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After a disappointing first quarter, NML seems to have upped their game. Recall that the firm had unexpectedly reported a decline in volumetric sales of all its segments-except weaving-during 1Q FY14 and that slow demand of yarn from Chinese buyers had suppressed all expectations of a lucrative second quarter.
However, bucking expectations, the companys sales clocked-in at Rs28 billion for the period-an increase of 7 percent year on year mostly on the back of volumetric sales of high value-added garments.
Word on the street also had that Nishats margins will likely take a hit in second quarter as a result of having bought the bulk of their inventory at a time when raw material prices in the country had hit the highest mark. However, the firm has managed to keep the damage in check--with the sharp uptick in profitability during 1H FY13 being helped along by the ten percent depreciation of the Pak Rupee against the greenback.
A 17 percent increase in gas prices during the period was also expected to take its toll on the firms profitability. But the dividend income realized from the portfolio of Nishats subsidiaries has continued to support profitability during the second quarter as well, boosting the bottom line by another Rs1.9 billion during the period. The firms financial charges also remained flattish during the period at Rs829 million-all of which combined to create a cushion around the earnings, which have managed to climb by a whopping 35 percent year on year.
Being widely touted as the single biggest gainer from the GSP+ development, Nishat is already on track and has been actively expanding capacity in the value-added segment. Armed with a strong existing customer base in the EU-barring any unexpected unfortunate twist-all we see in NMLs immediate future is rosiness.


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NISHAT MILLS LIMITED
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Rs (mn) 1HFY14 1HFY13 Chg
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Sales 28,088 26,317 6.73%
Cost of sales 22,858 21,932 4.22%
Gross profit 5,229 4,385 19.25%
Gross profit margin 18.62% 16.66% 1.96 ppt
Other Income 1,931 1,394 38.52%
Profit from operations 5,039 3,900 29.21%
Finance cost 829 831 -0.24%
NPAT 3,853 2,857 34.86%
Earning per share (Rs) 10.96 8.13 -
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Source: KSE notice
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