GOC (Pak) Limited

GOC (Pak) Limited (PSX: GOC) was incorporated in Pakistan as a private limited company in 1964 and was converted into a public limited company in 1986. The principal activity of the company is the manufacturing and sale of cricket balls, hockey sticks, and other quality sports goods.

Pattern of Shareholding

As of June 30, 2023, GOC has a total of 7.349 million shares outstanding which are held by 346 shareholders. Associated companies, undertakings and related parties have the major stake of 47.59 percent in GOC followed by its directors, CEO, their spouse and minor children holding 27.7 percent shares. Local general public accounts for 17.59 percent shares of GOC while NIT and ICP own 4.3 percent shares. Around 2.2 percent of GOC’s shares are held by banks, DFIs and NBFIs and the remaining 0.63 percent are with other local companies.

Financial Performance (2018-23)

The topline and bottomline of GOC show an asymmetrical pattern during the years under consideration. While both topline and bottomline boast decent growth in 2019, 2022 followed by a staggering rise 2023, the years in between (2020 and 2021) were gloomy where not only revenue and net profit terribly dropped but margins also hit the rock bottom. GOC’s margins greatly recovered in 2022. In 2023, while gross margin continued to tick up, operating and net margins tumbled.A detailed breakdown of the financial performance of GOC over the years is given below.

In 2019, GOC’s topline grew by 28 percent year-on-year which is the combination of better off-take and devaluation of Pak Rupee which made export sales dearer. While the export volumes of wooden hockey sticks, composite hockey sticks and accessories increased during the year, cricket balls posted a volumetric drop. Local sales also plunged during the year. Rise in the cost of raw materials coupled with high fuel and power charges drove the cost of sales up by 22 percent year-on-year in 2019. However, handsome volumes and favorable currency movement induced a year-on-year growth of 38 percent in gross profit with a GP margin of 36.8 percent in 2019 versus 34 percent in 2018. Operating expenses jumped on the back of inflation coupled with better branding and distribution strategies undertaken during the year. Other expense rose by 73 percent year-on-year on account of WPFF and donations. A significant support to the bottomline was provided by other income which multiplied by over 30 times in 2019 as the company wrote back its credit balances worth Rs.17.56 million and also because of stunning exchange gain. The result was a striking year-on-year rise of 140 percent in the operating profit while OP margin also jumped from 13.3 percent in 2018 to 25 percent in 2019. GOC doesn’t have any bank loans on its balance sheet and is an entirely equity backed company. Finance cost only comprises of bank charges which increased by 26 percent year-on-year during 2019. The share of loss from Grays Leasing Limited, an associated company of GOC also dropped during the year. The bottomline posted an impressive growth of 172 percent in 2019 to clock in at Rs.71.53 million in 2019 with an EPS of Rs.9.73 versus Rs.3.58 in 2018. NP margin also grew from 11 percent in 2018 to 23.4 percent in 2019.

The subsequent two years were sluggish as GOC’s topline plummeted by 16 percent and 20 percent year-on-year in 2020 and 2021 respectively due to a drastic drop in sales volumes owing to the outspread of COVID-19. GP margin also shrank to 33.4 percent and 30.4 percent respectively in 2020 and 2021. Distribution expense and other expense also declined in both the years owing to lesser clearing and forwarding charges, low advertisement budget, lesser provisioning for WPFF and lesser donations. It is to be noted that administrative expense significantly increased by 31 percent in 2020 and then plunged by 21 percent in 2021. The increase in administrative expense was the result of disbursement of bonus of Rs. 14.091 million in 2020. Other income didn’t prove to be encouraging in both the years. In 2020, other income fell by 73 percent year-on-year as the credit balances written back in 2019 had provided a high-base effect and also because of lesser net exchange gain due to massive drop in export volumes. In 2021, other income further slipped by 52 percent year-on-year as the company made net exchange loss during the year. Operating profit slid by 69 percent and 57 percent respectively in 2020 and 2021 with an OP margin of 9.2 percent in 2020 which further nosedived to 5 percent in 2021. The share of loss from associate company expanded in 2020 and then turned to profit in 2021. The bottomline narrowed down by 74 percent and 70 percent respectively in 2020 and 2021. In 2020, the net profit stood at Rs.18.88 million with an EPS of Rs.2.57 and an NP margin of 7.3 percent. This further thinned down to a net profit of Rs.5.72 million and an EPS of Rs.0.78 in 2021. NP margin stood at a meager 2.8 percent in 2021, the lowest among all the years under consideration.

In 2022, the topline made a comeback with a growth of 16 percent year-on-year as international sports got back on track after COVID-19. Gross profit also improved by 30 percent year-on-year as not only did the sales volume grow but exchange rate movement also played its part in boosting the revenue. GP margin burgeoned to 34 percent in 2022. Operating expenses grew on the back of rising inflation which drove up the salaries and wages and also because of higher clearing and forwarding charges on export sales. Other expenses mushroomed by 266 percent on account of higher provisioning for WPPF. Other income escalated by over 31 times in 2022 as GOC made gain on the disposal of its fixed assets during the year. This provided tremendous growth impetus to operating profit which jumped by over 900 percent in 2022. The OP margin of 43.3 percent achieved by the company in 2022 is not only higher than its GP margin but also the highest mark ever seen by the company. Share of profit from associate company dropped during the year, however, the bottomline magnified by 1601 percent year-on-year to clock in at Rs.97.36 million in 2022 with an EPS of Rs.13.25. NP margin stood at 41 percent in 2022.

Recent Performance (2023)

In 2023, GOC’s net sales boasted a tremendous year-on-year growth of 190 percent on account of robust export volumes of wooden hockey sticks, composite hockey sticks, cricket balls and other products. Pak Rupee depreciation also proved to be a boon for the company and propelled its topline. During the year, the company made concentrated efforts to increase its market share in the composite sticks market. Cost of sales hiked by 179 percent year-on-year on account of high inflation, Pak Rupee depreciation as well as high energy and fuel cost. However, better volumes and prices drove the gross profit up by 213 percent in 2023 with GP margin flourishing to 36.7 percent. Distribution expense surged by a massive 140 percent in 2023 primarily due to a spike in clearing and forwarding charges, export development surcharge as well free samples cost. Administrative expense also escalated by 45 percent year-on-year on account of higher payroll expense as well as traveling and conveyance charges. While GOC made a splendid exchange gain of Rs.26.66 million in 2023, high base created by the gain on disposal of fixed assets in the previous year pushed the other income down by 63 percent in 2023. Operating profit improved by 59 percent year-on-year in 2023, however, OP margin considerably fell to 23.6 percent. Bank charges grew by 219 percent in 2023, however, didn’t produce much of a difference in GOC’s bottom line which outshone the previous year by 58 percent to clock in at Rs.153.76 million. EPS rose to Rs.20.92 in 2023 – the highest-ever EPS posted by the company. However, NP margin plunged to 22.2 percent.

Future Outlook

With rise in demand and devaluation of Pak Rupee, the topline of GOC will continue to impress. The company is actively working on diversifying its product base and has started producing a wide range of composite sticks which may boost the profitability in the coming times. The company also expects significant growth in the demand of cricket balls locally as well as from Australia, South Africa, and England. GOC’s increased focus on R&D, advertising and distribution to grab greater market share will radically drive up its distribution cost, however, will yield return in terms of bigger sales volume.