Starting out as a single spinning unit in 1990, Nishat Chunian Ltd (PSX: NCL) has expanded and diversified into a fully vertically integrated textile conglomerate. With a market capitalisation of over Rs 9.4 billion, the company is one of the largest textile units on the Pakistan Stock Exchange. Nishat Chunian Limited operates in four segments - spinning, weaving, processing and home textile, and power generation (which do not have any external sales). The company's yarn market spans a range of loyal customers all over the world; major markets include Hong Kong, Mainland China, and Europe. Apparel fabric is exported to the Far East, Europe and North America, whereas the sheeting fabric is mainly exported to high-end US and European buyers. In terms of sales, the company is one of the largest Pakistani exporters of sheeting products to the US.
Nishat Chunian has a number of subsidiaries to its name as well - Nishat Chunian (Power) Limited; NC Electric Company Limited (established in June 2014); and most recently, NC Entertainment (Private) Limited (to set up multiplex cinemas all over Pakistan - a project currently in the works).
Pattern of Shareholding and Stock Price
NCL is a frequently traded stock, with a daily average of over 760,000 being traded on the exchange. This makes it one of the hottest stocks in the textile composite category. Gul Ahmed Textile Mills, a peer with a comparable stock price and scale, had a daily traded average of just over 300,000 over the same period.
As of FY15, the general public has access to around 32 percent of NCL's total outstanding shares issued - a decent amount for a float. The Director, CEO, and family collectively held over 25 percent, while associated companies had around 17 percent. Of the associated companies, Nishat Mills has around 14 percent stake.
For the most part of FY16, NCL stock has traded above the KSE100. However, for the latter part of the fiscal year - ie March to July - the stock remained below the index. This has less to do with the company and its fundamentals, and more to do with the KSE100's upward march; the rise in KSE100 was due to the euphoria of re-inclusion in MSCI index and due to formation of PSX and potential strategic sale of it.
Prior Performance
Circa 2012, Nishat Chunian Limited's top line has seen steady growth each year. However, where the firm's profitability is concerned, each year has been different; profitability has taken on a mixed trend over the years, and a largely negative one.
Gross and net margins skyrocketed in FY13 due to a dollar appreciation and increased sales, not to mention cost-cutting measures, as per the Director's Report. However, in the subsequent year, the margins suffered not only due to increased global competitiveness and exchange rate fluctuations, but due to high-scale expansion of spinning capacity, which wasn't able to operate to its maximum capacity. In FY15, the demand for textile products in general and cotton yarn in particular declined during the year, while the Rupee appreciation hurt the bottom line.
A segment-wise analysis shows that the spinning segment accounts for 60 percent of total revenues (as of FY15), while home textile makes up 27 percent and weaving forms 13 percent. In terms of profitability, the trend has been largely mixed, albeit negative.