8/8/2019 Nishat Mills Standalone Annual Earnings Increased Sep 14, 2010

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shat Millss standalone annual earnings increased by 1.3times

hat Mills (NML) export sales is nearly 2% of Pakistan exports

ML reported superb FY10 standalone earnings of Rs 2,915.4 mn (diluted EPS: Rs 8.29) as

inst Rs 1,268 mn (diluted EPS: Rs 3.61) reported last year. NML also reported cash

dend of Rs 2.5/sh thus spelling annual dividend yield of 5.3%.

ML is undervalued in our universe (our TP Rs 73 75/sh based on various valuation

thods) and we remain positive based on FY12 outlook in the company. BUY

ssive sales jump is behind 1.3times increase in profitability

s indeed is a terrific show by NML in the wake of 32% y-o-y increase in sales that

ched all time high of Rs 31.5 bn mark equivalent to US$ 367mn (nearly 2% of Pakistans

al exports). However, gross margins are still lagging behind at 9% given host of factors.

n though, NML gets benefit of local currency weakness plus 25% - 30% increase in

duct value in international market.

nefit of higher sales quantum may wane in FY11

e benefit of voluminous sales is likely to wane given exacerbating increase in cotton lint

t year NMLs average cotton pickings were below Rs 4000/maund). This year this

rage of around Rs 6500/maund may mean that NML may not enjoy bout of increased

fitability. Moreover, we see sluggish growth in international home textiles may keep

ML earnings depressed within the proximity of Rs 6 7/sh EPS.

ese earnings may be devoid of a possible dividend payout from new acquisitions of two

uth Punjab based IPPs AES Lalpir & AES Gen.

per our discussion with NML management, there is no likelihood that cash dividend

m these newly acquired IPPs to yield dividend in the coffers of NML at least in FY11.

wever, NMLs FY12 earnings may shoot up due to spat of dividends from these old IPPjects.

uation

cover NML on sum of parts based methodology wherein we have assigned previous

uations of Rs 73 Rs 75/sh cumulative fair value. However, with the change of new

al we will come up with updated call once detailed accounts published.

wever, we remain positive on NML given economy of scale, higher yarn prices and

spects of developing huge niche in China and diversification into the power sector for

ssible dividends. BUY

FIPI Update* (U

Gross Buy

Gross Sell

Net Buy/

*Source NCCPL website

Total Foreign portfolio update** ** Source SBP website

KSE 100 Index

KSE 100 Index (Sep 9, 2010) 9

Change

Volume (mn)

KSE Market Capitalization (bn) 2

KSE Market Capitalization (USD)

SCRA (8-September-10) (USD)

GDR UpdateMCB (1GDR=2Shares)

OGDC (1GDR=10Shares)

UBL (1GDR=4Shares)

LUCK (1GDR=4Shares)

HUBC (1GDR=25Shares)

Key Financial Market Update

CPI Inflation %

FX Reserves (USD)

Trade Balance (USD)

6-Months KIBOR %

PKR-USD parity

Volume Leaders V

JSCL

FCIBL

NML

FFBL

NPL

AKSL

September 14, 20