Nishat Chunian Limited (NCL) net profit also likely to decrease by 48.6pc in 2QFY20
LAHORE: Nishat Mills Limited (NML) is scheduled to announce its Q2FY20 results on Friday and we expect it to report Net Profit after tax (NPAT) of Rs1,154 million (EPS: Rs3.28) as compared to Rs2,100 million (EPS: Rs5.97) which is 45 percent less during the same period in 2019, AKD Research’s report issued on Thursday stated.
The report which is prepared by Umer Farooq, Research Analyst at AKD Securities Limited, stated that the expected decline in bottom-line is due to lower other income (down 66pc YoY) because of weak payouts from portfolio companies and high base effect as a result of one-off exchange gain in same period last year (SPLY).
Farooq mentioned that core textile earnings, however, are likely to jump 85 percent YoY on account of firstly, topline growth of 15 percent YoY which is largely driven by higher realised final product prices in Pak rupee terms (i.e. currency translation gains) and secondly, due to slight margin accretion at gross level (67bpsYoY).
He further mentioned that sequentially, earnings are likely to increase 25 percent QoQ, where seasonality gains drive both core (i.e. seasonally higher volumes in value-added segments) and non-core earnings (the reflection of year-end payouts from portfolio companies) higher. The AKD report stated that overall in 1HFY20, NML’s headline earnings are estimated to stand 34 percent YoY lower, reflecting both lower payouts compared to SPLY and high base effect due to large one-off exchange gains in SPLY.
Nishat Chunian Limited (NCL)
In his report, Farooq said that previewing 2QFY20F results for NCL, we expect the company to report NPAT of Rs600 million (EPS: Rs2.50) as compared to Rs1,166 million (EPS: Rs4.86) in 2QFY19, down by 48.6pc YoY basis.
He further mentioned that the estimated earnings decline is primarily on account of lower other income (-66pcYoY) – which was abnormally high in SPLY, courtesy one-off gain on sale of the entertainment business and exchange gain recorded in SPLY.
Farooq mentioned core textile earnings, however, are likely to increase 31 percentYoY, on the back of firstly, top line growth of 5 percentYoY and secondly, YoY margin accretion at gross level (+170bpsYoY).
The report reads, sequentially, earnings are likely to jump 3.46xQoQ, where seasonality gains drive both core (i.e. seasonal improvement in yarn business) and non-core earnings (reflection of year end payout from power subsidiary) higher.
“Cumulatively, NCL’s headline earnings in 1HFY20 is expected to stand 62 percent YoY lower, reflecting both decline in core earnings (cycle reversal in the low value-added segment) and high base effect due to large one-offs (exchange gains and gain on sale of the subsidiary) in SPLY,” the report mentioned.