Ghani Glass Limited (PSX: GHGL) has been operating in the glass manufacturing industry for the past twenty-five years and is one of the most the prominent player in this sector. The company caters top FMCG and pharmaceutical companies in Pakistan such as GlaxoSmithKline, Coca-Cola, Sanofi-Aventis, Abbott, The company was listed on the stock exchange in 1992. Commercial operations of the company started in 1995. Over the years, Ghani Glass has expanded its production capacity and product portfolio to cater to various segments and industries.
The production capacity of the company is around 400,000 tons per annum. In addition to local sales, the company also exports its products. Ghani's plants were the first one in Pakistan to get ISO 9001:2000 and 14001 certifications. Recently these plants have achieved ISO 9001:2008 and 14001:2 certifications as well.
Historical performance: Ghani Glass has been a consistent performer over the last few years. The company has been able to increase its sales by 11 percent on average since the past five years. The margins of the company have also kept with its sales. The gross margins of the company currently are around 32 percent, up almost 10 percent compared to five years ago.
Growth in top-line can be directly linked to the overall increase in consumption especially with pharmaceutical and fast-moving consumer goods sector. One of the prominent features of this company has been debt-free balance sheet. The management and sponsors of the company have mostly relied on right issues for getting any additional money. In turn this has kept the finance cost of the company lowest in the industry whereas some of the competitors over the years have struggled because of their debt payments.
9MFY16 snapshot: The company recently announced its result for third quarter of the financial and its performance during the first nine months has been very good. The sales of the company have gone up by 11 percent whole gross profit has increased by 19 percent due to better product mix and overall efficiency in the manufacturing process.
On the expense, the administrative cost shot up by more than 50 percent while distribution expense went up by 17 percent. The company has no long-term debt and relies mostly on equity mode of financing. Hence any growth in the top-line falls directly on the bottom-line which went up 21 percent. During the first nine months, the earnings of the company have clocked in at 7.53 rupees. Over the same period, the company has also paid cash dividend of 11 rupees.
In addition to the financials, the company also announced a 90 percent rights issue at 10 rupees par value. According to the stock filing, the purpose of this rights issue is to install a new float line which in turn help the company in achieving economies of scale, cater to upcoming local demand and maintain market share of the company.
Shareholding pattern: Over 50 percent of the company's shareholding is with directors. The general public only holds about 28 percent of the shareholding in the company. The participation of institutions is lacking in the shareholding of the company mainly due to the overall liquidity of the stock.
Share price performance: The stock price performance of Ghani Glass (GHGL) over the last one year has been volatile. Either the stock has significantly underperformed the benchmark KSE-100 index or outperformed it. During the first half of the year, the stock was down until the announcement of the first quarter result, after which the stock moved up almost 50 percent.
The stock started its decline around December and underperformed until the announcement of the third quarter result. The announcement of rights at par value caught the attention of the investors and since then the stock has been hitting its upper circuit breakers.
Outlook: The forward outlook for Ghani Glass looks very good. The company is in the sweet spot to take advantage of the infrastructure and consumer spending boom in Pakistan. Its window glass range will benefit from the construction activities, while container glass demand is directly linked to the sale of FMCG and beverage companies. The company recently announced further capital expenditure to add a new float glass line to cater to the growing demand in the country.
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PATTERN OF SHAREHOLDING (AS OF JUNE 30, 2016)
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Directors, CEO, and their Spouses and minor children 121,327,553 55.33%
Associated Companies, Undertakings and related parties 149,068 0.07%
NIT and ICP 891 0.00%
Mutual Funds and Modarabas 1,882,417 0.86%
Insurance Companies 1,076,678 0.48%
Banks, DFI, NBFC, & Pension Funds 333 0.00%
General Public 62,147,026 28.30%
Others 32,642,905 14.85%
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Source: Company Accounts.
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GHANI GLASS 9MFY2017 SNAPSHOT
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Particulars (Rs million) 9MFY2017 9MFY2016 YoY
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Sales 9,507 8,546 11%
Cost of sales 6,364 5,915 8%
Gross profit 3,142 2,630 19%
Administrative expenses 439 289 52%
Distribution expenes 552 471 17%
Other expenses 156 133 17%
Other income 47 38 24%
Profit from operations 2,041 1,774 15%
Finance cost 0.7 0.27 159%
Share of profit from Associate 74 77 -4%
Profit before tax 2,108 1,824 16%
Taxation 457 456 0%
Profit after tax 1,651 1,368 21%
EPS (basic and diluted) 7.53 6.24 21%
GP Margin 33% 31% up 200 bps
NP Margin 17% 16% up 100 bps
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Source: Company Accounts.
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