FLASHNEWS:

AKD Securities Limited – Off the Analyst’s Desk (June 30, 2022)

Karachi, June 30, 2022 (PPI-OT): GATM: 9MFY22 Analyst Briefing Takeaways

GATM held its analyst briefing today to discuss 3QFY22 result and future outlook of the company. To highlight, the company reported a consolidated NPAT of PkR6,175mn (EPS: PkR10.01) in 9MFY22 vs. PkR3,597mn (EPS: PkR5.83) in the same period last year. On a quarterly basis, 3QFY22 earnings stood at PkR2,434mn (EPS: PkR3.96), +2.9%QoQ/43%YoY.

Key highlights of the briefing were:

GATM reported revenue of PKR26,189mn in 3QFY22, up 16.8%YoY while 9MFY21 revenue grew by 27.5%YoY to PKR82,954mn because of robust demand from US and EU and rerouting of orders from regional competitors amidst supply-chain disruptions.

The company anticipates revenue growth to continue and expects FY22 sales to go well beyond ~PKR100bn, and remains hopeful to sustain the same level of revenue in FY23. Moreover, Exports sales breakup for 9MFY22 are as follows; i) Europe: PKR25,341mn (+3.8%YoY) and, ii) North America: PKR8,744mn (+34%YoY). The largest segment in export sales consists of majorly Home Textile with 9MFY22 sales occupying ~86% of total exports.

Capacity-wise, the company is operating above 90% despite enhancing its spinning capacity to 88K tpa (+26%yoY) during 9MFY22 and moving forward, the spinning mill’s capacity is expected to further increase in Oct’22. Commenting on inventory management, the management has already booked cotton for Sep’22 with avg. procuring cost of around PkR18,000/40kg. Moreover, the company will also start purchasing cotton from the 1st week of Jul’22 at prevailing local market rates, as per management.

Commenting on the IPO of IDEAS, the management is of the view that the current fragile and uncertain economic environment is not an ideal time for an IPO and hence, they have decided to delay it for the foreseeable future. While commenting on retail sales, GATM is currently re-profiling its retail stores and no addition in retail stores is considered at this time.

Furthermore, commenting on the outlook of export sales, management believes export sales of FY22/FY23 to clock in at US$300/310mn while management also foresees an industrial decline of 15% and 20% in overall exports and local textile sector demand in FY23, respectively.

The solar power plant of 20MW capacity is likely to come online by the end of CY23. Moreover, a significant part of the DLTL payment has been released by GoP in Jun’22 which will improve the cash flow situation of the company. Finally, an increase in LTFF rate to 7% is for new loans whereas, the company has LTFF rate locked in at 2-3%.