Download Exports down 9% YoY in 7MFY16 on lower cotton yarn demand

February 23, 2016
Pakistan Economy
MORNING BRIEFING
Textiles: Exports down 9% YoY in
Syed Atif Zafar,
Zafar, CFA
on lower cotton yarn demand
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Ext: 3118
KSE100 Index: Closing 30,677.68 ↓ (334.09
(334.09)
334.09)
Value-added segments fared slightly better, however they too felt the
pressure of (1) relatively stronger PKR vis-à-vis peers, (2) soft commodity
prices and (3) slowdown in global trade.
As per our analysis, ~60% of the decline in textile exports during 7MFY16
is due to lower quantity sold whereas the remaining 40% is owing to
lower product prices.
900
600
300
-
Cotton yarn pulling down textile exports
Pakistan textile exports in Jan-2016 recorded a ninth consecutive YoY decline to
clock in 10.5% YoY lower at US$1.08bn, as per the latest numbers released by
Pakistan Bureau of Statistics (PBS). However, a 3.9% MoM uptick was witnessed
given higher seasonal demand during the month. Hence, textile exports came in
9.2% YoY (or US$742mn) lower at US$7.35bn during 7MFY16 vis-à-vis
US$8.09bn recorded in 7MFY15.
Pakistan textile exports
Yarn (not cotton yarn)
Price Value Quantity
Price Value
1,545
1,567 -44% -44%
-1%
2,824 -32% -32%
0%
47,697
790
280,814
1,303 1,210,013
133
84,648
2,812 1,161
411,193
1,077 1,444 1,201,742
0
68
1,368
6
5,406
1,138 -98% -99% 20%
7,651
2,639
26
8,204
3,209 -23%
1,403
Bedw ear
1,165
185,645
6,278 1,255
465
102,410
4,542
56
19,412
2,876
Tents, canvas etc.
Readymade garments** 1,253
65,018 21,582 1,440
4%
-6%
6,537
-7%
-3%
-4%
458
97,097
4,722
1%
5%
-4%
90
32,423
2,786 -38% -40%
3%
154,757
1,122
217
18,051 66,889
182,108
-3%
-7% -18%
191,997
18,503 67,718 1,207
62,578 23,012
4%
3%
1%
1,194 -20% -15%
-6%
Art, silk & synthetic*
174
Madeup articles
366
378
-3%
Other textile material
277
270
2%
7,345
8,087
-9%
Total
1% -10%
20
Knitw ear**
Tow el
1,201 -10%
Qty Price
200
180
160
140
120
100
80
60
40
20
Dec-15
Cotton carded
Value Quantity
74
Change
Sep-15
Cotton cloth*
7MFY15
Jun-15
Cotton yarn
Monthly yarn exports (US$ mn)
7MFY16
Sep-14
Raw cotton
Source: PBS
Dec-14
1,200
Dec-15
India and Vietnam have successfully penetrated the Chinese market,
replacing Pakistan as the largest Cotton Yarn supplier to China.
1,500
Sep-15
Monthly textile exports (US$ mn)
Jun-15
Textile exports came in 9.2% YoY (or US$742mn) lower at US$7.35bn
during 7MFY16, where we believe the overriding factor behind dismal
textile exports have been lower demand of Cotton Yarn (-32% YoY),
mainly from China.
Mar-15
Dec-14
Pakistan textile exports in Jan-2016 recorded a ninth consecutive YoY
decline to clock in 10.5% YoY lower at US$1.08bn. However, a 3.9% MoM
uptick was witnessed given higher seasonal demand during the month.
Sep-14
Mar-15
7MFY16
Source: PBS
Source: PBS, Value=US$mn, Price=US$/quantity unit, Quantity=MT
*Quantity=TH.SQM, **Quantity=TH.DOZ
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Page 1
February 23, 2016
MORNING BRIEFING
We believe the overriding factor behind dismal textile exports have been lower
demand of Cotton Yarn from China (overall 32% YoY decline in quantity exported
in 7MFY16), as the segment’s exports declined the most by US$372mn (or 32%
YoY) during 7MFY16 and halved in Jan-2016 compared to Jan-2015 (US$88mn vs.
US$167mn). India and Vietnam have successfully penetrated the Chinese market,
replacing Pakistan as the largest Cotton Yarn supplier to China.
Pakistan m arket statistics (Feb 22, 16)
ValueValue-added segments fare slightly better
PSX Market Cap. (US$ bn)
61.73
Total Volume (Shares mn)
133.31
Value-added segments fared slightly better, however they too felt the pressure of
(1) relatively stronger PKR vis-à-vis peers, (2) soft commodity prices and (3)
slowdown in global trade. Bed wear and Readymade garments segments recorded
-7% YoY and +4% YoY growth in exports during 7MFY16. As per our analysis,
~60% of the decline in textile exports during 7MFY16 is due to lower quantity sold
whereas the remaining 40% is owing to lower product prices.
Also in Focus
KSE-100 Index
30,677.68
Previous KSE-100 Index
31,011.77
-334.09
Change from last closing
-1.08%
Change from last closing (%)
6,472.57
PSX Market Cap. (Rs. bn)
Traded Value (Rs. bn)
5.44
Traded Value (US$ mn)
51.91
17,909.20
KSE-30 Index
Change from last closing
-162.28
Change from last closing (%)
-0.90%
Futures Volume (Shares mn)
Futures Value (Rs. mn)
13.87
784.88
Futures Spread
8.25%
Source: PSX
Oil import bill 38% YoY in 7MFY16
As per data released by Pakistan Bureau of Statistics (PBS), oil import bill for Jan2016 clocked-in 14.3% YoY lower at US$482mn against US$563mn in Jan-2015.
Hence, oil import bill during 7MFY16 declined by 38% YoY to US$4,663mn
compared to US$7,509mn in 7MFY15.
PSX valuations
2014A 2015A/E
2016F
P/E (x)
7.5
7.4
7.2
P/BV (x)
1.4
1.3
1.2
Div. Yield (%)
6%
7%
7%
Earnings grow th
9%
0%
4%
Source: JS Research
Page 2
February 23, 2016
MORNING BRIEFING
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