Interloop Limited (ILP)

 Interloop Limited (ILP) announced its half result posting earnings of PkR2.9bn (EPS: PkR3.3) during 1HFY21 as compared to PkR1.5bn (EPS: PkR1.8) in the same period last year, up by 90%Y/Y. The result is in line with our expectations.

– The result was accompanied with an interim cash dividend of PkR1.5/sh.

– ILP’s topline registered a double digit growth of 37%Y/Y on the back of higher demand for hosiery segment and higher utilization of denim plant.

– The company’s gross margins improved by 200bps to 25% in 1HFY21 due to lower operating losses from denim segment in our view and robust margins for hosiery division.

– Other operating expenses increased by 87%Y/Y because of recognition of exchange loss in our view.

– During 2QFY21, the company reported earnings of PkR1.8/sh as opposed to PkR1.1/sh in corresponding period last year, up by 67%Y/Y.

– The growth in profitability was led by i) 35%Y/Y growth in topline and ii) reduction in finance cost due to lower interest rate.

– We have an Outperform stance on ILP with a TP of PKR94/sh that provides a decent upside of 34% from the last close. The scrip offers dividend yield of 5%. The stock is currently trading at a forward PER of 8.7x.

Regards,
KASB Research

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