Gadoon Textile Mills Ltd. was established in 1988 as a Public limited company and is listed on PSX. The principal activity of the company is manufacturing and sale of yarn and knitted fabrics. GADT has two manufacturing facilities one is in Gadoon Amazai - KPK and one is in Karachi - Sindh. Y.B Holdings Pvt. Ltd. is the parent company with the shareholding of 69.57%. Currently 28.0mn shares (free float: 8.4mn shares ~ 30%) of the company is outstanding with the market value of PKR 189.9 per share (BVPS: 263.1) trading on a P/E and P/BV multiple of 5.6 and 0.7. The company marked 52 weeks high and low of PKR 323.62 and PKR 182.0.
The earning of the company clocked in at PKR 28.79 per share as against LPS of PKR 9.77 in SPLY. The increase in earnings could be attributable to increase in other income, share of profits from associates, gross margins, decrease in administrative cost and finance cost. Other income surged substantially by 5.49x YoY (PKR 262mn in FY17 as against PKR 40mn in FY16) as company realised gain of 98mn on short term investments, received rebate on export sales (per share impact of PKR 5.28) amounting PKR 148mn and received dividend income of PKR 2mn from its associate companies; ICI Pakistan and wind power project of Yonus Energy Limited. The major cost components of goods manufactured includes 68% of raw material and 14% of power. Due to rising furnace oil and cotton prices internationally, management altered the mix by consuming more of natural gas against furnace oil and relied on procurement of mix of local and imported cotton to rationalize the cost of production. Company was able to reduce administrative cost by 10% as company enjoy economies of scale. The company was able to secure gross margins of 6% as against 3% in SPLY. Finance cost was reduced by 24% YoY owing to lower benchmark rate and minimum spreads due to exercise of greater bargaining power.
The antidumping duties imposed on import of yarn count above 55.5 in addition to allowing zero rating on local sales will spur the demand in the local market coming forward. The government has also announced relief package for Textile sector. Furthermore, the cut down in the prices of urea will most likely encourage farmers to expand cotton production. The company on 27th October’17 has decided to make strategic equity investments jointly with other associated undertakings in two wind power projects of 50MW.