Karachi, June 27, 2023 (PPI-OT): GATM - Analyst Briefing Takeaway
Gul Ahmed Textile Mills Limited (GATM) held its analyst briefing yesterday to apprise investors on the future outlook. To recall, GATM posted PAT of PkR2.6bn (EPS: PkR4.3) in 9MFY23.
Management expects the company to achieve standalone top line of PkR113.2bn in FY23, furthermore they anticipate PBT to end at PkR5.7bn. Gross margin is expected to be 14.5% in FY23, compared to 17.3% in FY22. The decline in gross margin is attributed to rising energy costs amidst declining prices. Management remains confident that the company's bottom line will reach PkR14-15bn in the next two years.
Management apprised that the company aims to reduce its short-term borrowing to zero in the next two years through efficient inventory and working capital management. Short-term borrowing is expected to be reduced by PkR7-8bn in each of the next two quarters. In addition, CAPEX activities have been halted for the next two years to prioritize the reduction of short-term borrowing.
Management is optimistic about a bumper cotton harvest in Pakistan this year, with an estimated production of 11-13mn bales. To note, last year cotton production was 4.9mn bales. As of now, company has exhausted its cotton inventory and is currently procuring new cotton at a rate of PkR17.8-18k/mound.
Management expects a 15% volumetric growth in exports and has an order book until Jan’24. However, domestic retail sales have witnessed shrinkage in gross margins despite an increase in their customer base. This decline is attributed to the company's inability to pass on the impact of price increases to customers due to inflationary pressures.
GATM is the largest polyester synthetic consumers in Pakistan, accounting for over 60% of their total raw material usage. Management stated that LC restrictions have mostly been eased, but the company is still facing delays in clearance of imports.
As per management, there has been no change in tariffs towards the company’s exports to the UK, despite the country’s GSP (Generalized Scheme of Preferences) status being replaced by DCTS (Developing Countries Trading Scheme). Talks remain underway regarding the continuation of GSP status for Europe, with the outlook remaining positive.