Gul Ahmed Textile Mills Limited (GATM PA Equity)

Dear Clients,

Gul Ahmed Textile Mills Limited (GATM) held its analyst briefing today to discuss financial performance and provide its future outlook onwards. GATM posted a profit of PKR 3.5bn (EPS: PKR 8.1) in 9MFY21 as against PKR 700mn (EPS: PKR 1.6) in SPLY, up 4.94x YoY. The profitability is attributed to booming textile business as the company saw hefty order inflow in home textile segment.

Key takeaways

– Europe and North America are the major export markets for GATM and the sales to these regions increased by 39% YoY and 52% YoY, respectively in 9MFY21.

– The company has 200+ customers internationally in 44+ countries. Major customers include Carrefour, Urban Outfitters, IKEA and Argos.

– The export sales clocked in at USD 207mn in 9MFY21 and the biggest contribution came from home textile segment clocking in at USD 161mn.

– GATM is expanding its spinning segment in a phased manner which would take the capacity to 100k tons at an estimated capex of PKR 4.0 – 4.5bn. The first phase is expected to come online in Oct’21.

– E-commerce business saw a substantial growth in the last 5yrs and the sales for 9MFY21 clocked in at PKR 2.0bn. The management expects this segment to hit PKR 3.0bn in FY21.

– The company is carving out its retail segment, Ideas, to enable it to be a 100% owned subsidiary subject to the court’s order. The proceeds of IPOs would be utilized in setting up a factory in economic zones to avail tax holiday and enhancing the retail network.

– The management is expecting a revenue growth of 20% YoY in FY22 closing it at PKR 90.0bn and exports to reach USD 420mn.

– We expect the company’s expansion in all of its major segments to reap profits on a sustainable basis in the future. Extrapolating 9MFY21 financial, GATM is trading at an attractive PER of 7.5x and offers a dividend yield of 5.0%.

(Please see the report for Q&A)

KASB Research

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