Karachi, December 20, 2021 (PPI-OT): Pakistan Textile – 5MFY22 textile exports up 28.4%YoY

As per the data released by PBS, textile exports for the month of Nov’21 registered a growth of 35.3%YoY to stand at US$1.74bn. Segment–wise value and non-value added exports posted a growth of 33.9/42.2%YoY in Nov’21 and 26.9/35.4%YoY in 5MFY22.

In the value-added segment, readymade garments and bed wear registered a growth of 27.2%/32%YoY while knitwear outperformed the segment with 41%YoY in Nov’21. In 5MFY22 readymade garments/bedwear/knitwear posted a growth of 23.4%/23.5%/36.6%YoY respectively.

International cotton prices have remained strong in the ongoing 2QFY22, hovering around USc119/Ib with an increase of 20.4%QoQ in 2QFY22 and FYTD/CYTD increase of 26.7/42.9%. Local cotton prices have remained elevated, up 13.8%MoM to currently hover around PkR18,005/40kg and up 16% QoQ in 2QFY22.

With global textile dynamics continuing to remain favourable amid brewing trade war between US and China and elevated local yarn margins (yarn margins: local 60% vs export 20% in 5MFY22), the local textile sector finds itself in a sweet spot. However, rising cases of Omicron variant poses serious threat to global economies where any kind of lockdown could hurt robust textile exports. Our top pick for the sector is NML (TP: PkR117/sh – 43% upside) based on diversified energy mix and an attractive valuations where the strong portfolio makes the core operations virtually free.