An exclusive weekly Stock Market report for PAGE
by Khadim Ali Shah Bukhari & Co.
Updated on Jan 17, 2000
Efforts at sustaining the current rally which saw the market improving
to the 1600 levels proved successful. The KSE 100 continued its upward climb breaching the
1600 levels to close the week at 1626.10, a 2 year high for the KSE 100. This 8.42% jump
over last week's closing of 1499.77 can be attributed to an across the board rise in stock
Increased investor interest was witnessed in almost all the blue chip
stocks as volumes touched a high of 314.78 mn. Main catalyst for the current run up is the
recent cut by the State Bank in the interest rates by 2%. Also providing background
support has been the recent positive news regarding the Energy sector. With the report on
Hubco for the perusal of the Chief Executive, we might see some additional interest
streaming into Hubco.
We believe there still exists an upside potential of 100-150 points for
the KSE 100. For the initial term we feel that the KSE 100 is likely to breach the barrier
of 1700 with relative ease. Though a technical correction might be in line but it would be
insufficient to dampen the bullish sentiments. Accumulate.
Nishat Mills: Overvalued
Largest sector of the economy
The Textile Industry has the distinction of being the largest economic
sector of Pakistan, logical, as Pakistan is basically an agrarian economy. The entire
textile sector contributes to just over 60% of exports, and provides 38% of overall
However the phenomenal increase in installed capacity over the years
does have its drawbacks as well. Over the gradual span of 50 years, the textile sector has
gamed the dubious distinction of being the largest loan defaulter, with the amount in
question to the tune of PKR 48.3 bn, accounting for 32.7% of total defaulted amount of PKR
Nishat Mills commenced business as a partnership in 1951. Incorporated
as a private limited company in 1959, NM went public in 1961 and was listed on the Karachi
It is engaged in the business of spinning, weaving and Dyeing unit
making it the largest composite unit operational in Pakistan.
Raw material prices continue to weaken: Indian refusal to add more
Due to the continuous oversupply being witnessed in the cotton market,
the cotton market is likely to remain highly liquid. With a crop expected to cross the 10
bn bale mark, we expect substantial ending inventories of cotton stock. In addition the
recent refusal of India to lift cotton stocks is likely to further aggravate the situation
thus adding another 200,000 bales into the market. Even if this is a temporary
development, the local price of cotton is going to remain under pressure at PKR 1100 per
International cotton prices stabilizes
The surplus cotton crop is not only in abundance in Pakistan rather
globally the situation is much the same. Oversupply has been of phenomenal size. This has
resulted in international Cotton prices hovering around the 48-52 US cents mark. As
Pakistan deals mainly in lower qualities of colon, Pakistan raw cotton prices tend to
fluctuate around the 35-38 US cents.
Though the profitability of the company has been improving at a steady
rate, the company is in a continuous process of adding yet more capacities, which allow it
to take advantage of economies of scale amidst a textile sector, engaged primarily in low
value added functions.
Aside from the fact that raw material pricing has touched rock bottom
on the domestic as well on a global front, there has been a drop in yarn prices
accordingly as well. However the margins have bettered y-o-y. With overall yarn prices
likely to remain in oversupply we feel that the recent run up in share price has caused
the share to enter choppy waters and due to the stock being over valued, we expect price
weakness to set in.
Profit and Loss
|Cost of Goods Sold
|Financial & other Charges
|Profit Before Tax
|Profit After Tax