Overall textile exports in Jul’14 shows a decline of 2.4%YoY

Though the overall textile exports in Jul’14 released by Pakistan Bureau of Statistics (PBS) shows a decline of 2.4%YoY, a closer look reviews a divergent trend within the sub groups. A drop of 35%YoY and 8%YoY in cotton yarn and cotton clothes (cumulatively contributing 29%YoY in total exports) more than diluted the impact of improved numbers in other heads. Amongst the leading contributors in exports, an increase was witnessed in Knitwear (22%YoY to US$239mn), Bed wear (14.5%YoY to US$196mn), and Readymade Garments (4%YoY to US$186mn). We believe this increase is attributed to i) exports in Europe due to grant of GSP plus status and ii) the introduction of the claw back provision for local duties and taxes to export oriented sector in FY15 budgetary announcement. We expect increase in exports in the above mentioned goods will bode well for Nishat Mills Limited (NML). Currently NML is trading at FY14E and FY15F PE of 6.7x and 6.1x, respectively.
Textile Exports up 5% MoM in Jul’14
Despite a decline of 4.8%MoM in overall country’s exports, Pakistan’s textile segment (contributing 61% to the country’s total exports) has managed to post a growth of 5%MoM (US$1.17bn in Jul’14) in the environment of the tax incentive offered by the government in FY15 budget. A view of the numbers signifies our hypothesis as knitwear, bedwear and cotton cloth witnessed an uptick in volumes by 11%MoM, 8%MoM and 7%MoM respectively. Furthermore, we believe the impact of GSP+ also lent its supporting hand in driving the volumetric growth of these products. On YoY basis, the textile exports witnessed a decline of 2.4% on the back of major decline in cotton yarn (35%YoY) and cotton clothes (8%YoY). The major reason behind this drop is the change in the cotton policy of China. But the support to the exports came from the value added segments majorly exporting to Europe.