Textile sector set to post earning

Textile sector set to post earning

Synopsis

market guru

Textile sector set to post earning

The government has approved a textile policy to boost the capacity of the industry for sustainable growth in textile exports. Image: File

Advertisement

KARACHI: The textile sector is set to announce second quarter of FY22 ended December 31, 2021 result and we foresee improvement in the earnings, amid strong order book, low cost inventory and currency depreciation.

We expect the margins to expand as the companies were able to increase the prices in the international market.

The textile exports remained strong evident from a growth of 12 per cent QoQ and 27 per cent YoY. The growth is attributed to the resumption of global economic activity post-vaccination drive. The order book of all leading players is lined up till December 2022.

Additionally, the currency depreciation of 6.1 per cent QoQ/8.1 per cent YoY would improve the revenues of the export-based companies, primarily Interloop.

We expect the sector’s gross margins to improve on a yearly basis. This is because the companies were able to pass on the impact of increase in cotton prices. Moreover, continuation of concessionary input cost would further provide support.

Advertisement

Spinning margins would remain strong in the second quarter of FY22, as yarn prices strengthened 17 per cent QoQ in the period under review. Nishat Chunian Limited (NCL), having the highest exposure in the non-value added segment, is expected to benefit the most in this case.

We have an outperform stance on the textile sector. This is accredited to strong order book, lower cost of debt and continuation of subsidised input cost.

As per the data of the Pakistan Bureau of Statistics (PBS), Pakistan’s textile exports witnessed a tremendous growth of 26 per cent in the first half of FY22 ended December 2021 to stand at $9.38 billion. However, the textile exports recorded a decline of 6.5 per cent, compared with November, owing to the suspension of gas supply for 15 days, mainly in Punjab region.

Segment-wise, the value-added products (knitwear, bedwear, towels, readymade garments) witnessed 26 per cent growth to stand at $6.51 billion in the first half of FY22, while basic textiles (raw cotton, cotton yarn, grey cloth) grew 32 per cent to clock-in at $1.77 billion, whereas, other textile products also increased 19 per cent to $1.08 billion.

On the volumetric front, the value-added volumes grew 13 per cent in the first half of FY22, thanks to the bed-wear segment; followed by the basic textiles and yarn (other than cotton yarn). However, other textile products declined 40 per cent.

Ayesha Fayyaz has over four years of experience in Pakistan’s equity markets. She has worked in leading brokerage houses, including Shajar Capital and BIPL Securities.

Advertisement

She is currently covering banks, fertiliser and textile sectors at KASB Securities. Ayesha is a graduate of Lahore University of Management Sciences (LUMS) and has passed the CFA.

Advertisement
Advertisement
Read More News On

Catch all the Business News, Breaking News Event and Latest News Updates on The BOL News


Download The BOL News App to get the Daily News Update & Follow us on Google News.


End of Article

Next Story