The country’s textile sector having enjoyed the government’s sympathy for the longest time has emerged as a leading exporter and one of the major employers in the country.
The sector’s importance in any federal budget therefore cannot be ignored, said analysts at InvestCap Research.
They said FBR had replaced the zero-rating regime for the textile industry with a 2% value added tax for the textile value chain, both for registered and unregistered entities. The refunds, under the scheme, would be available against exports, however, refunds to the unregistered entities would not be allowed.
“Such alteration is expected to facilitate the registered textile companies more as compared to the unregistered segment,” viewed Abdul Azeem, an analyst at InvestCap Research. Being a major exporter and key employer, the government had been giving distinctive attention to this sector, he added.
During last couple of years, the analyst said, the power shortage had been a major dampener for the profitability of the sector, specifically in Punjab which is the key manufacturer of textile items in the country.
Therefore, the new government has placed power sector reforms on top of its priority list. “We expect the production of textile sector to improve as the load-shedding in this sector reduces. This coupled with better production, stable cotton prices both internationally and locally is expected to make the sector more profitable,” said Azeem.
Higher portfolio value is expected to be beneficial for NML and NCL as they have significant investments in their associated companies, said the analyst. NML is trading at a PE multiple of 6.3x and offering a dividend yield of 5.6% on FY13 estimates. Similarly, NCL is trading at PE of 4.5x and offering a dividend yield of 7.2% on FY13 estimates.
Textile output to improve as energy crises top of government’s priorities
