Nishat Chunian Limited Review

NCL: Result Preview FY13

Nishat Chunian Limited (NCL) is scheduled to announce its FY13 results on October 04, 2013. In today's Karachi Stock Exchange Analysis, we present a result preview for the results expected to be announced along with our recommendation on the same.

PAT to grow by 229% YoY (EPS 12.65) in FY13

We  expect  Nishat Chunian Limited (NCL)  to  post  profit  after  tax  of  Rs2,303mn  (EPS  Rs12.65)  in  FY13, showing a massive increase of 229% YoY. This colossal growth in the bottom line is expected mainly due to i) a 13%YoY increase in net sales of the company on the back of increase in spinning and weaving exports to China and Hong Kong coupled with depreciation in PKR against USD ii) gross margins are expected to improve by 520bps to 16.4% owing to low cost cotton inventory built during FY12  iii)  financial  charges  are  likely  to  decline  by  17%YoY  as  low  interest  scenario has reduced the financial burden of the company and iv) other income is also expected to post a 31%YoY increase on the back of rise in dividend income from  its  subsidiaries.  We  expect  payout  of  Rs4.0/share  to  be  declared  along with  FY13  results.

However,  in  4QFY13,  the  company  is  expected  to  post  a  profit  after  tax  of Rs580mn (EPS Rs3.19), registering a decline of 21%QoQ.  The top line though is expected  to  depict  essentially  a  flat  trend  (increasing  by 3%  QoQ),  the  other income  is  expected  to  be  the  main  culprit  for  the  turn  down  in  bottom line, falling by 62% QoQ, due to the absence of dividend income from its subsidiary, NCPL.

Recommendation 'Hold' with Dec-13 TP of Rs61/share

At current levels, the scrip is trading at a discount of 2.5% to our Dec-13 TP of Rs61/sh. We recommend 'Hold' on Nishat Chunian Limited (NCL).