Gul Ahmed Textile Mills Limited (GATM PA Equity)

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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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