 KTML Kohinoor Textile 166 253 825 52% ‐69% 209 261 120 25% 117% 1,938 1,960 3,261 1% ‐40% 891 863 1,550 ‐3% ‐44%5 SFL Sapphire Fiber 192 126 221 ‐34% ‐43% 357 383 343 7% 12% 703 526 538 ‐25% ‐2% 470 229 267 ‐51% ‐14%6 GATM Gul Ahmed 51 104 45 105% 134% 225 235 192 4% 22% 152 589 237 288% 149% 94 524 182 456% 188%7 NCL Nishat (Chunian) 28 277 96 893% 188% 655 698 541 7% 29% 830 1,308 751 57% 74% 313 795 302 154% 163%8 IDYM Indus Dyeing 36 1 8 ‐96% ‐83% 68 70 75 3% ‐6% 436 213 591 ‐51% ‐64% 366 138 419 ‐62% ‐67%9 MSOT Masood Textile 55 245 61 344% 301% 200 (211) (148) ‐206% 42% 227 341 235 50% 45% 172 278 185 62% 50%10 ADMM Artistic Denim 13 87 12 550% 643% 18 29 20 62% 45% 125 158 3 26% 5893% 104 150 14 44% 1003%11 GADT Gadoon Textile 51 43 38 ‐14% 14% 127 123 91 ‐3% 35% 235 273 76 16% 258% 161 244 23 52% 969%12 FZCM Fazal Cloth 13 11 114 ‐13% ‐90% 294 334 225 13% 48% 310 193 264 ‐38% ‐27% 199 108 299 ‐46% ‐64%13 MEHT Mehmood Tex 133 280 443 110% ‐37% 142 169 101 19% 66% 80 134 418 67% ‐68% 32 82 385 157% ‐79%14 SURC Suraj Cotton (10) 40 134 ‐503% ‐70% 30 24 13 ‐19% 82% 23 102 178 336% ‐43% 23 98 134 336% ‐27%15 CRTM Crescent Textile 62 90 52 46% 73% 89 158 (66) 78% ‐340% (32) 39 88 NM ‐56% (44) 67 43 NM 55%16 FASM F i l S i i 12 19 12 54% 63% 25 35 38 37% 9% 141 179 138 27% 30% 107 142 112 32% 27%16 FASM Faisal Spinning 12 19 12 54% 63% 25 35 38 37% ‐9% 141 179 138 27% 30% 107 142 112 32% 27%17 CTM Colony Mills Ltd 10 46 3 350% 1312% 192 182 206 ‐5% ‐11% 28 (92) 31 NM NM (15) (141) 1 NM NM18 ZAHID ZahidJee Tex. 3 6 18 136% ‐67% 38 46 47 20% ‐3% 141 135 62 ‐4% 119% 126 166 60 32% 175%19 DINT Din Textile 0 ‐ 2 NM NM 74 85 69 15% 23% (65) 68 (26) NM NM (25) 35 (23) NM NM20 BHAT Bhanero Tex. 2 ‐ ‐ NM NM 16 26 17 60% 56% 90 124 91 38% 37% 71 99 74 38% 33%21 TOWL Towellers Limited 136 1 8 ‐99% ‐85% 1 1 2 ‐42% ‐50% 129 117 71 ‐9% 65% 124 110 62 ‐11% 77%22 KML Kohinoor Mills 10 22 17 115% 28% 62 68 76 10% ‐10% 109 123 115 14% 7% 81 93 87 15% 7%22 KML Kohinoor Mills 10 22 17 115% 28% 62 68 76 10% 10% 109 123 115 14% 7% 81 93 87 15% 7%23 BTL Blessed Tex. 1 1 1 ‐8% 70% 36 43 40 17% 5% 92 129 90 41% 43% 62 99 70 60% 42%24 JKSM J.K.Spinning 7 11 20 58% ‐47% 32 39 35 22% 13% 2 30 3 NM NM 21 11 9 ‐48% 16%25 SUTM Sunrays Textile 3 (15) 3 ‐634% ‐598% 7 27 3 310% 730% 23 20 30 ‐11% ‐32% 16 20 16 30% 26%26 RCML Reliance Cotton 1 4 1 501% 606% 22 18 19 ‐19% ‐5% 94 78 34 ‐17% 127% 77 67 18 ‐13% 265%27 REWM Reliance Weav 0 1 3 130% ‐76% 129 142 131 10% 8% 40 83 41 110% 103% 2 64 15 NM NM28 GLAT Glamour Textile ‐ 0 ‐ NM NM 11 5 10 ‐58% ‐51% (10) 9 (8) NM NM (16) 1 (13) NM NM
Honda Atlas Cars (HCAR) 5Pakistan Textiles
29 ANL Azgard Nine 5 27 6 485% 348% (264) (287) (170) 9% 69% 49 20 13 ‐59% 56% 15 (17) (18) NM NM30 PRET Premium Tex. 2 (1) 5 ‐158% ‐127% 44 52 39 18% 36% 47 54 34 14% 57% 30 44 21 45% 111%
Total Sample of 30 companies 1,575 2,431 3,717 54% ‐35% 4,981 3,703 2,871 ‐26% 29% 7,246 10,112 10,673 0 ‐5% 5,681 7,147 7,188 26% ‐1%Source: Topline Securities, Company Accounts
PKR‐USD Domestic vs. International Cotton Prices
90
100
7,200
8,000
US$/lbRs/maund Local Cotton Price Int'l Prices (RHS)
110 00
115.00
120.00
60
70
80
4,800
5,600
6,400
r-15
n-15
p-15
c-15
r-16 l-1
6
t-16
n-17
y-17
g-17
v-17
r-18
100.00
105.00
110.00
-15
-15
-15
-15
-16
-16
-16
-17
-17
-17
-17
-18
Source: State Bank of Pakistan, Topline Research Source: Karachi Cotton Association, Cotlook, Topline Research
Textile Sector vs. PSX Market Capitalization Pakistan Textile vs. Total Exports
Mar
Jun
Sep
Dec Ap
r
Ju Oct
Jan
May
Aug
Nov
Mar
Mar
-
Jun-
Sep
-
Dec
-
Apr
-
Jul-
Oct
-
Jan-
May
-
Aug
-
Nov
-
Mar
-
p p
8 0009,000 10,000 11,000
450
500
550 RsbnRsbn Textile Sector Mkt. Cap. PSX Mkt. Cap.
60%
62%
64%
15,000
20,000
25,000 US$mn Total Exports Textile Exports Share in Total
5,000 6,000 7,000 8,000
300
350
400
Mar
-15
un-1
5
ep-1
5
Dec
-15
Mar
-16
un-1
6
ep-1
6
Dec
-16
Mar
-17
un-1
7
ep-1
7
Dec
-17
Mar
-18
54%
56%
58%
-
5,000
10,000
FY14
FY15
FY16
FY17
FY18
Honda Atlas Cars (HCAR)Pakistan Textiles 6
Source: PSX, Topline Research Source: PBS, Topline Research
M J S D M J S D M J S D M
1H
The research analyst(s), denoted by an “AC” on the cover of this report, primarily involved in the preparation of this report, certifies that (1) the views expressed in this report accurately reflect his/her
Analyst Certification and DisclosuresThe research analyst(s), denoted by an AC on the cover of this report, primarily involved in the preparation of this report, certifies that (1) the views expressed in this report accurately reflect his/herpersonal views about all of the subject companies/securities/sectors and (2) no part of his/her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressedin this report.Furthermore, it is stated that the research analyst or its close relative have neither served as a director/officer in the past 3 years nor received any compensation from the subject company in the past 12months.Additionally, as per regulation 8(2)(i) of the Research Analyst Regulations, 2015, we currently do not have a financial interest in the securities of the subject company aggregating more than 1% of the value ofthe company.
Rating SystemTopline Securities employs three tier ratings system to rate a stock, as mentioned below, which is based upon the level of expected return for a specific stock. The rating is based on the following with timehorizon of 12‐months.Rating Expected Total ReturnBuy Stock will outperform the average total return of stocks in universe Neutral Stock will perform in line with the average total return of stocks in universeSell Stock will underperform the average total return of stocks in universeFor sector rating, Topline Securities employs three tier ratings system, depending upon the sector’s proposed weight in the portfolio as compared to sector’s weight in KSE‐100 Index:Rating Sector’s Proposed Weight in PortfolioOver Weight > Weight in KSE‐100 IndexMarket Weight = Weight in KSE‐100 IndexUnder Weight < Weight in KSE‐100 IndexRatings are updated daily to account for the latest developments in the economy/sector/company, changes in stock prices and changes in analyst’s assumptions or a combination of any of these factors.
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7Pakistan Textiles