Karachi, April 27, 2022 (PPI-OT): MUGHAL and NML: 9MFY22E Result Previews

MUGHAL – earnings to clock in at 4.95/sh: MUGHAL is slated to announce its 3QFY22 result (28th Apr’22), where we expect the company to register NPAT of PkR1.7bn (EPS: PkR4.95) vs PkR1.1bn (EPS: PkR3.31) in 3QFY21. This will take 9MFY22 earnings to PkR5.1bn (EPS: PkR15.48) against PkR2.5bn (EPS: PkR7.47) in 9MFY21. The earnings are primarily expected to emanate from 94.4%YoY/11.7%QoQ growth in topline largely on account of higher rebar (+7%QoQ) and copper prices (+7.2%QoQ). We expect gross margin to clock in at 14.4% compared to 16.2% in 2QFY22 due to soaring scrap prices (+13%QoQ) while surge in copper prices (+7.0%QoQ) is expected to provide some respite to the declining margins. Moreover, earnings are likely to see an improvement/decline of 50%/9.8% for YoY/QoQ. The company currently trades at FY22/23F P/E of 3.9/3.5x while 3-yr PEG stands at 0.12x with our TP of PkR140/sh provides a capital upside of 71% from last close – Buy.

NML to post 3QFY22 earnings of PkR6.13/sh: We expect Nishat Mills Limited (NML) to post NPAT of PkR2.2bn (EPS: PkR6.13) in 3QFY22 vs PkR1.9bn (EPS: PkR5.32) in 3QFY21, up by 15.2%YoY. This will take 9MFY22 earnings to PkR7.8bn (EPS: PkR22.1) against PkR3.6bn (EPS: PkR10.37) in 9MFY21, an increase of 113%YoY. The expected earnings for the quarter are attributable to i) robust export order book where country’s textile exports grew by 25%/3.6%YoY in value/volume terms during 9MFY22 and ii) incessant PkR depreciation against US$ (3.9%QoQ) in 3QFY22. However, we expect gross margins to decline to 12.07% vs 12.67% in 2QFY22 amidst soaring cotton prices both locally (+21.5%QoQ) and globally (+13%QoQ) during the period under discussion. We have a buy stance on NML with our TP of PkR128/sh providing an upside of 53.5% from last close. The stock is currently trading at FY22/23F PE of 3.3/3.8x vs market PE of 4.5x.