For a firm that has such huge potential, and a just recently proven turn around, shareholders haven't been treating Thal Limited well. The stock has been on a downward journey for some time, and it seems there is no respite to it (see stock graph). Does Thal's stock deserve such bashing?
Thal has been operating under the umbrella group of the House of Habib since 1966. Ergo, the firm has strong business group behind it, and they are not newbies in the business world. Recall that the House of Habib already has equity as well as technical collaborations with a host of Japanese, European and American business names such as Toyota, Denso, Koito, Gabriel etc.
As for the company itself, it is a diversified business engaged in the manufacture of engineering products in Karachi, jute products in Muzaffargarh, laminate sheets in Hub and paper sacks in both Hub and Gadoon.
Realistically speaking, however, it is the engineering division that earns the most buck. For instance, engineering segment earned Rs 5.46 billion in the first half ended December 2015, a period during which the firm's total sales were Rs 6.9 billion. The segment produces automotive parts such as car air-conditioners, radiators, wiring systems and engine components.
The remaining 20 percent of the sales comes from the building material and allied products segments (read jute, laminate, and paper sacks), where jute leads the pack. Apart from these key business segments, Thal subsidiaries include renowned names such as Makro-Habib Pakistan Limited, Pakistan Industrial Aids (Private) Ltd, and Thal Boshoku Pakistan (Pvt) Ltd. Interestingly, a bulk of Thal's shares (44%) are held by foreign investors, who traditional market pundits classify as 'brown goras' - and of whom the lesser mortals at local exchange have little information about.
Recent financial performance
After the tough years of 2013 and 2014, Thal managed a sweet turnaround in 2015 when it posted a 34 percent growth in top line and 58 percent growth in net profit after taxes. The reason: the previous two years had seen auto assemblers facing difficulties in revenue growth, whereas 2015 saw auto sales kick off - a trend that has been continuing in the fiscal year to date. Since nearly 80 percent of Thal's revenues originate from engineering segment - that caters to auto sector - any swing in auto sector naturally affects the firm's top line.
In the fiscal year to date, Thal has continued to shine - operationally speaking. However, one-time hit on the firm's profit and loss account has made a dent in its earnings. According to its latest results, Thal saw a 20 percent growth in the second-quarter gross profits, which took the first half gross profits to Rs 1.5 billion - a growth of 42 percent year-on-year. This growth mainly came from engineering segment, whose sales rose 22 percent during the half year ending December 2015.