HCAR Anticipated to Report Significant Earnings Growth; NCL Expected to Post Improved Margins

Karachi, HCAR is predicted to showcase a remarkable increase in its earnings for 2QMY24, while NCL is set to announce its 1QFY24 results with anticipated improved margins on Monday. Both companies are seeing favorable factors, including enhanced sales volumes for HCAR and a boost from declining cotton prices for NCL.

According to AKD Securities Limited, the board of HCAR is poised to release its 1QMY24 results next month. It is anticipated that the company will record earnings of PkR1.4bn (EPS: PkR9.9), a substantial increase from the PAT of PkR145mn (EPS: PkR1.0) in the prior quarter. This sharp rise is attributed to a 3.1xQoQ improvement in topline, reaching PkR15.3bn, a leap from PkR3.8bn in 1QMY24. This is primarily a result of the company witnessing a 3.2xQoQ surge in sales volumes after previous sales were hampered due to LC restrictions. Furthermore, gross margins are projected to reach 12.8%, a significant recovery from the previous -3.9%, credited to better fixed cost absorption and a 7.3%QoQ decrease in CRC prices. Operating costs are predicted to climb by 23%QoQ, mainly due to heightened distribution expenses. Notably, for the 1HMY24 period, the earnings per share are estimated to be PkR10.9, marking a 4.6xYoY increase.

In parallel, the board of NCL is preparing to announce its 1QFY24 results on Monday. Expectations indicate the company will report earnings of PkR960mn (EPS: PkR4.0), doubling from the PAT of PkR448mn (EPS: PkR1.9) in 4QCY23. This upward trajectory in earnings is attributed to projected higher gross margins, thanks to a drop in local cotton prices. The company’s topline is anticipated to see a modest rise by 2%QoQ and 38%YoY, standing at PkR21.1bn, compared to PkR20.5bn in the previous quarter. A significant factor for this annual growth is the appreciation of the US dollar (up 32%YoY). Moreover, gross margins for the company are expected to reach 17.9% in the current quarter, an uplift from 14.1% in 4QCY23, largely propelled by the fall in local cotton prices paired with enhanced domestic production.

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