Ghani Value Glass Limited (PSX: GVGL) was incorporated in Pakistan as a public limited company in 1967. The company is engaged in the manufacturing and sale of mirrors, laminated glass, and tempered glass.
Pattern of Shareholding
As of June 30, 2023, GVGL has a total of 149.942 million shares outstanding which are held by 3420 shareholders. Directors, CEO, their spouse and minor children have the majority stake of 77.296 percent in the company followed by local general public holding 21.61 percent shares of GVGL. The remaining shares are held by other categories of shareholders.
Historical Performance (2019-23)
GVGL’s topline has ridden an upward trajectory over the period under consideration, however, its bottom line slid twice i.e. in 2020 and 2023. The company’s margins which posted tremendous growth in 2019 steeply fell in 2020. This was followed by a significant rebound in 2021. In 2022, the gross and operating margins of GVGL continued to look up while the net margin slightly ticked down. In 2023, all the margins plunged. The detailed performance review of the period under consideration is given below.
In 2019, GVGL’s topline grew by 23.46 percent year-on-year. The sale of mirror glass was the main source of revenue for the company which posted significant growth during the year. Other categories also registered growth except for the revenue from rendering of tempering and other services. Higher sales volume coupled with price increase enabled GVGL to record 66.10 percent stronger gross profit in 2019 with a GP margin of 34.24 percent versus a GP margin of 25.45 percent posted in 2018. Distribution expense contracted by 42.9 percent in 2019 on the back of lower reserve for ECL and lesser freight, handling, and forwarding charges incurred during the year. Administrative expenses surged by 122.46 percent in 2019 due to higher payroll expenses as the company expanded its workforce from 212 employees in 2018 to 297 employees in 2019. Other expenses hiked by 35.17 percent in 2019 due to higher profit-related provisioning done during the year. However, it was offset by 79.38 percent higher other income recorded in 2019 which was the result of hefty scrap sales. Operating profit enlarged by 72.41 percent in 2019 with OP margin staggeringly rising from 16.64 percent in 2018 to 23.23 percent in 2019. It is interesting to note that GVGL had no external borrowings on its books, which means no finance cost. Net profit enhanced by 106.10 percent in 2019 to clock in at Rs.350.127 million with EPS of Rs.6.82 versus EPS of Rs.4.85 recorded in 2018. NP margin climbed up from 14.28 percent in 2018 to 23.85 percent in 2019.
GVGL recorded 11.66 percent topline growth in 2020. COVID-related lockdown and halted economic activity resulted in reduced capacity utilization in 2020 which resulted in under-absorption of fixed costs. Gross profit leveled down by 5.85 percent in 2020 with GP margin sliding down to 28.87 percent. Distribution expenses multiplied by 29 percent in 2020 due to higher payroll expenses and sales promotion expenses incurred during the year. Administrative expenses surged by 19.53 percent in 2020 due to higher payroll expenses as the company increased its headcount to 332 employees. 139.37 percent higher other expenses incurred in 2020 was the result of hefty donations granted during the year coupled with increased provisioning for WPPF. Other income declined by 29.22 percent in 2020 due to reduced scrap sales made during the year. Operating profit weakened by 32.76 percent in 2020 with OP margin falling down to 14 percent. With no external borrowings, there was no finance cost. Net profit dropped by 34.26 percent to clock in at Rs.230.18 million in 2020 with EPS of Rs.4.25 and NP margin of 14 percent.
In 2021, GVGL’s topline improved by 56 percent over the last year. Economic recovery resulted in demand development which led to increased capacity utilization in mirror glass and laminated glass segments in 2021. However, automotive glass production dropped 1782 units in 2020 to 878 units in 2021. Increased demand enabled the company to share the cost burden with customers which resulted in 75 percent higher gross profit recorded by GVGL in 2021 with GP margin climbing up to 32.39 percent. Distribution expense escalated by 51.26 percent in 2021 due to higher payroll expenses as well as freight & handling charges incurred during the year. Administrative expenses also spiked by 40.48 percent in 2021 due to higher payroll expenses and greater provisioning booked for ECL during the year. The number of employees increased to 371 in 2021. Other expenses declined by 45.18 percent in 2021 which was completely wiped off by 96.68 percent stronger other income recorded during the year. The growth in other income was due to higher scrap sales, profit on saving accounts, and rental income. GVGL registered 129.57 percent higher operating profit in 2021 with OP margin jumping up to 20.59 percent. Net profit grew by 156.13 percent in 2021 with EPS of Rs.9.15 and NP margin of 23 percent.
GVGL’s net sales strengthened by 33.36 percent in 2022 due to increased sales volume as well as upward price revision. Increased export sales to new destinations such as London, Jordan, and South Africa also buttressed the topline in 2022. These factors greatly offset the impact of the high cost of raw materials, Pak Rupee depreciation, and reversal of fuel and electricity subsidies and resulted in 54 percent higher gross profit and GP margin attaining its maximum level of 34.72 percent in 2022. Distribution expense slid by 0.23 percent in 2022 due to considerably lower payroll expenses which offset the impact of higher freight, handling, and forwarding charges incurred during the year. Administrative expenses soared by 23.83 percent in 2022 due to higher payroll expenses on account of inflationary pressure and workforce enhancement to take the headcount to 432 employees in 2022. Other expenses mounted by 114.25 percent in 2022 due to higher profit-related provisioning done during the year. Other income shrank by 9.96 percent in 2022 due to lower profit on saving accounts as well as lesser rental income received from Ghani Glass Limited. Operating profit augmented by 66.58 percent in 2022 with OP margin attaining its highest level of 25.71 percent. Net profit grew by 28.21 percent in 2022 to clock in at Rs.755.87 million with EPS of Rs.5.04 and NP margin of 22.16 percent.
In 2023, GVGL recorded 12.18 percent year-on-year topline growth. Except for tempered glass, the capacity utilization of mirror glass and automotive glass fell during the year owing to depressed demand. The high cost of raw materials, Pak Rupee depreciation, elevated energy tariff, and Pak Rupee depreciation resulted in a 16.82 percent spike in the cost of sales in 2023. This translated into a paltry 4.41 percent uptick in gross profit in 2023 with GP margin falling down to 34.82 percent. 52.87 percent higher distribution expense incurred in 2023 was due to higher freight, handling, and forwarding charges and increased sales promotion expenses. Administrative expenses also escalated by 22.26 percent in 2023 primarily due to higher payroll expenses on account of inflationary pressure and workforce enrichment to incorporate a total of 504 employees. Other expenses declined by 4.6 percent in 2023 due to the high base effect as the company incurred a loss on the disposal of operating fixed assets in the previous year. Other income was magnified by 111.94 percent in 2023 on account of higher scrap sales, rental income, and exchange gain. GVGL’s operating profit inched up by 2.15 percent in 2023 with OP margin sliding to 23.41 percent. Net profit declined by 31.82 percent to clock in at Rs.515.33 million in 2023 with EPS of Rs.3.44 and NP margin of 13.47 percent.
Recent Performance (9MFY24)
During 9MFY24, GVGL recorded a 30.97 percent enhancement in its net sales. The cost of sales grew by 33.4 percent in 9MFY24 due to the high cost of raw materials, elevated energy tariff, soaring level of inflation, and Pak Rupee depreciation. Gross profit recorded 26.7 percent growth in 9MFY24, however, the GP margin fell to 35.1 percent from the GP margin of 36.25 percent recorded during the same period last year. Distribution and administrative expenses spiked by 58.90 percent and 18.14 percent respectively during 9MFY24 most likely due to inflationary pressure and enhanced operations which might have pushed up payroll expenses and freight charges. Other expenses surged by 33.24 percent during the period most likely due to increased profit-related provisioning. Other income magnified by 119.49 percent during 9MFY24 maybe on account of higher exchange gain as the company is continuously expanding its geographical outreach. Scrap sales and rental income also form a prominent component of GVGL’s other income. Operating profit enriched by 33.24 percent during 9MFY24 with OP margin slightly inching up to 25 percent from 24.62 percent in 9MFY23. After accounting for taxation, GVGL’s net profit for the period stood at Rs.717.427 million in 9MFY24, up 20.75 percent year-on-year. EPS stood at Rs.4.78 in 9MFY24 versus EPS of Rs.3.96 recorded during the same period last year. NP margin fell from 20.19 percent in 9MFY23 to 18.62 percent in 9MFY24.
Future Outlook
Economic and political instability will continue to take its toll on industrial and construction activity, resulting in depressed demand for GVGL’s products. A stronger foothold in the export market and the adoption of cost optimization measures may save the day for GVGL in the future.
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