Morning Call about -NML: Massive earnings growth in FY13, outlook even better! – Arif Habib Limited

Karachi, September 26, 2013 (PPI-OT): NML surpasses expectations, posts 65% YoY jump in profits in FY13 Nishat Mills Limited (NML) announced its FY13 financial results yesterday.

According to Arif Habib Limited the company reported a substantial growth of 17% YoY in its top line to PKR 52.4bn. Support from associate companies’ dividends further supported the bottom-line where the total other operating income saw a 2% YoY jump to PKR 2.73bn, (PKR 7.79/share impact).

On the whole, the company posted an EPS of PKR 16.63 in FY13, compared to an EPS of PKR 10.04 in similar period last year, a massive jump of 65% YoY. In line with Arif Habib Limited expectations, NML declared a cash dividend of PKR 4.00/share with the full-year results.

For the 4QFY13, NML posted an EPS of PKR 4.94/share, a massive jump of 38% QoQ, primarily on an operating income increase of 48% QoQ mostly from interim dividends of the associate companies. Company’s top line also escalated by 8% QoQ in 4QFY13.

Financial Highlights 
PKR mn                     4QFY13        3QFY13     QoQ     FY13     FY12   YoY
Sales                      13,530        12,579      8%   52,426   44,924   17%
Gross profit                2,422         2,238      8%    9,044    6,789   33%
Gross margin                17.9%         17.8%    0.1%      17%      15%  2.1%
Distribution expenses         667           586     14%    2,529    2,555   -1%
Other operating income        802           543     48%    2,739    2,684    2%
Profit from operations      2,234         1,841     21%    7,974    5,842   36%
Operating margin              17%           15%      2%      15%      13%    2%
Finance cost                  387           399     -3%    1,618    1,761   -8%
Profit after taxation       1,736         1,254     38%    5,847    3,529   66%
EPS (PKR)                    4.94          3.57       -    16.63    10.04     - 
DPS (PKR)                    4.00             -       -     4.00     3.50   14%

Sources; Company Accounts, AHL Research 

New power venture and considerable financial support to subsidiaries Along with the FY13 results, the company’s BoD also announced its intention to participate in the bidding of a 590MW Mahal Hydropower project, which has been initiated by the Private Power and Infrastructure Board gov’t of Pakistan. To recall, NML already owns 51% in Nishat Power Ltd (NPL, 200MW), 32% in Lalpir Power Ltd (LPL, 362MW) and 28% in Pakgen Power Ltd (PKGP, 365MW). Since NML’s dividend income is on the rise, given its spreading footprints in the power sector (dollar-based tariffs and better cash recoveries recently), the new venture would add significantly to the bottom-line should NML become successful in the bid.

The BoD also announced PKR 400mn as equity injection to NML’s wholly-owned subsidiary Nishat Hospitality (Pvt) Ltd that is building a 4-star hotel (for cost overruns and project modifications). Another investment chunk of PKR 2.0bn has also been allocated to Nishat Linen (Pvt) Ltd to support the working capital requirements of the subsidiary. Arif Habib Limited believes cash outflows on part of these injections would eventually be compensated through better returns and dividends from the same.

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