Hot Stocks

Interloop Limited plans expansion

Despite dismal performance in the second quarter of FY22, Interloop Limited Pakistan (ILP) is favourite for expansion in the growing hosiery segment, improved prices in the international market and relative insulation against macroeconomic headwinds.

The ILP’s much-awaited Hosiery Division V has successfully achieved CoD in the third quarter of FY22 with an installation of 1,200 machines, enhancing capacity by 20 per cent.

As per the management, the plant is already operating at full capacity because of robust demand.

The prices of socks have surpassed the pre-Covid levels, allowing higher margins, going forward. The expansion in the hosiery division would start reflecting in the third quarter of FY22 results and analysts anticipate strong sales driven by volumetric growth and better prices.

Denim segment has remained an earnings dampener for ILP, as it has been incurring losses since its inception. The management attributes this to higher cost, amid skyrocket cotton prices in the local market.

Analysts expect this segment to breakeven by December 2022. The earlier-than-expected turnaround in the profitability would be an upside trigger to investment case.

ILP has aggressive expansion plans. It intends to invest $300 million by FY26 to expand its production capacity and install apparel factory to capture the growing demand.

It is expected to register a three years earnings CAGR of 34 per cent during FY21/24, underpinned by expansions, better margins, and sales. The company currently trades at undemanding forward multiple of 5.8x and 4.9x for FY22 and FY23, respectively.

The Interloop Limited was incorporated in Pakistan on April 25, 1992 as a private limited company under the Repealed Companies Ordinance, 1984 (now Companies Act, 2017).

On July 18, 2008, it was converted into the public limited company and subsequently, on April 5, 2019, it was publicly listed on the Pakistan Stock Exchange.

The company is engaged in the business of manufacturing and the sale of socks, leggies, denim and yarn, and generating electricity for its own use.

Lucky Cement profits rise 27% to Rs17.2 billion

Lucky Cement’s earnings came relatively in-line with industry estimates, as its profits increased 27 per cent to Rs17.2 billion in the first half of FY22.

The company’s core cement business; however, came under pressure in the second quarter ended December 31, 2021 because of inflationary concerns, resulting from elevated energy prices, particularly coal. As such, the company’s growth during the period was largely credited to the performance of its investments.

Analysts believe its investments, particularly ICI, Kia Motors, and Lucky Electric, will considerably improve the company’s profitability and cash flows down the road.

In the automobile business, Lucky Motor Corporation introduced Kia Stonic in its line-up, as well as started commercial production of Samsung branded mobile phones during the half year under review. Whereas, the company’s overseas operations profitability increased mainly due to improvement in the sales volume and operations of joint venture greenfield cement plant in Samawah, Iraq, which commenced commercial operations in March 2021.

Lucky Cement also reported progress on its brownfield plant expansion activities in Khyber-Pakhtunkhwa (KP) with the project completion targeted for December 2022.

The construction activity for setting up a 660MW super critical, lignite coal-based power plant is near completion and it has been synchronised with the national grid in November 2021.

The project is currently under testing phase and it is targeted to achieve commercial operations in February 2022.

While the previous waves of the Covid-19 receded, the pandemic continues to resurge with different variants of the virus. Even with the persistent drive of the government on compliance of Standard Operating Procedures (SOPs) and getting the masses vaccinated, prudent expectation is that volatile infection rates will continue for the time being.

Lucky Cement; however, expects that the economy will continue to show resilience against the adverse impacts of such pandemic.

Besides, the ongoing inflationary trend in commodities globally has resulted in an increase in the cost of inputs, such as coal, diesel, furnace oil and freight charges, which are a major cost component of cement.

The rupee depreciation has further impacted and increased these costs. Due to an increase in the costs of other construction materials, the local demand will remain flat. At the same time, cement prices have only partially offset the increase in the input costs faced by the manufacturers.

The construction of dams, hydropower projects, real estate development and low-cost housing schemes will help maintain the demand of cement in the medium- to long-term.

Pakistan Cables net sales up 20.2%

Pakistan Cables announced significant increase in profits for the quarter ended December 31, 2021, primarily attributable to improving market dynamics and the ongoing industrialisation on the back of TERF facility.

Pakistan Cables Limited is engaged in the manufacturing of copper rods, wires, cables and conductors, aluminum extrusion profiles and PVC compounds.

The company’s net sales stood at Rs5.2 billion, up 20.2 per cent during the quarter ended December 31, 2021. This increase is primarily attributable to improving economic activity and better brand presences.

The company is confident that it will be able to achieve consistency in operating performance, going forward, to support improved market demand for its products.

High copper prices, the rupee depreciation and rising interest rates are increasing the cost of doing business and could potentially impact the profits.

Moreover, early signs of the economy overheating and uncertainty around the geo-political situation and the International Monetary Fund (IMF) programme could have a bearing on the performance of the company in the future.

Pakistan Cables, the country’s premier and most trusted cable manufacturer, was established in 1953 in a joint venture with British Insulated Callender’s Cable (BICC), UK to set up Pakistan Cables in Karachi.