Karachi, July 21, 2022 (PPI-OT): Pakistan Textile: Textile exports close FY22 at record levels

Export proceeds for Pakistan recorded at an all-time high of US$31.8bn in FY22 is the result of textile exports reaching their highest level in the country’s history at US$19.3bn, up 25.5%YoY.

The value-added segment registered an uptick of 25.6%YoY to US$15.6bn. Moreover, ready-made garments/ bedwear /knitwear posted growth of 28.7%/18.8%/34.2%YoY, respectively.

For Jun’22, textile exports stood at US$1.7bn, up 3.9%MoM and 2.9%YoY, whereas segment–wise, value-added exports posted a growth of 8.3/5.8% MoM/YoY while non-value-added exports posted a decline of 12.7/9% MoM/YoY.

Global cotton prices have plummeted 22%MoM to a seven-month low, and currently hovering around USc127/lb vs the last two weeks’ avg. of USc163/lb. Furthermore, Cotlook A index futures have also plunged 32%MoM to USc110/lb for Aug’22.

Moreover, in Asian markets, cotton prices are following suit and have registered a decline of 15-20%MoM in India. Similarly in Pakistan, local cotton prices have receded, down 7%WoW in Jun’22 to currently hover around PkR16,611/40kg and witnessing a decrease of 24.8%MoM in Jun’22.

In light of sharp decline in local and global cotton prices, textile players are likely to benefit from improved spinning margins in the short term while expected reduction in global demand (textile exports likely to decline by 15%YoY in FY23) is likely to counterbalance an expected increase in value added segment’s margins. Currency deval is an added positive.

Based on valuation, NML (TP: PkR128/sh) and NCL (TP: PkR65/sh) appear attractive, however, as with the market, stock outlook is contingent on economic outlook, which remains hazy at best.