Introduction to Business

Finance – Project

Nishat Mills
Limited Pakistan
By
Sardar Osama
Sobia Sheikh
Haris Khan
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Table of Contents
Brief Introduction:....................................................................................................................................2

Mission Statement (Taken from Company’s Profile).............................................................................3

Vision Statement (Taken from Company’s Profile)................................................................................3

Macro Environmental Analysis................................................................................................................3

Political Factors............................................................................................................................3

Economic Factors.........................................................................................................................3

Sociocultural Factors....................................................................................................................4

Technological Factors...................................................................................................................4

Nishat’s Industries:...................................................................................................................................4

Nishat’s Competitors.................................................................................................................................4

Analyzing Stock Prices of Nishat..............................................................................................................5

Some Graphs from Above Data................................................................................................................7

FREE CASH FLOW....................................................................................................................7

ASSETS (in ,000)..........................................................................................................................7

Enterprise Value (billions pkr)...................................................................................................8

Nishat’s Competitor’s Brief Analysis.......................................................................................................8

Competitor’s Asset Turnover Ratio:...........................................................................................8

Competitor’s P/E Ratio:...............................................................................................................8

Nishat’s General Analysis.........................................................................................................................8

Nishat’s Debt Paying Ability.....................................................................................................................9

Quick Ratio...................................................................................................................................9

Current Ratio..............................................................................................................................10

Nishat’s Asset Efficiency.........................................................................................................................10

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Nishat’s Growth Prospect.......................................................................................................................10

Nishat’s Corporate Structure.................................................................................................................10

Nishat’s Total Debt..................................................................................................................................11

Comparison of Estimated Price to the Current Stock price.................................................................11

Is Nishat or Its Shares a Good Buy?......................................................................................................11

References................................................................................................................................................12
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Nishat Mills Limited Pakistan

Brief Introduction:
Nishat mill is owned by the business tycoon of Pakistan, Mian Muhammad Mansha. Nishat Mills
Limited is the flagship company of Nishat Group. It was established in 1951. The company is listed
on all three stock exchanges of Pakistan. His son Mian Umer Mansha is the Chief Executive
Officer (CEO) of NML and another son Mian Hassan Mansha is the Chairman of Board of
Directors of NML.

This group includes following giant companies:

 Adamjee Insurance Limited

 DG Khan Cement Company Limited
 Lalpur Power Limited
 MCB Bank Limited
 Nishat (Chunian) Limited
 Nishat Power Limited
 Pakgen Power Limited.
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Another prominent quality of Nishat Mills Limited is that one the largest vertically
integrated companies in Pakistan; that is the company also owns its suppliers, distributors,
and retailers aside from its core business.

Mission Statement (Taken from Company’s Profile)

To impart highly qualitative goods to consumers and explore new avenues to
market/increase sales of the organization using perfect management and encourage a stable and
flexible team, so that to get reasonable prices of goods of the Organization for long-lasting and
steady growth and expansion of the firm.

Vision Statement (Taken from Company’s Profile)

To turn the Organization into a latest, up-to-date and flexible yarn, unstitched cloth and
processed dresses and completed cloth producing Firm that is completely equipped to serve a
prominent part on ong-lasting basis in the economy of the country. To take the Organization into
a latest, up-to-date and changeable power generating Firm that is entirely equipped to serve a
remarkable role on long-lasting and environment-friendly basis in the economy of the state.

Macro Environmental Analysis

Macro environmental analysis includes many factors:

Political Factors

Economic Factors

Sociocultural Factors

Technological Factors

We will discussed it one by one,

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Political Factors
As political factors great role for any organization and their strategies. NML actually
have some role in political process of Pakistani government. Main Muhammad Mansha was a
great supporter of Main Muhammad Nawaz Sharif and he actually support it. But they have
some issues with the current government of Imran Khan Party (PTI). Few allegations of
corruption was also noticed on top management of NML.

Economic Factors
As Economy plays a key role for any business, so NML is also affected with the changes
in economic policies of government and its overall country economy. As NML is one of the
leading exporters of Pakistan, so it is greatly affected due to the recent devaluation of currency of
Pakistan which soars above 160 pkr per dollar. Moreover due to the recent pandemic situation in
Pakistan the company will greatly affected because of closure of company and worst economic
situation of Pakistan.

Sociocultural Factors
Nishat mainly produces and sells clothes, as mentioned before, and clothes
represent culture. So, all the cloth designing and printing decisions made by Nishat Mills Limited
are directly affected by sociocultural element of Pakistan.

Technological Factors
Nishat is known for being heavily equipped with highly sophisticated machinery
for clothes manufacturing. So, any technological shift causes Nishat Mills Limited to change its
technological equipment. The recent digitization movement in Pakistan recognized them to make
improvement in technology.

Nishat’s Industries:
The group has presence in all major sectors including Textiles, Cement, Banking,
Insurance, Power Generation, Hotel Business, Agriculture, Dairy and Paper Products. Today,
Nishat Group is considered to be at par with multinationals operating locally in terms of its
quality products and management skills. Following is the list of companies in the group.
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 Adamjee Insurance Limited

 DG Khan Cement Company Limited
 Lalpir Power Limited
 MCB Bank Limited
 Nishat Chunian Limited
 Nishat Power Limited
 Pakgen Power Limited

Nishat’s Competitors
There is a large number of competitors of Nishat. Jubilee life insurance in insurance companies.
Lucky and kohat cement limited in cement industry. Allied Bank Limited and Habib bank
Limited in banking sector. GulAhmed and Zara in fabric industries etc.

Analyzing Stock Prices of Nishat

Now we have to analyze the stock prices of NML. We have taken quarterly stock prices from
March 1st 2014 till today (25/7/2020). This will show us the company performance over time.

The graph is shown below:

Quaterly Stock Prices Of Nishat Mills Limited

180
160
140
120
100
Prices (in pkr)

80
60
40
20
0
14 14 14 14 15 15 15 15 16 16 16 16 17 17 17 17 18 18 18 18 19 19 19 19 20 20 20
/ 20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 5
3/ 6/ 9/ 12/ 3/ 6/ 9/ 12/ 3/ 6/ 9/ 12/ 3/ 6/ 9/ 12/ 3/ 6/ 9/ 12/ 3/ 6/ 9/ 12/ 3/ 6/ 27/
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Now by analyzing the graph it clearly shows that NML stock prices was almost same from
March 2014 to June 2016. However it shoot up gradually y reaching to the highest point of 165.
After that it gradually came down. March 2020 can be seen as worst scenario for NML. This
happen because of the pandemic situation all over the world due to closure of industries.

6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019

Ratio Analysis:

Growth Analysis

Sales Growth -5.9581% -6.2520% 2.6010% 9.0998% 18.1836%

Free Cash Flow Per Share 0.95 8.77 1.67 2.37 3.47
Growth
Net Income Growth -6.5725 13.51% -8.78% 13.01% 6.76%

Enterprise Value (billions pkr) 55.24 46.65 65.1 63.15 53.88

Inventory and turnover analysis 3.7751 3.4687 3.528 3.4447

Profitability: 3,911,925000 4,923,03800 4,262,342000 4,097,127000 5,859,048000

0
Return on common equity 7.70 6.85 6.50 7.31 7.61

Return on assets 5.43 4.9 4.52 5.2 5.21

Return on capital 7.65 6.78 5.24 6.10 8.38

PX Last

Book value 249.04 252.89 270.07 283.38 291.87

Dividend per share 11.13 14.00 12.12 11.65 16.66

Liquidity:
Quick Ratio 0.92 1.02 0.87 0.96 0.82

Current Ratio 1.59 1.65 1.48 1.58 1.46

Balance Sheet Analysis:

Assets (in ,000) 124,170,162 124,236,865 136,567,678 140,031,082 149,781,129
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Liability (in ,000) 36,606,648 35,319,265 41,612,074 40,395,759 47,158,635

Cash Flow Analysis:        

Cash Flow Growth -32.492% 48.12% -151.61% 173.79% -160.28%

Free Cash Flow 6,719 9,953 (5,136) 3,790 (2,284)

Debt Factors:
Debt to Equity Ratio 30.0401 30.7098 34.8214 32.2226

Some Graphs from Above Data

FREE CASH FLOW

10

4
free cash flow
2

-2

-4

-6
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ASSETS (in ,000)

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160,000,000

140,000,000

120,000,000

100,000,000

80,000,000 Assets (in ,000)

60,000,000

40,000,000

20,000,000

0
2015 2016 2017 2018 2019

Enterprise Value (billions pkr)

70

60

50

40

30

20

10

0
2015 2016 2017 2018 2019

Enterprise Value (billions pkr)

Nishat’s Weighted Average Cost of Capital (WACC)

WACC = 11.694%
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Calculation

WACC = (WACC cost of equity)(WACC weight of equity) + (WACC cost of

debt – after-tax)(WACC weight of debt – after-tax) + (WACC cost of preferred stock)
(WACC weight of preferred stock)

WACC = (16.8076)(0.626679) + (3.11)(0.373321) + (0)(0)

WACC = 11.694%

Nishat’s Competitor’s Brief Analysis

Competitor Name: GUL AHMED TEXTILE MILLS LTD PAKISTAN

Competitor’s Asset Turnover Ratio:

Competitor’s Asset Turnover Ratio 1.05

Competitor’s P/E Ratio:

Competitor’s P/E Ratio 4.65

Nishat’s General Analysis

Now in Table-2 we will puts light on Nishat’s general performance. It includes data from
company’s number of shares outstanding to marketable securities purchased to company’s asset
efficiency data. This table will clearly examine the company’s performance.
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NISHAT TEXTILE MILLS LTD PAKISTAN

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Company Name NISHAT MILLS LTD

PAKISTAN
Fiscal Year FY – 2019 06/30/2019
Current Stock Price PKR 91.40
Number of Share Outstanding 351,599,848
WACC 11.694%
Quick Ratio 0.71
Revenue Growth Year over Year 13.32

Price to Book Ratio 0.53

Net-Income - 1 Year Growth 8.13

Cash Flow -1 Year Growth 3.47

Inventories Turnover 3.94 %
Marketable Securities (including Cash) PKR 3,713.2m
Free Cash Flow (2,284) millions
Long Term Debt 4,171000000
Short term Debt 24,403000000
Book Value of Equity Rs. 296.04
(Tangible Common Equity)
Competitor’s Asset Turnover Ratio 1.05
Debt to Common Equity 36.98
(Total Debt to total equity)
P/E Ratio 4.52
Book Value per Share 291.87
Assets Turnover ratio 0.66
Growth Rate Free Cash Flow 3.47
COGS to Net Sales 89.17
Profit Margin 8.18%
Net Income 5,859,048000
EBITDA 11,211,441000
Competitor’s P/E Ratio 4.65

Nishat’s Debt Paying Ability

Quick Ratio
Liquidity ratios, current ratio and quick ratio help us to find out any company’s ability to pay
back its debt. In Nishat’s case, it appears that Nishat Mills Limited have had a quick ratio of 0.71
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in 2019 which shows that they will have to face hard situation to pay its depts. It shows that
NML’s all current assets except the inventory are almost 71% of the firm’s all current liabilities.
Hence it clearly explains that the firm will not be able to satisfy its short term obligations this
year.

Current Ratio
As the NML current ratio is 1.59 which clearly defines the bright picture of the company. Due to
this NML’s have the ability to satisfy its short-term obligations. The company’s current ratio for
2019 was 1.59 which gives the information that the firm’s all current assets are 159% of its all
current liabilities. Hence the firm has more current assets than it has current liabilities. .
Therefore, NML, according to current ratio, has the ability to pay its short-term liabilities.

Nishat’s Asset Efficiency

Now, to find the efficiency of company’s assets we have to look its Asset Turnover Ratio (ATR).
NML’s asset turnover ratio is 0.66 which means the firm’s total sales equal 66% of its total
assets. So for every 1 rupee worth of asset added to firm’s total assets increases firm’s sales by
0.66 rupees. Now secondly by looking its major competitor which is Gul Ahmed and there asset
turnover ratio is 1.05 which is far better than that of Nishat. Therefore, as per the ATRs of NML
and its competitor, it can easily be concluded that Nishat’s assets are not efficient enough as
compared to other firms in the industry.

Nishat’s Growth Prospect

Now, Price-to-Earnings Ratio or P/E Ratio will predict a firm’s growth prospects. NML has had
a price-to-earnings ratio of 4.52 in the year 2019 which tells that the organization’s market price
per share is 4.52 times its earnings per share. It also indicates that, for 1 rupee earning on the
firm’s shares, an investor is willing to pay 4.52 rupees. Now to compare its major compactor P/E
ratio we get Gul Ahmed had a P/E ratio of 4.65 in 2019 which is slightly better than Nishat’s P/E
ratio. To sum up, NML’s growth prospects are good but not as good as other companies in the
industry.
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Nishat’s Corporate Structure

Now to find the company corporate structure to know how the company will raise capital we will
use Debt-to-Equity Ratio. 36.98. NML’s debt-to-equity ratio is 36.98 which indicates that the
firm’s total liabilities are 36.98 times its total stockholders’ equity. In this case, liabilities of
NML exceed its stockholders’ equity by a very large margin, which makes the company very
risky because it is having a high dose of debt.

Nishat’s Total Debt

Total Debt = Short Term Debt + Long Term Debt

Total Debt = 24,403000000 + 4,171000000

Total Debt = PKR 28574000000

Comparison of Estimated Price to the Current Stock price ( 2018)

Name Values
Value of Operations PKR 7870.381 millions
Total Corporation Value PKR 78231.872 millions
Intrinsic Value of Equity PKR 12850.003 millions
Intrinsic Value of Stock PKR 36.54722
Market Value Added PKR -42053.118 millions
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Is Nishat or Its Shares a Good Buy?

Analyzing the above table that gives data used by investors, we can say that value of operations,
total corporation value, and intrinsic value of equity do not tell much about whether any investor
should buy Nishat Mills Limited or its shares or not. However, intrinsic value of stock and
market value added do tell a negative tale about NML. Intrinsic value of stock is too smaller than
the current price per share. It is highly risky for investors to buy NML’s shares because the
expected price per share is PKR 54.87 whereas they are being sold at a price of PKR 140.92
which is a big difference. Additionally, market value added is also negative which means the
company, instead of gaining value for investors over time, has lost value over times. The firms
has gained nothing extra for its investors making sure of the fact that investors should not invest
in it. Therefore, the company is not a good buy.

References
http://www.scstrade.com/stockscreening/SS_CompanySnapShotYR.aspx?symbol=NML

https://www.investing.com/equities/nishat-mills-financial-summary
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http://nishatmillsltd.com/wp/index.php/financial-highlights-2-2-2/

http://gulahmed.com/investor-relations/financial-information/

https://www.infrontanalytics.com/fe-EN/30017FP/Nishat-Mills-Ltd-/financial-ratios

https://www.investing.com/equities/nishat-mills-balance-sheet

https://www.wsj.com/market-data/quotes/PK/XKAR/NML/financials/annual/cash-flow