IN FOCUS Pakistan Textiles: Improving Outlook as GSP+ Benefits Trickle-in Pakistan Bureau of Statistics (PBS) released its monthly export figures for Jun’14 wherein textile exports increased by 4.9%YoY to USD13.7bn. The rise comes amid improved exports from the higher value adding sectors as the country gradually begins to realize the benefits of the GSP+ program. In this regard, exports of Knitwear, Bed Wear, Towels and Readymade Garments depicted annual increments of 11%-18%, which bodes favorably for the players at the higher end of value chain like Nishat Mills Limited (NML), Gul Ahmed Textile Mills Limited (GATM) and Masood Textile (MSOT). Yarn exports, however, declined by 9%YoY amid lower demand of Pakistani yarn from China, continuing with the bleak outlook for lower value adding players such as Nishat Chunian Limited (NCL). With the new cotton procurement season getting ever so close, attention is now likely to shift towards the price of the commodity in the international market. Cotton futures are currently trading at USc0.69/kg (Cotlook A Index) and have already shed ~20% since Mar’14 on back of expectation of bumper crop in the US and India. With China potentially ending its support price regime in favor of a more liberal regime, we expect the resultant local cotton price to settle in at a much lower level than last year’s PKR6,600/maund. The procurement of cheaper raw material is likely to bring the Textile sector in the limelight once again following a dismal showing of-late with the sector shedding 1% over the past 4 months and underperformed market by 14%. Higher value adding companies are likely to be the key beneficiaries where we continue to like NML and GATM. Report by: Jehanzaib Zafar BMA Capital Management Ltd. (9221) 111 262 111 This report produced by BMA Capital Management Ltd. contains information from sources believed reliable; we do not guarantee that the matter is accurate or complete. Our Research Analysts compile this memorandum based on opinions and judgments, which may vary and be revised at any time without notice. This report is for information only and is not an offer to buy or sell, or solicitation of any offer to buy or sell the securities mentioned. It is published for the use of our clients may not be reproduced, distributed or published by any person for any purpose whatsoever. Action will be taken for unauthorized reproduction, distribution or publication. The views expressed in this document are those of the BMA Research Department and do not necessarily reflect those of BMA or its directors.
Posted on: Thu, 24 Jul 2014 06:24:36 +0000
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