Karachi, July 27, 2021 (PPI-OT): Textile exports cross US$15bn in FY21

Textile exports increased by 73% YoY in Jun-2021 marking an all-time high of US$1.66bn. The aggregate for 4QFY21 reached US$4.05bn, up 91% YoY while FY21 exports of the textile segment totalled to US$15.4bn, up 23% YoY.

Knitwear, Readymade and Bed wear continued to contribute higher than other segments, with a cumulative contribution of more than 60% almost throughout the year.

While the growth was primarily driven by volumetric growth in the month of Jun-2021, textile exports also received a boost from higher prices (ex-Knitwear) during FY21. During the year, while average volumes increased by ~20-30% in various segments as compared to the lock down period, average prices increased by ~8-10%.

Reliefs announced in the Federal Budget FY22 are expected to cushion the textile sector’s working capital, assisting in managing higher prospective export orders. Moreover, the sector stakeholders also expect no material change in energy costs in the near future for export-oriented sectors given government’s efforts to boost inflow of dollars from this stream.

Higher textile exports – as a result of the response to the TERF facility – are expected to materialize during FY22. While we expect a sustainable US$1.5bn monthly export from the textile sector, a key downside risk emits from restricted trade from potential export countries with uncertainty over the magnitude of Delta variant COVID cases.

We reiterate KTML (TP: Rs110) as our top pick from the textile space given the stock’s current market value offering a deep discount to its portfolio. Moreover, we maintain a Buy for NML (TP: Rs140) and NCL (TP: Rs65).