Robust dividend income from its stable and efficient running subsidiary NCPL will continue to remain a strong cushion against any deterioration in cotton-yarn margins
The easing finance cost (lower by 6% YoY in 9MFY12) also provided a breather to NCL’s profitability. However, possibility of another round of monetary tightening remains the key downside risk to our estimates
With persistent decline in PKR value during 4QFY12 (3% depreciation in just last one month), we believe the company to book notable uptick in exchange gains thus further strengthening the bottom-line
The recent approval of the EU trade concessions will certainly bode well for the company as it is already well positioned in the EU market
With no near term solution in sight to the prevailing energy crisis, the rise in fuel costs will keep the margins under pressure
With Cotlook A index bottoming to its lowest (since Feb10) at USD0.78 during the first week of Jun12, the sentiments continue to remain weak. Average cotton prices in 4QFY12 stands at USD0.91/lbs, depicting a decline of 10% QoQ as against USD1.0/lbs in 3QFY12
Healthy dividend income and trade concessions offered by EU parliament will remain the key triggers, going forward. Based on our downward revised target price of PKR19/share, the stock represents a total return of 14%, thus justifying our ‘ADD’ stance on the stock
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