Gul Ahmed Textile Mills Limited (GATM)

Dear Clients,

Gul Ahmed Textile Mills Limited (GATM) held its analyst briefing today to discuss financial performance and provide its future outlook onwards. The company is a composite unit – making everything from cotton yarn to finished products. GATM posted PAT of PKR 1.7bn (EPS: PKR 4.0) in 3QFY21 as against a loss of PKR 370mn (LPS: PKR 0.9) in SPLY. The profitability is attributed to higher demand due to shift in orders to Pakistan from regional peers amidst supply chain disruptions.

Key takeaways

– Home textile continues to drive the top-line of the company whereas Apparel and Garment segments have remained laggards because of sluggish demand during pandemic

– As per the management, despite COVID19 the retail segment has contributed 20% towards the topline mainly attributed to spill-over of orders. The management expects this segment to see higher growth as vaccine has started to rollout

– Within textile composite, GATM posted the highest revenue of PKR 63.5bn and gross profit of PKR 12.3bn amongst peers namely ILP, NML and KTML in 9MFY21

– The company continues to invest PKR 5.0bn every year dedicated towards capacity expansion (PKR 3.0bn) and BMR activity (PKR 2.0bn) using long term financing facility to achieve optimal level of ROA

– GATM has 108 stores spread across 45 cities that resulted in achieving exponentional E-commerce sales of PKR 2.0bn in 9MFY21 and expects to close this year’s sales to PKR 4.0bn. The company plans to expand its retail presence by adding 20 new stores this year

– 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 management is aiming for its IPO between Nov’21 and Mar’22 depending on the market conditions

– 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 4.2x and offers a dividend yield of 5.3%.

(Please see Q&A in report)

KASB Research

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