INTERLOOP LIMITED (KSE: ILP)

An Unyielding Force in the Face of Economic Volatility

31ST December 2023 Sector: Industrial
Industry: Textile
Karachi Stock Exchange (KSE)

Recommendation: BUY Executive Summary

Initiating our assessment of Interloop Limited (PSX: ILP), we advise a BUY Recommendation
Exhibit 1: ILP Overview
based on a 1-year target price of PKR 87.58, resulting in a 21.6% upside potential against the
Target Price PKR 87.58
market price of PKR 72, as of 31 December 2023. The target price is a mix of discounted cash
Current Price PKR 72
flow and relative valuation models.
Upside 21.6%
ILP is Pakistan’s leading value-added textile manufacturing company being on top in terms of
Market Capitalization (millions) 92369 market capitalization. For the past few years company has experienced significant growth in
Shares Outstanding (millions) 1401 revenues and profits, the company was listed on PSX in 2nd quarter of 2019 while seeking funds
Free Float 20% to source its expansion plans. ILP’s immunity to COVID-19 reflected in its profitability has put
52 Week High 75.25 the company in the eyes of many investors as it jumps through every economic barrier and
52 Week Low 34.99 ensures no halt in its growth phase. ILP a beast emerged from shadows that keeps pushing
forward against all odds.
Exhibit 2
As per our internal assessment, we believe that the market has underestimated the ILP as (1)
Source: investing.com
better Textile export sector outlook, (2) Resilient to economic shocks, and (3) Strong Financial
Position despite increased costs. Therefore, we expect an increase in company revenues,
accompanied by positive announcements that are forecasted to be catalysts for an upward
trajectory in share price over the next 12 months.

A New Dawn: upswing in performance of textile exports

Exhibit 3: Product Mix
Source: Team Analysis
The industry’s current outlook has underestimated the potential of Interloop company. Despite
current downsides in the industry, the future outlook of the industry is positive. We believe
Interloop would perform better because:
• One of the reasons for the decline in textile exports was low demand conditions in Europe
resulting from global inflation. As the developed nations are recovering the demand will
soon bounce back.
• Various initiatives by the government to support export-oriented companies with news
hovering of a $50 billion export plan would reduce economic challenges

A Tough Beast: withstanding economic shocks

Exhibit 4: Business Categories
Source: Company filings, BCC analysis
While the country suffered from inflationary crises, gas shortages, and import restrictions
Interloop’s profit continued to increase. ILP’s future target of $700 million in revenue seems
achievable as:
• ILP's impressive profitability performance over the past years.
• Ability to retain its client base despite weak macroeconomic conditions

Armored Titan: strong financial position

ILP’s impressive performance has equipped us with a strong financial position, despite
increased costs in FY23, the company’s growth continued and we anticipate that ILP's focus on
agile manufacturing and new plants with the latest equipment will reduce operational costs.

Financial Highlights
FY19A FY20A FY21A FY22A FY23A FY24E FY25E FY26E FY27E FY28E
Revenues 37,478 36,303 54,962 90,894 119,200 152,713 189,286 229,633 268,195 309,884
Exhibit 5
Growth -3.14% 51.40% 65.38% 31.14% 28.11% 23.95% 21.32% 16.79% 15.54%
Source: Company filings EBIT 6,402 3,154 7,857 15,859 26,953 35,049 43,881 54,385 65,395 76,596
Growth -50.7% 149.1% 101.8% 70.0% 30.0% 25.2% 23.9% 20.2% 17.1%
Gross Margin 31.9% 21.7% 25.9% 28.7% 33.4% 33.6% 33.6% 34.0% 34.5% 34.9%
NOPLAT 6,211 3,022 6,671 14,518 24,817 32,340 40,489 50,181 60,340 70,675
Values in PKR millions
Company Overview
Interloop Limited, headquartered in Pakistan, is a vertically integrated Full-Family Clothing
company that has evolved beyond its origins in hosiery to a diverse product portfolio across all
ages, genders, and abilities, including Denim, Knitted Apparel, Seamless Activewear, spinning,
and other segments involving yarn dyeing and energy (Exhibit 4). Globally renowned for

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 Exhibit 6: Global Presence
Source: Company filings
Exhibit 7: Margin Breakdown
Source: Company filings, BCC analysis
Exhibit 8
Source: PBS, Analysts Research
manufacturing excellence, the company has positioned itself as a preferred partner for top
international brands and retailers (Exhibit 5). Interloop follows a Triple bottom-line approach,
emphasizing Planet, People, and Prosperity, and outlines a growth-led strategy with a customer-
first approach. The strategic focus includes maintaining leadership in hosiery, building
credibility in new categories, and becoming a full-family clothing supplier. Key drivers include
exceptional customer service, value-added services, and responsible business practices
(Research and Innovation, Design Studio, and Loop Trace).
Interloop operates on a global scale, with an organizational network spanning six countries. Its
industrial infrastructure includes well-equipped LEED-certified facilities in Pakistan, an
associate manufacturing facility in Sri Lanka, a contract manufacturing facility, and a sourcing
office in China. Marketing services offices are strategically located in the USA, Europe, and
Japan (Exhibit 6). As the largest listed textile company on the Pakistan Stock Exchange by
market capitalization, Interloop boasts an impressive annual sales figure of PKR 119,200
million. With a workforce exceeding 30,000 people from over 15 nationalities, it is among the
top exporters in Pakistan, contributing significantly to the nation's textile industry.
The primary drivers of Interloop’s revenue are its robust manufacturing capabilities and global
market presence. The company's consistent focus on maintaining a leadership position in
hosiery has been a significant driver, as evidenced by the substantial revenue figures of PKR
89,388 million (32% profit before tax and unallocated income and expenses) in 2023 (Exhibit
7). Beyond hosiery, diversification into new product categories, including Denim with PKR
12,650, Spinning PKR 7,949 Apparel with PKR 6,887, and Activewear PKR 767, reflects a
proactive approach to target a wide customer base. Expenses are managed through a
combination of operational efficiency measures and a commitment to sustainable practices.
Investments in digital transformation, such as Robotic Process Automation, ensure streamlined
operations, reducing labor costs and enhancing productivity. The company's dedication to
environmental consciousness, as evidenced by the transition to cleaner biomass fuel and water
recycling initiatives, showcases a proactive approach to managing costs while aligning with
global sustainability standards.

Industry & Competitive Overview

Exhibit 9
The textile sector is one of the most important sectors in Pakistan contributing to the country’s
Source: Pakistan Bureau of Statistics
GDP by about 8.5%. There exist multiple companies in this sector. Textile is also considered a
cash cow sector for Pakistan due to its export nature it stands in FY22 the overall export value
stood at $39.42B (MacroTrends n.d.) of overall exports the share of textile export is $19.4B
almost 49.21%. Reports indicate in FY23 the exports took a decline of 15% YoY to $16.5B. The
primary reasons were identified as the recession in Europe and the global slowdown.
Textile sector exports as of FY23 include 67% of value-added products. Value-added products
such as Knitwear, Bedwear, and Readymade garments. Exports of such products declined by
14%. While the basic textile witnessed an increase of 4% YoY other textile products also hiked
Exhibit 10 by 13%. Value added textile sector is expected to increase in the coming year as the global
Source: PBS, Team Analysis recession is expected to decline. Therefore, we expect that value-added products will rebound
US$ millions Sep-23 Sep-22
Annual and exports will increase in terms of volumetric terms.
Change

Raw Cotton (MT)

Cotton Yarn (MT)
4
114
0
76 50%
Sector Dynamics: Macroeconomic Challenges
Cotton Cloth (MT) 174 203 -14%
Other (MT)
Basic Textile
3
295
4
283
-23%
4%
The textile sector of Pakistan observed significant growth in 2020 during the period of COVID-
Knitwear 346 436 -21% 19 as the government adopted a smart lockdown, foreign orders were given to Pakistani
Ready made Garments 251 277 -9%
Bed Wear 233 267 -13% companies and Bangladesh and India were in the complete lockdown stage.
Towels
Value added
84
914
87
1067
-3%
-14% Despite the post-Covid Boom: The Sector faces various challenges: The textile sector
Other Textile Products
Total Textile Export
153
1362
175
1525
-13%
-11%
currently is facing high finance costs due to an increase in interest rates by SBP while pursuing
tight monetary policy to control inflation. The KIBOR currently stands at around 21.44%. The
Exhibit 11: Cotton Production
EFS and IEFRS initiatives by SBP provided financing to meet operating capital requirements
Source: SBP Annual Report, 2023
for export-oriented firms by a 3% discount from the policy rate. It has been observed that SBP
is gradually ending this subsidized financing scheme for exporters. Another major challenge
faced by industry is increasing power costs. In addition to that shortage of gas in Pakistan
remains another challenge, the government has increased gas prices for export-oriented
companies from Rs.1,100/- per MMBTU to Rs.2,400/- per MMBTU.
Textile Sector to improve: Government initiatives & Companies focus on renewable
energy: Textile policy 2025 aimed to boost value-added exports has taken various steps for the
sector’s development. The federal minister for commerce and industries sets a target of $25B
export target for next FY23, minister also assured that challenges are being handled to ensure
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 Exhibit 12: Textile Cotton Imports the industry’s growth. Many companies within the sector have started to focus on renewable
Source: PBS, Analysts Research energy to reduce dependency on fossil fuel power generation.

Textile Sector Driver: Cotton Production & Prices

Cotton Production rebounding: Cotton Production suffered a setback in the previous fiscal
year 2022 with a 34% decline due to floods production stood at around 5 million bales. In the
current FY2023, the commerce ministry announced a 71% year-on-year growth this year. The
government expects the production level at 12 million bales favorable weather conditions have
yielded better cotton crops this year.
Exhibit 13
Source: Team Analysis Cotton Prices: The industry has witnessed a shift from imported to local cotton (Exhibit 12)
Company Wise Textile setor profits
Shifting from imported to domestic cotton sourcing is probably driven by the enhanced quality
Symbol Market Profits Profits % of the recent cotton harvest and the cost-effectiveness of using local cotton when compared to
international prices. The Cotton local prices on average have a declining trend indicating that
Cap After tax After tax Change
PKR mn FY23 FY22

ILP 63,556 20,172 12,359 63.2%

the textile sector is going to benefit from high cotton yield and low prices in the coming year.
FML 36,933 8,969 3,408 163.2%
SAPT
SFL
26,028
23,153
3,291
5,121
7,016
6,215
-53.1%
-17.6%
Competitive Positioning
NML 21,947 12,166 10,312 18.0%
KTML
MEHT
16,810
16,001
2,407
1,202
4,741
3,178
-49.2%
-62.2%
Fierce Competitive Market: The Textile sector is highly competitive with around 50 organized
GATM
NCL
13,158
5,187
4,897
(999)
9,845
7,468
-50.3%
-113.4%
textile composite entities operating in the country out of which 30 are listed on the Pakistan
ZAHID 5,073 1,213 3,978 -69.5% Stock Exchange. The firms have different products and most of them manufacture value-added
Total 227,846 58,439 68,520 -14.7%
Top 10 based on Market Cap goods including hosiery, Knitwear, towels, garments, and denim. Few players in the industry
Exhibit 14: Profitability have their yarn manufacturing facility in which they also sell yarn and unprocessed fabric.
Source: Company filings, Team Analysis Improved Efficiencies: The players in the industry have applied backward and forward
integration strategies to increase operational efficiencies. The company’s focus is on rapid
expansion and increasing its capacities to increase its profitability. Simultaneously focusing on
alternate power sources and continuous investments in solar power generation the sector is
adapting to current challenges related to power and gas by shifting to more efficient energy
alternatives.

Financial Analysis
Exhibit 15a: Dupont Analysis Profitability: ILP Limited demonstrated a positive trajectory in profitability metrics from FY18
Source: Team Analysis to FY23 (Exhibit 14). The Gross Profit Margin increased from 29.37% to 33.45%, showcasing
the company's ability to retain a larger portion of revenue after accounting for the cost of goods
sold. The Operating Profit Margin exhibited consistent improvement, rising from 14.42% in
FY18 to 22.74% in FY23, indicating enhanced operational efficiency. Despite some
fluctuations, the Net Profit Margin reached 16.92% in FY23, reflecting overall profitability.
Return on Assets (ROA) showed variability, ranging from 4.2% in FY19 to 18.2% in FY23,
highlighting ILP's capacity to generate profits from its average total assets. ILP has successfully
navigated challenges, positioning itself as a financially strong player as well as resilient in a
competitive industry landscape.
Dupont Analysis: ILP’s notable improvement in Net Profit Margin (NPM) from 13.9% in 2019
Exhibit 15b: Return on Equity to 16.9% in 2023 (Exhibit 15a) signifies an increasing ability to convert revenue into net profit,
Source: Team Analysis indicating improved operational efficiency and profitability over the five years. The slight
decline in Asset Turnover between 2019 to 2023 suggests that the company became slightly less
efficient in generating revenue from its average total assets (Exhibit 15a). Despite this decline,
the company's positive Net Profit Margin implies effective cost management and value creation
from the revenue generated. Financial Leverage, which gauges the use of debt to magnify
returns, increased from 2.727 in 2019 to 3.004 in 2023. The decline in ROE from 38.5% in
FY19 to 10.2% in FY20 (Exhibit 15b) is a significant drop and might be influenced by the
sharp decrease in net profit margin to 4.9% (due to the loss in the denim segment) and a slight
decline in asset turnover. However, the subsequent recovery, reaching 54.7% in 2023, indicates
improved profitability and operational efficiency. The role of financial leverage is evident in
Exhibit 16: Return on IC enhancing returns, reflecting strategic financial management.
Source: TeamAnalysis ROIC: The varying ROIC values suggest that the company's profitability in invested capital
has improved significantly after a sharp decrease from 21.67% in FY19 to 9.27% in FY20
(Exhibit 16). The positive EVA indicates that, overall, the company has created an economic
value of (PKR 6,485,895 in thousands), suggesting a positive net impact on shareholder value.
Liquidity Position: Over the observed period from FY18 to FY23 (Exhibit 17), the current
ratio trended positively, reflecting an improvement from 0.861 to 1.137. A higher current ratio
is generally favorable in the textile industry, as it suggests a company has sufficient short-term
assets to cover its liabilities. The quick ratio, despite having some fluctuations, remained
relatively stable, ranging from 0.559 to 0.754. Stability in the quick ratio is important in the
textile sector where inventory turnover can vary. ILP's ability to maintain this stability indicates
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 Exhibit 17: Liquidity Ratios
Source: Company filings, Team Analysis
Exhibit 18: Cash Conversion Cycle
Source: Team Analysis, Refinitiv
Exhibit 19: CFI Per Sales
Exhibit 19: CFI Per Sales
Source: Team Analysis
Exhibit 20a: Productivity Analysis
Source:Company filings, Team Analysis
Exhibit 20b: Productivity-2023
Source: Team Analysis, Refinitv
Exhibit 21: Interest coverage ratio
Source:Company filings, Team Analysis
Exhibit 22: Altman Z score
Source: Team Analysis
a consistent ability to cover immediate liabilities without heavy reliance on inventory. In FY18,
the working capital to total assets ratio was -0.08, showing short-term liabilities surpassed
assets. However, this improved over time, reaching 0.06 in FY23, indicating a positive shift and
more efficient asset utilization for day-to-day operations. These trends suggest an enhanced
liquidity position and improved operational efficiency for the company.
Efficiency: The efficiency metrics of ILP Limited showcase adaptability to market dynamics.
The lengthening payment and collection periods, along with variations in inventory turnover,
are common in the textile sector, Inventory turnover measures how quickly a company sells its
inventory. The decreasing trend in inventory turnover from 3.905 in FY19 to 3.359 in FY23
implies a slowdown in ILP’s inventory to be converted into sales. The collection period
represents the average number of days it takes for the company to collect receivables (Exhibit
18). The increase from 106 in FY19 to 116 in FY23 suggests a lengthening collection period,
possibly indicating changes in customer payment behavior or credit policies. DSI calculates the
average number of days it takes to sell inventory. The fluctuating trend, from 93 in FY19 to 109
in FY23, implies variations in the efficiency of inventory turnover and sales cycle duration over
the period. DPO measures the average number of days a company takes to pay its suppliers. The
decreasing trend from 45 in FY18 to 14 in FY23 suggests a shorter period for settling payables,
potentially indicating improved cash management or negotiation of favorable payment terms
with suppliers. ILP's positive liquidity trends suggest it is well-positioned to navigate short-term
financial obligations effectively.
Growth: ILP’s ash flow from investing activities (CFI) to sales, shows negative values over
FY19 to FY23 (Exhibit 19). It is considered favorable as it reflects a deliberate and strategic
investment in the company's growth and expansion. This indicates that the company is utilizing
its cash flow to make investments (acquiring new assets and plants, expanding operations, and
making strategic investments) that are expected to generate future returns.
Productivity: The overall trends in Net Income per Employee, Sales per Employee, and Total
Assets per Employee of ILP indicate positive improvements in productivity over the years
(Exhibit 20a). These metrics suggest that the company has become more efficient in generating
net income, sales, and managing assets on a per-employee basis. This efficiency is attributed to
improved business processes (technological advancements), increased employee skill sets
(training and skill development), or effective utilization of resources (continuous process
improvement initiatives), contributing to overall productivity gains for the company (Exhibit
20b).
Solvency: The declining trend in debt to asset ratio from 0.562 in FY18 to 0.476 in FY23
indicates a decreasing reliance on debt to fund the company's assets, reflecting improved
solvency and potentially reduced financial risk. The Interest Coverage Ratio gauges the
company's ability to meet interest payments with its earnings. The fluctuating trend from 9.282
in FY18 to 4.905 in FY23 suggests variations in the company's capacity to cover interest
expenses. A higher ratio indicates better coverage, while a declining ratio signals increased
financial risk (Exhibit 21).
The Altman Z-Scores consistently falling around 2.3 over the period of FY19 to FY23 suggest
a persistent but moderate risk of financial distress (Exhibit 22). The Z-Score consistently below
2.60 indicates a moderate risk of bankruptcy. Despite not entering the distress zone (Z-Score <
1.10), the proximity to this threshold suggests potential vulnerability to financial distress. M-
Score: M-Score > - 1.78: RED FLAG; likely earnings manipulation, -2.22 < M-Score < -1.78:
YELLOW FLAG; possible earnings manipulation, M-Score < -2.22: GREEN FLAG; unlikely
profit manipulation (Exhibit 23). ILP has demonstrated positive trends in its financial
performance, with notable growth in sales, improvements in gross margin, and effective expense
management. However, the presence of fluctuations in the Day Sales in Receivables Index
(DSRI > 1 in FY21 and FY22 – might be due to a change in credit policy to boost sales), Gross
Margin Index (GMI > 1 in FY21, FY22, and FY23 shows the probability of earnings
manipulation) raises attention to potential volatility in these areas. Additionally, the consistent
value in the Asset Quality Index (AQI=1) is considered favorable as it indicates a lower chance
of asset quality manipulation, The depreciation index lower than 1 indicates that assets are
depreciated at an appropriate rate, and the decrease in leverage index from 1.10 in FY19 to 0.92
in FY23 shows the decrease in interest payment because of repayment of debts. It's noteworthy
that the M Score indicates a lower risk of financial manipulation in FY23 as compared to FY21
and FY20, suggesting a degree of reliability in the reported financial data and less likelihood of
earnings manipulation.
Investment Summary
We recommend a buy on Interloop Company with a 1-year target price of PKR 86.93 per share,
a 20.74% upside potential against a market price as of December 31, 2023. The company has
provided an excellent profit margin over the years (Exhibit 14). We believe that the company
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 Exhibit 23: M-Score
Source: Team Analysis
Exhibit 24: Gross and Profit Margins
Source: Team Analysis
Exhibit 25: Revenues
Source: Team Analysis
Exhibit 26: Hosiery Utilization
Source: Team Analysis
Exhibit 27
Source: Team Analysis
Target
Methodology Weightage
Price
DCF 81.12
Relative (Local
72.47
Cometitors)
Relative (international
107.82
Cometitors)
Intrinsic Value 86.93
Upside/downside 20.74%
will continue to outperform and its strong position would help the company to navigate through
current industry challenges through its continuous expansion and leveraging the latest
technological machines in its plants.
Stable demand Conditions ahead despite macroeconomic challenges
The post covid that put the Pakistani textile sector back on its roadmap since then companies
have been getting orders from many renowned international brands (Exhibit 5). Interloop has
left no stone unturned to grab the larger portion of the pie. The Company has observed an
increasing flow of international orders with about 31.14% growth in revenues in FY2023
(Exhibit 15). We estimate that as the world recovers from global recession the company is likely
to receive more orders. The Interloop’s main product Hosiery will continue to increase and will
revert to its historic average utilization of 85% (Exhibit 16). While the Company also plans to
convert into full family clothing brand hence, we estimate that the company is likely to increase
the apparel section with the first commercial output expected to ship to EU customers in the
coming FY24, we expect the apparel section to continue to increase in terms of orders received
and by FY28 the apparel section would be operating at 37% capacity.
Take off Stage: Expansion in every Segment
Interloop Textile has experienced significant growth with the denim plant planned for a 100%
capacity increase to 12 million units expected to be completed in FY2025. The recent expansion
in the apparel Section in FY23 made it capable of 22 million annual garments production
capacity. The Plant is equipped with renewable energy and, efficient processes. We expect that
the company will make apparel and denim as flagship products. The Company’s current flagship
product Hosiery has witnessed expansions every year except FY23. We estimate that the
company will continue to focus on its flagship product and expand it in the coming years, taking
advantage of the Europe market’s recovery. The Interloop currently has 66.3 million dozen
capacity of Hosiery. Interloop currently stands at the number 1 company in terms of market
capitalization (Exhibit 13) and has experienced 63.2% growth in after-tax profits in FY23
where the majority of players in the industry had declining profits. We expect the company to
utilize its investments and generate maximum results by investing in state-of-the-art plants and
we conclude that the strong market position would increase investor’s confidence in the
company.
Management Optimistic View: Future Growth Plans
Interloop’s management plans to become a full family clothing partner of choice which they
plan to achieve by improving the manufacturing process by following the Agile method. The
management consistently attracts new clients through continuous efforts in green practices. The
management’s target for FY26 is to increase revenue to $700M. Our proforma income statement
(Appendix 1) shows that by FY26 gross sales stand at PKR 233.8B converting to USD we
estimate FY26 revenue to be $657M which is $43M short of management’s target despite using
conservative assumptions. Therefore, we believe that the company may achieve its target of
$700M with management's continuous focus on improving value-added services. The
management's efforts to reduce its carbon footprint by 25% in FY2 6 would further strengthen
its relations with international clients. Hence, we believe that company management’s positive
attitude will drive the company’s value.
Valuation
65%
We have estimated the target price of PKR 86.93 against the market price of PKR 72 as of
10% December 31, 2023. The Intrinsic value was calculated as the weighted average of Discounted
Cashflow (DCF) and relative valuation methodologies (Exhibit 17), with 65% weight to DCF
and 35% to relative valuation within 35%, 10% allocated to relative valuation from local
25%
competitors and 25% allocated to international competitors. We believe that our weightage mix
reflects a balance between market expectations and since the company is export-oriented
therefore more weight is allocated to RV through international competitors, more weightage to
DCF is given due to the fact it is the most preferred technique and it considers operational and
industry factors.
Discounted Cashflow Model
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 Exhibit 28 We have estimated the intrinsic value of PKR 81.12 using free cash flow to the firm, we used a
Source: Team Analysis WACC of 22.2%, and because it is an export-oriented company we set our terminal growth
Hosiery Capacity (Dzn '000) equivalent to global GDP at 3%. The Forecast horizon was set for 5 years through FY28. The
68000

66000
10.00%
9.00% terminal value was calculated using the perpetuity growth method.
8.00%
64000
7.00%

Revenues: We have forecasted the revenues based on the utilization method in which we
62000 6.00%
60000 5.00%
4.00%

observed the trend of historic utilization of total capacity and also considered the expansions
58000
3.00%
56000
2.00%
54000

52000
1.00%
0.00%
that increase total capacity. The Interloop has 5 segments. Hosiery: we determined the historic
FY19 FY20 FY21 FY22 FY23

Installed capacity % Capacity inc utilization of the hosiery segment and observed it has been operating at around 85%. However,
due to floods in FY22, the company had observed a decline in utilization due to the
Exhibit 29: Cost of Equity
unavailability of local raw materials. Additionally, every year expansion had also been observed
Source: Team Analysis
(Exhibit 28). We expect that this segment will bounce back and operate at 85% utilization by
Input Value FY28. Spinning: more than 50% of the production from spinning is consumed in-house, we
expect the trend to continue by FY28 and estimate the utilization will follow the historic trend
Risk free rate 21.50% and bounce to 87% by FY28. Denim: The company is expected to increase its capacity by 100%
Beta 0.94
in FY25 financial reports indicate that all necessary infrastructure is in place. We believe that
the new plant will begin at 35% utilization and by FY28 the new plant will reach 50% utilization
EMRP 7.00% while the old plant will operate at 80%. Apparel: With the recent expansion of apparel and the
company’s vision of a family clothing brand. We estimate that the apparel segment will grow
Cost of Equity 28.05%
from 29% utilization in FY24 to 37% utilization by FY28.
Margins: We estimate that company gross margins would hover around 34 to 36% the main
Exhibit 30: Cost of Debt
reason for that is the company is now shifting to procure local cotton as it serves as a cheaper
Source: Team Analysis
alternative and with better cotton yield in FY23, we believe that local cotton would be more
Input Value efficient in terms of price and quality. The net profit margins are expected to increase over the
years as we believe that high-interest rates would gradually decline and the company would
% Long term debt 26.7% incur low financing costs, the profit margins are expected to increase from 17% to 22%.
Capital Expenditure: Interloop being in the growth phase has incurred significant capital
% Short term debt 73.3% expenditures various expert reports indicate that the company has incurred $150M capital
expenditure and another $150M expenditure remaining to take place by FY26 for the denim
Cost of LT 22.54% plant and its goal for becoming family clothing brand. For FY27 we expect the company will
expand the spinning segment based on historic trend which would be another capital
Cost of ST 10.86% expenditure.
Cost of Capital: The WACC was estimated by taking the market value of equity and debt value
the capital structure portion was taken based on the current standing of the company. The cost
Cost of Debt 13.98%
of equity was obtained using CAPM with risk-free taken as 1 1-year Pakistan treasury bill of
21.5% to reflect alternate investment opportunity available for 1-year investment. The Beta for
Exhibit 31: DCF Output
the company has been calculated by using the re-levered method and covariance of the market
Source: Team Analysis
with the firm’s price data. However, since the competitor's size and product nature varied
Base Case PKR '000 significantly ILP’s flagship product Hosiery the highest sales ratio (75% as of FY23) product.
Few competitors had similar offerings. On the other hand, the beta through statistical method
Terminal Value 262,587,720
PV of Terminal Value 96,238,382 had less than 60 observations as company price data was available since May 2019 therefore, a
PV of FCF 72,671,801 third alternative beta was used which was based on experts' estimates. Hence, the Beta was a
Value of Operations 168,910,183
Add: non operating assets 2,274,061
mix of all three alternatives due to issues found in re-levered and statistical techniques a low
Less: Debt 57,497,813 weight was assigned (Exhibit 29) we estimated the beta for ILP which is 0.94. Finally, taking
Value of Equity 113,686,431 the industry practice of a market premium of 7% we determined the cost of capital around 28%.
No. of Shares 1,401,447
Intrinsic Value 81
For the cost of debt, we prepared the debt schedule and took the weighted average based on the
Upside 12.67% debt value of long-term and short-term borrowings as of FY23 which yielded the cost of debt
of 12.89%. Hence, using all inputs we estimated the WACC of ILP at 22.2%.

Exhbit 32: Relative (Local) Relative Valuation Technique

Source: Refinitiv, Annual Reports, BCC
We considered using relative valuation separately, by using only local competitors the target
price is PKR 72.466 per share indicating 0.65% upside potential, for the second part we used
international competitors (Refinitiv) and obtained a target price of PKR 107.82 with a premium
of 49.75% against the market price of PKR 72 per share (as of Dec, 31). We considered using
Price multiples and Enterprise multiples to obtain the above two results. (Damodaran 2012)
highlights the importance of using both price and enterprise multiples, as each expresses
different aspects of the company.
Company selection: we identified the companies as close peers that offered at least one similar
product type and the company must also be export-oriented. Additionally, our priority was to

6
 Exhbit : Relative (Int.) find a company that matched our flagship product, and market capitalization and targeted
Source: Refinitiv, Annual Reports, BCC similar markets to ILP We identified 10 companies. For international competitors.
Multiple selections: Initially, we used three multiples for each Price and Value multiple. P/E,
P/BV, P/S and EV/Sales, EV/EBIT, EV/EBITDA. The Price multiples mean and Enterprise
value multiple mean for all 3 values yielded a value of PKR 38 and PKR 70 respectively. Which
did not reflect the actual company’s value. Hence, we identified multiples (Exhibit 34) that
provided too low or too high values than average, we omitted those values and approached for
single Price multiple (P/E) by rejecting the other two due to (1) The companies different sizes
impacted Book Value which did not reflected true value (2) The peers had other products that
ILP was not offering due to which sales fluctuations was manipulating the mean. For value
multiples, we omitted the EV/Sales multiple reasons being the same as (2) and used the average
Exhibit 34 value of EV/EBIT and EV/EBITDA and obtained PKR 83 as the fair value of the company.
Source: Team Analysis Relative Positioning: Appendix __ shows the multiples results and the ILP standing for Price
Relative Results Summary multiples stands at 1 standard deviation from the mean indicating its position as closer to the
Alternate 1
Overall mean
Alternate 2
omitting outliers
Result industry average, when considering P/BV the ILP is 2 standard deviations away from reflecting
Local Competitors: ILP’s book value is 2 SDs away than the industry average. When assessing the position in terms
Price Miltiples 35 69
72.5 of overall Enterprise values the ILP again stands closer to average with 1 standard deviation
Value Multiples 64 76 from average. However, the EV/Sales multiple is 2 standard deviations away from the industry
International Competitors: average. When assessing the ILP’s relative position in the international market we observe that
Price Miltiples 166 95
107.8 industry multiples show high fluctuations and when adjusting for outliers we identified that the
Value Multiples 206 120 P/E and EV/EBIT of ILP are 2 standard deviations away from than average while other multiples
are one standard deviation away from the mean.
Exhibit 35a: US - SDGs
Source: UN website, Company reports Environmental, Social, and Governance
ILP’s commitment to environmental, social responsibility, and governance (ESG) is
deeply rooted in its mission and has gained it global recognition as a pioneer in
responsible manufacturing. The company embraces a circular approach, actively
participating in the Race to Zero initiative, and has set science-based emissions
reduction targets, making it a pioneer in the sector. From the installation of a water
recycling plant to the transition from coal to biomass fuel, ILP strategically addresses
Exhibit 35b: US - SDGs
its environmental impact, significantly reducing its carbon footprint. In a digital-first
Source: UN website, Company reports
era, the deployment of technologies such as Robotic Process Automation and the
proprietary traceability solution, LoopTrace, underscores the company's dedication to
transparency and accountability. ILP's Triple Bottom Line approach, focusing on the
Planet, People, and Prosperity, is not just a corporate philosophy; it's a testament to the
company's alignment with the United Nations Sustainable Development Goals
(Exhibit 35a and 35b). This commitment has earned ILP recognition, including The
Global Compact Best Practices Sustainability Award 2023.
Environmental | Stitching a Greener Future
Exhibit 36: Targets Vs Achievements
ILP demonstrates a steadfast commitment to environmental sustainability, driving
Source: Company reports and website
comprehensive initiatives across its value chain. From science-based emissions reduction and
renewable energy adoption to circularity practices and responsible waste management, the
company has achieved notable milestones (Exhibit 36). With a focus on reducing carbon
intensity, water conservation, waste diversion, sustainable material sourcing, and adherence to
global climate targets, ILP emerges as a leader in environmental stewardship within the textile
industry. Carbon: ILP, a participant in the Carbon Leadership Program, sets ambitious goals
for carbon reduction. Initiatives such as a Heat Recovery System, 8MW solar capacity covering
25% of energy needs, and transitioning to biomass-based fuel contribute to a complete phase-
Exhibit 37: Scope 1 and Scope 2 Emissions out of coal usage. The target for 2025, aligning with the company's commitment to
Source: Company Reports environmental responsibility, involves a 25% reduction in GHG emissions (Exhibit 37). Water:
Water conservation is a priority for ILP, with initiatives like Nano Bubble Technology achieving
a 95% reduction in water consumption and wastewater treatment plants reaching 20% recycling
capacity. The target for 2025 aims for a 25% reduction in water consumption, emphasizing the
company's commitment to SDG 6 (Clean Water and Sanitation). Waste: ILP's waste reduction
initiatives align with circularity principles, utilizing ZDHC Program practices and digital
sampling to eliminate waste. Wastewater treatment plants operate 24/7, adhering to ZDHC
standards, with plans for 100% diversion of waste by 2025. The company transforms pre-
7
 consumer and post-consumer waste into valuable textiles, contributing to a sustainable material
Exhibit 38: Social
Source: Company reports and website footprint. Materials: ILP's responsible sourcing initiatives involve organic cotton
empowerment, transparent supply chains through Looptrace technology, and material
innovation with regenerative fibers. The target for 2025 is set at 70% sustainable raw materials,
ensuring traceability from farm to floor. Moreover, ILP values sustainable partnerships,
emphasizing ethical practices and a green purchasing strategy to assess suppliers for their
environmental impacts and ensure an eco-friendly supply chain. Science-Based Targets: As
Pakistan's first company with Science-Based Targets Initiative (SBTi) approval, ILP commits
to keeping global warming below 1.5 °C. The company collaborates across the value chain for
industry-wide decarbonization, tracking and reducing carbon intensity since 2018. LEED
Facilities: ILP showcases environmental efficiency with LEED-certified manufacturing plants,
Exhibit 39a: Value Distribution including Gold and Platinum certifications.
Source: Company reports
Social | Diverse Minds, Inclusive Paths

ILP prioritizes its social responsibility, embodying a commitment to diversity, equity, inclusion,
and community well-being. The company's initiatives extend from a diverse and inclusive
workplace to impactful community development projects, making a positive impact on people's
lives (Exhibit 38).
People: ILP's people strategy emphasizes growth and inclusivity, boasting a diverse team of
over 30,000 individuals, marking a notable 57% increase in diversity since 2020. Achievements
Exhibit 39b: Value Distribution include the training of 9,400 people in lean methodologies, and fostering a skilled and
Source: Company reports empowered workforce. As a member of the Champions of Change Coalition, ILP champions
gender equity, evident in an 89% retention rate after parental leave, 25% women in the
management committee, and 266 women in STEM roles. The company's commitment to
equality extends to gender-neutral leaves, contributing to a more balanced and equitable society.
Health and safety initiatives, ensuring a secure workplace and comprehensive well-being
support for employees, including initiatives like sports engagement, online counseling, and
regular health checks. Financial well-being is addressed through an Employee Stock Option
program and a Special Welfare Fund, showcasing ILP's dedication to employee welfare
(Exhibit 39a). The company's significant investment in Training and development, with over
Exhibit 40a: DIRECTOR(S)
227,000 person-hours dedicated to various programs, covers managerial competencies,
Source: Company reports technical skills, and EHS compliance.
Chairman / Non-Executive Community: ILP's community impact extends across diverse initiatives. The ILP Welfare Trust,
Musadaq Zulqarnain
Director investing 4% of profits since 2022, has contributed Rs. 2.7 billion in the past decade, fostering
Chief Executive Officer / community well-being (Exhibit 39b). Education initiatives provide equal access to education
Navid Fazil
Executive Director for 1500+ differently-abled children, while healthcare services have reached 55,000+ patients.
Jahan Zeb Khan Banth Non-Executive Director Women empowerment programs, sports sponsorships, and cultural support initiatives
Muhammad Maqsood Executive Director collectively highlight ILP's dedication to community growth and social responsibility.
Shereen Aftab Non-Executive Director
Saeed Ahmad Jabal Independent Director Governance | The Charge for Sustainable Excellence, Where Leadership Meets Green
Tariq Iqbal Khan Independent Director
ILP's commitment to sustainable business practices is deeply ingrained in its governance
Exhibit 40b: Remuneration Breakdown
structure, guided by the Companies Act 2017, Code of Corporate Governance, and international
Source: Company reports best practices.
The Board of Directors, elected every 3 years, comprises seven members, including two
independent directors (Exhibit 40a), ensuring diverse expertise. The Board oversees various
committees, such as the Audit Committee, HR and Remuneration Committee, Nomination
Committee, Risk Management Committee, and the newly established ESG Committee,
demonstrating robust governance (Exhibit 41). At the highest management level, sustainability
is rigorously reviewed and deliberated during Board meetings, ensuring a strategic approach.
These committees uphold transparency, accountability, and ethical conduct in decision-making.
Exhibit 41 BOD
Furthermore, the comprehensive evaluation of the Board's performance and adherence to
Source: Company reports
ENVIRONMENTAL,
governance regulations underscore ILP's commitment to ESG principles, fostering long-term
HUMAN RESOURCE

value creation and leadership in sustainability. Gender Diversity: The ILP Board currently
NOMINATION RISK MANAGEMENT SOCIAL, &
AUDIT COMMITTEE AND REMUNERATION
COMMITTEE COMMITTEE GOVERNANCE
COMMITTEE
COMMITTEE

TARIQ IQBAL KHAN

CHAIRMAN
SAEED AHNAD JABAL
CHAIRMAN
MUSADAQ
ZULQARNAIN
CHAIRMAN
TARIQ IQBAL KHAN
CHAIRMAN
MUSADAQ
ZULQARNAIN
CHAIRMAN
boasts a 15% gender ratio, with a firm commitment to elevate it to 33%. Meanwhile, their
SAEED AHMAD JABAL
NAVID FAZIL MEMBER NAVID FAZIL MEMBER
MUHAMMAD
NAVID FAZIL MEMBER
Management Committee already has a 25% representation of women. Remuneration: ILP
upholds a commitment to transparent governance by implementing a formal remuneration
MEMBER MAQSOOD MEMBER

JAHAN ZEB KHAN

BANTH MEMBER
JAHAN ZEB KHAN
BANTH MEMBER
MUHAMMAD
MAQSOOD MEMBER
YAQUB AHSAN
MEMBER
JAHAN ZEB KHAN
BANTH MEMBER
policy that excludes Directors from influencing their compensation. Non-Executive Directors
SYED HAMZA GILLANI
MEMBER
FARYAL SADIQ
MEMBER
receive fees solely for meeting attendance, in line with industry practices. In 2023, strategic
AHSAN PERVAIZ SHEIKH AQEEL AHMAD
compensation allocation included Rupees 40.05 million for the Chief Executive (1), Rupees
MEMBER MEMBER

8
 Exhibit 42a: Ownership 56.88 million for Directors (6), and Rupees 2.61 billion for Executives (442) (Exhibit 40b),
Source: Company reports reflecting alignment with organizational goals. The provision of company-maintained cars for
some executives shows ILP’s commitment to facilitating and supporting its key executives.
Ownership: ILP's ownership structure is characterized by a significant stake held by its
leadership, including Directors, the Chief Executive Officer, and their immediate family
members, collectively holding 78.61% (Exhibit 42a). Financial institutions and insurance
companies contribute to a stable foundation, accounting for 2.16%, while modarabas, mutual
funds, and other categories make up the remaining 6.17%. With a broad base of 12.02% held
by the local general public and a minimal foreign share of 0.06%, ILP showcases a diversified
ownership pattern fostering stability and broad market participation (Exhibit 42b).

Exhibit 42b: Public Ownership Risks

Source: Company reports Scenario Analysis

We conducted a scenario analysis to consider to assess key drivers of ILP’s share price, The
downside case represents a decline in the company’s performance and utilization by 5%, and
similarly, the upside case represents an increase in utilization by 5%. Additionally, inflation and
interest impact have also been considered in scenario analysis, and companies’ ability to
perform more efficiently and less efficiently is included in terms of increase or decrease in
operational costs. (Exhibit 43)

Exhibit 43 Sensitivity Analysis

Source: Team Analysis Market Risks: ILP is highly sensitive to cotton and yarn prices while the yarn is manufactured
Scenario Analysis - Output and utilized in-house yet the requirement exceeds and the company procures the yarn from
Downside Base Upsiede
outside. Hence, (Exhibit 44) shows the impact of yarn and imported cotton prices on the share
price. A 10% decline in yarn price of FY24 increases the share price by 25.75 to PKR 106.87
Target Price 78.63 85.60 100.73 while a 10% increase in yarn p rice reduces the share price by PKR 25.75 to PKR 55.37.
Avg Profit
18.23% 19.83% 21.88%
Indicating share price is highly sensitive to yarn price. On the other hand, since the company is
margins
shifting towards local cotton the impact of imported cotton is still observed a 10% increase in
upside 9.20% 18.88% 39.91% cotton prices per 40kg (in dollars) reduces the share price by PKR 3.67 to PKR 77.45. suggesting
Exhibit 44 that cotton prices are less sensitive than yarn prices. (Exhibit 45) shows the sensitivity of both
Source: Team Analysis cotton and yarn price on the earning per share and the trend is similar to that of share price yarn
Cotton,Yarn Price Sensitivity to Share Price price causing EPS to fluctuate more than cotton prices. Mitigation: One way to reduce yarn
Imported Cotton Price $
0.00 68 76 84 92 102 price sensitivity is to increase the in-house consumption and improve its capacity by investing
1396 135.90 133.30 130.05 126.38 121.80
in its expansion.
Yarn Price

1551 112.72 110.12 106.87 103.20 98.63

1724 86.97 84.37 81.12 77.45 72.87
1896 61.22 58.62 55.37 51.70 47.12 Financial Risk: ILP has utilized short-term debt to finance working capital requirements,
2085 32.89 30.30 27.04 23.37 18.80
through various export financing schemes. However, the industry analysis indicates that the
Exhibit 45 scheme is likely to shut down. Given, the company’s operations and expansions the company
Source: Team Analysis may seek debt to finance its future expansions which could increase the firm risk and ultimately
Cotton,Yarn Price Sensitivity to EPS further increase the finance costs (Exhibit 46) showing the sensitivity of more debt and higher
Imported Cotton Price $
18.15 68 76 84 92 102 finance costs. The table shows that a 2% increase in cost of debt raises the WACC by 0.7% and
1396 24.34 24.10 23.83 23.57 23.27
a 10% increase in debt ratio increases the WACC by 1.3%. The impact of WACC on the share
Yarn Price

1551 21.64 21.40 21.14 20.87 20.58

1724 18.65 18.41 18.15 17.88 17.59 price decreases to PKR 61.36 when WACC is 25.2% and the share price increases to PKR
1896 15.66 15.42 15.16 14.89 14.60
2085 12.37 12.13 11.86 11.60 11.31 108.75 when WACC is 19.2% reflecting that company’s capital structure and its cost of equity
has a significant impact on the share price. Hence, we conclude that future interest rate policies
Exhibit 46: Debt Sensitivity to WACC would have a significant impact on share price and continuation of export finance schemes
Source: Team Analysis would be beneficial for the company in terms of finance costs. Lastly, we have used global GDP
##### 9.61% 11.61%
Pre tax Cost of Debt
13.61% 15.61% 17.61%
growth for terminal growth, since Pakistan also suffers from exchange rate movements and its
impact could either drive the terminal up or down shows the impact of terminal growth on the
Weight of debt

18% 18.9% 19.2% 19.5% 19.9% 20.2%

28% 19.8% 20.3% 20.8% 21.3% 21.9%
38% 20.7% 21.4% 22.1% 22.8% 23.5% share price a 1% increase in growth leads the share price (obtained through DCF) to PKR 85.59
48% 21.6% 22.5% 23.4% 24.3% 25.2%
58% 22.5% 23.6% 24.7% 25.8% 26.8% while a 1% decline in growth leads the shares price to PKR 77.09.

9
 APPENDICES

S. No Title Page
1 Glossary 10
2 Income Statement 11
3 Balance Sheet 11
4 PPE schedule and Working capital assumptions 12
5 Debt Schedule 12
6 Pro-forma assumptions 12
7 NOPLAT and Free cashflow 13
8 Cost of capital 14
9 Discounted cashflow method 14
10 Relative valuation local-competition 15
11 Relative valuation International-competition 15
12 Valuation Summary (Football field) 16
13 Decision 16
14 Sensitivity Analysis 16
15 Scenario Inputs 17

APPENDIX 1: GLOSSARY

Acronym
KSE Karachi Stock Exchange
PSX Pakistan Stock Exchaange
NOPLAT Net operating profit after/adjusted tax
PPE Property Plant and Equipment
NPM Net profit margin
AT Asset turnover
FL Fianncial leverage
CFO Cash from operations
ROIC Return on invested capital
RV Relative valuation
PKR Pakistani Rupee
EBTUIE Earnings before tax and unallocated income expenses
PBS Pakistan Bureau of statistics
SBP State bank of Pakistan
CFI cash from investing activities
SDGs Sustainability development goals
IDPs Individual development programs
IC Invested capital
ROIC Return on invested capital

10
APPENDIX 2: INCOME STATEMENT
Income Statement Historic Forecasted
In PKR '000' 2018A 2019A 2020A 2021A 2022A 2023A 2024F 2025F 2026F 2027F 2028F

Income Statement
Sales 31,138,736 37,478,321 36,302,794 54,962,265 90,894,049 119,200,293 152,712,744 189,285,581 229,632,549 268,195,292 309,884,391
Cost of Sales 21,994,237 25,523,607 28,439,076 40,749,985 64,827,880 79,327,921 101,414,462 125,615,755 151,550,439 175,575,646 201,754,336
Gross profit 9,144,499 11,954,714 7,863,718 14,212,280 26,066,169 39,872,372 51,298,282 63,669,825 78,082,110 92,619,647 108,130,055
Operational Expense 0 0 0 0 0 0 0 0 0 0
Distribution cost 2,641,013 2,783,719 2,007,264 2,639,632 3,382,031 3,952,564 5,063,804 5,897,952 7,155,123 7,820,310 9,035,923
Administrative Expense 1,597,804 1,984,209 2,197,949 2,796,180 4,681,472 6,245,370 8,193,372 10,182,438 12,042,822 14,149,380 16,426,462
Other operational Expense 425,429 784,540 504,513 919,479 2,143,370 2,721,284 2,992,262 3,708,872 4,499,433 5,255,034 6,071,892
Total operational Expense 4,664,246 5,552,468 4,709,726 6,355,291 10,206,873 12,919,218 16,249,438 19,789,262 23,697,379 27,224,724 31,534,277
EBIT 4,480,253 6,402,246 3,153,992 7,856,989 15,859,296 26,953,154 35,048,844 43,880,563 54,384,731 65,394,923 76,595,778
Other income 9,164 14,444 99,001 162,912 57,122 158,237 2,992,262 3,708,872 4,499,433 5,255,034 6,071,892

Profit from operations 4,489,417 6,416,690 3,252,993 8,019,901 15,916,418 27,111,391 38,041,106 47,589,436 58,884,165 70,649,957 82,667,670
Finance cost 483,654 995,707 1,137,162 1,147,038 2,492,950 5,527,536 10,478,536 8,501,599 8,766,016 8,726,636 8,797,175

Profit before Taxation 4,005,763 5,420,983 2,115,831 6,872,863 13,423,468 21,583,855 27,562,570 39,087,836 50,118,148 61,923,321 73,870,495

Taxation 119,954 226,216 319,428 581,292 1,063,972 1,412,009 2,130,507 3,021,376 3,873,987 4,786,493 5,709,974
Profit for the year 3,885,809 5,194,767 1,796,403 6,291,571 12,359,496 20,171,846 25,432,063 36,066,460 46,244,161 57,136,828 68,160,520

APPENDIX 3: BALANCE SHEET

Historic Forecasted
In PKR '000' 2018A 2019A 2020A 2021A 2022A 2023A 2024F 2025F 2026F 2027F 2028F

Balancesheet Check OK OK OK OK OK OK OK OK OK OK OK

Balancesheet

Assets
Non Current Assets
Property, Plant and Equipment 15,451,969 18,256,474 22,744,239 26,193,029 34,730,382 58,650,853 74,055,603 90,615,709 108,417,823 133,628,181 152,221,244
Intangible Asset 42,410 66,161 171,459 209,623 227,457 394,618 394,618 394,618 394,618 394,618 394,618
Long Term Investments 380,549 1,008,735 1,853,735 - - - - - - - -
Long Term Loans 60,747 65,762 113,823 144,673 179,626 147,858 147,858 147,858 147,858 147,858 147,858
Long Term Deposits 25,055 28,019 38,337 60,478 86,955 81,701 81,701 81,701 81,701 81,701 81,701
Total Non-Current Assets 15,960,730 19,425,151 24,921,593 26,607,803 35,224,420 59,275,030 74,679,780 91,239,886 109,042,000 134,252,358 152,845,421

Current Assets
Stores and Spares A 779,198 887,659 1,062,524 1,199,116 1,866,417 2,490,975
Stock in Trade B 5,121,718 6,282,491 8,810,625 11,276,308 23,142,048 19,728,810
Inventory (A+B) 22,219,785 28,734,781 35,591,978 42,940,313 49,747,617 57,165,089
Trade Debts 7,293,008 8,247,740 7,207,391 15,052,940 28,603,965 34,138,665 40,191,173 49,816,468 60,435,045 70,584,046 81,555,847
Loan & Advances 617,743 1,063,342 485,930 1,034,836 1,633,562 2,112,755 3,005,275 3,725,002 4,519,001 5,277,887 6,098,298
Prepayment and Other Receivables 179,864 194,544 193,182 318,708 998,491 671,874 671,874 671,874 671,874 671,874 671,874
Derivative financial instruments - - - - - 21,672 21,672 21,672 21,672 21,672 21,672
Accrued Income - 10,441 2,239 2,131 4,570 1,623 1,623 1,623 1,623 1,623 1,623
Tax Refunds due from Government 2,451,806 1,925,439 2,408,014 4,328,555 4,224,938 4,758,814 4,758,814 4,758,814 4,758,814 4,758,814 4,758,814
Short Term Investments 147,425 1,207,251 125,044 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000
deffered employes share option compensation 5,014 - - - - - - - - - -
Cash and Bank balances 193,687 1,538,564 150,787 374,442 117,119 1,544,502 361,614 7,333,880 16,728,669 28,726,039 57,032,558
Total Current Assets 16,789,463 21,357,471 20,445,736 34,087,036 61,091,110 65,969,690 78,246,827 102,421,310 130,577,010 160,289,573 207,805,775
Total Assets 32,750,193 40,782,622 45,367,329 60,694,839 96,315,530 125,244,720 152,926,607 193,661,196 239,619,011 294,541,931 360,651,196

Equity & Liabilities

Equity
Authorized Share Capital 3,000,000 10,000,000 10,000,000 10,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000
Issued, Subscribed and Paid up capital 1,901,104 8,721,975 8,721,975 8,721,975 8,983,635 14,014,469 14,014,469 14,014,469 14,014,469 14,014,469 14,014,469
Reserves 38,863 3,791,602 3,791,602 3,791,602 3,528,149 3,150,573 3,150,573 3,150,573 3,150,573 3,150,573 3,150,573
Unappropriated Profit 7,142,570 5,366,207 4,766,115 8,001,035 17,428,486 26,641,364 45,292,237 71,741,957 105,655,603 147,557,501 197,543,740
9,082,537 17,879,784 17,279,692 20,514,612 29,940,270 43,806,406 62,457,279 88,906,999 122,820,645 164,722,543 214,708,782
15,354,745 21,215,991 27,850,044 49,404,024 57,497,813
Non Current Liabilities
Long Term Financing 2,247,936 3,628,745 6,861,130 8,213,978 14,396,116 15,348,901 11,512,779 8,800,360 5,578,314 1,795,820 1,143,154
Lease liabilities 615 - 102,158 152,969 93,973 57,011 57,011 57,011 57,011 57,011 57,011
Deferred liabilities 1,925,612 2,482,623 3,140,682 3,816,001 5,048,654 7,999,204 7,999,204 7,999,204 7,999,204 7,999,204 7,999,204
Total Non-Current Liabilities 4,174,163 6,111,368 10,103,970 12,182,948 19,538,743 23,405,116 19,568,994 16,856,575 13,634,529 9,852,035 9,199,369

Current Liabilities
Trade and Other Payables 2,730,414 3,576,861 3,031,231 5,551,641 9,084,790 12,003,908 11,911,818 13,894,723 15,360,438 17,630,608 20,220,235
Unclaimed Dividend 475,276 130,935 2,952 4,004 3,006 4,074 4,074 4,074 4,074 4,074 4,074
Accrued MarkUp 137,856 110,483 191,136 221,674 702,689 1,830,013 1,830,013 1,830,013 1,830,013 1,830,013 1,830,013
Short Term Borrowings 15,180,937 11,726,000 14,354,861 19,636,066 35,007,908 42,148,912 55,108,137 70,122,520 83,923,021 98,456,367 112,642,432
Derivative Financial Instruments - - - 33,074 94,154 - - - - - -
Current Portion of Non Current Liabilities 969,010 1,247,191 403,487 2,550,820 1,943,970 2,046,291 2,046,291 2,046,291 2,046,291 2,046,291 2,046,291
Total Current Liabilities 19,493,493 16,791,470 17,983,667 27,997,279 46,836,517 58,033,198 70,900,333 87,897,622 103,163,837 119,967,353 136,743,046

Total Equity & Liabilities 32,750,193 40,782,622 45,367,329 60,694,839 96,315,530 125,244,720 152,926,607 193,661,196 239,619,011 294,541,931 360,651,196

11
APPENDIX 4: PPE SCHEDULE AND WORKING CAPITAL ASSUMPTIONS
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Property Plant & Equipment Schdeule

Property Plant & Equipment

Operating Fixed Assets - Net 17,038,440 21,897,796 23,467,161 29,632,448 33,588,068 48,992,818 65,552,924 83,355,038 108,565,396 127,158,459
Capital work in progress 1,218,034 733,655 2,543,689 4,964,375 24,959,464 24,959,464 24,959,464 24,959,464 24,959,464 24,959,464
Right of use of assets - 112,788 182,179 133,559 103,321 103,321 103,321 103,321 103,321 103,321
Total Net PP&E 18,256,474 22,744,239 26,193,029 34,730,382 58,650,853 74,055,603 90,615,709 108,417,823 133,628,181 152,221,244

Capex due to operations 4,487,765 3,448,790 8,537,353 23,920,471 - - - 25,210,357 18,593,063

Capex Planned 15,404,750 16,560,106 17,802,114 - -
CAPEX (% of Sales) 12.4% 6.3% 9.4% 20.1% 0.0% 0.0% 0.0% 9.4% 6.0%

Capacity Expansions:
Hosiery 2.8% 2.2% 9.1% 0.1% 5.0% 4.5% 4.0% 3.5% 3.5%
Spinning 0.0% 0.0% 0.0% 5.6% 0.0% 0.0% 0.0% 5.6% 0.0%
Denim 38.5% 0.0% 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% 0.0%
Apperal 0.0% 0.0% 0.0% 1.9% 13.6% 0.0% 0.0% 0.0% 0.0%
Active Wear 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Working Capital Assumptions

Current Assets:
Accounts Receivable 7,293,008 8,247,740 7,207,391 15,052,940 28,603,965 34,138,665 40,191,173 49,816,468 60,435,045 70,584,046 81,555,847
Inventory 5,900,916 7,170,150 9,873,149 12,475,424 25,008,465 22,219,785 28,734,781 35,591,978 42,940,313 49,747,617 57,165,089
Non Current Assets:
Accounts Payables 2,730,414 3,576,861 3,031,231 5,551,641 9,084,790 12,003,908 11,911,818 13,894,723 15,360,438 17,630,608 20,220,235

Ratios
DSO 75.68 77.70 73.91 87.66 96.06 96.06 96.06 96.06 96.06 96.06
ITO 93.46 109.37 100.09 105.52 108.65 103.42 103.42 103.42 103.42 103.42
DPO 42.96 38.72 36.13 34.53 50.28 40.28 38.28 35.28 35.28 35.28

1,269,234 2,702,999 2,602,275 12,533,041 (2,788,680) 6,514,996 6,857,196 7,348,335 6,807,304 7,417,472

APPENDIX 5: DEBT SCHEDULE

2022 2023 2024 2025 2026 2027 2028

Long Term Debts

Long Term Financing

Pricing Tenor Repayment

From financial institutions-secured Islamic banking:

Islamic long term finance facility - ILTFF SBP ILTFF rate + 0.75% per annum 10 years including 2 years grace period 32 quarterly payments 3,448,273 3,139,758 2,748,766 2,465,172 2,123,153 1,724,184 1,256,902
Islamic temporary economic refinance facility - ITERF SBP ITERF rate + 0.95% per annum 10 years including 2 years grace period 32 quarterly payments 44,500 45,061 42,662 39,495 35,446 30,554 24,835
Islamic finance renewable energy - FRE SBP rate + 0.75% per annum 6 years including 1 year grace period 20 quarterly payments 222,983 173,431 128,297 95,468 54,300 2,913 -
Diminishing musharika 3 months KIBOR + 0.05% to 0.15% per annum 6 to 10 years including 1 to 2 years grace period 20 to 32 quarterly payments 3,944,980 6,109,031 4,457,161 3,249,197 1,810,161 90,709 -
Diminishing musharika vehicles 3 months KIBOR + 0.50% per annum 5 years 60 monthly payments 24,453 20,949 18,299 17,611 16,765 15,795 14,681

Conventional banking :

Long term financing facility - LTFF SBP LTFF rate + 0.50% to 0.75% per annum 10 years including 2 years grace period 32 quarterly payments 2,389,730 3,177,154 1,967,459 1,603,239 1,167,179 653,683 34,490
Demand finance loan 3 months KIBOR + 0.05% per annum 10 years including 2 years grace period 32 quarterly payments 2,746,211 1,758,828 1,542,448 1,374,447 1,175,248 946,817 683,914
Temporary economic refinance facility - TERF SBP TERF rate + 0.75% to 1.25% per annum 10 years including 2 years grace period 32 quarterly payments 2,701,924 2,709,488 2,375,491 2,132,366 1,838,423 1,494,676 996,450
SBP renewable energy SBP rate + 0.75% per annum 12 years including 2 years grace period 40 quarterly payments 154,382 154,382 144,051 135,944 125,372 112,017 96,476
Refinance for salaries SBP rate + 0.90% to 1% per annum 2.5 years including 6 months grace period 08 quarterly payments 548,667

Total 16,226,103 17,288,082 13,424,634 11,112,938 8,346,048 5,071,347 3,107,747

less; Current portion of long term financing (1,829,987) (1,939,181) (1,911,855) (2,312,578) (2,767,734) (3,275,527) (1,964,593)
Net Balance at the End of Year 14,396,116 15,348,901 11,512,779 8,800,360 5,578,314 1,795,820 1,143,154
Interest Expense For the Year 3,927,557 2,514,889 2,052,174 1,588,550 1,193,811

2022 2023 2024 2025 2026 2027 2028

Short Term Debt

Islamic banking: Tenor

IERS - II 180 days 2,230,000 4,930,000
Islamic export finance scheme (IEFS) 180 days 999,998 2,000,000
Running musharika 10,325,671 6,803,003

Conventional Banking:
EFR - II 180 days 18,220,000 20,702,960
Export finance Scheme (EFS) 180 days - 6,518,318
FAPC - own source 2,600,000 -
Running Finance 180 days 632,239 1,194,631

Total Short Term Debt 35,007,908 42,148,912 55,108,137 70,122,520 83,923,021 98,456,367 112,642,432
Interest Expense (%) 7.75% 10.86% 11.89% 8.54% 8.00% 7.25% 6.75%
Finance Cost 2,713,113 4,577,372 6,550,980 5,986,710 6,713,842 7,138,087 7,603,364

The total limits available to the Company for short term borrowings from all the banks are amounting to Rs. 62,996 million (2022: Rs. 51,996 million)
Total Long Term 15,348,901 11,512,779 8,800,360 5,578,314 1,795,820 1,143,154
Total ShortTerm 42,148,912 55,108,137 70,122,520 83,923,021 98,456,367 112,642,432
Overall 57,497,813 66,620,917 78,922,881 89,501,335 100,252,187 113,785,586
% LT 26.7% 17.3% 11.2% 6.2% 1.8% 1.0%
% ST 73.3% 82.7% 88.8% 93.8% 98.2% 99.0%
Cost of debt LT 22.54% 17.41% 16.03% 14.81% 14.36% 14.29%
Cost of debt ST 10.86% 11.89% 8.54% 8.00% 7.25% 6.75%

Weighted avg Cost of debt 14.0% 12.8% 9.4% 8.4% 7.4% 6.8%

APPENDIX 6: PRO-FORMA ASSUMPTIONS

Account Head Forecast Method 2019A 2020A 2021A 2022A 2023A 2024E 2025E 2026E 2027E 2028E Comments

Exhange rate 164.00 168.25 157.80 205.50 286.60 308.10 331.20 356.04 382.75 411.45 8% PKR Devaluation
Inlflation 12.60% 8.00% 12.30% 23.80% 26.90% 23.55% 12.15% 12.00% 11.00% 11.00%
Kibor rate 15.00% 21.44% 25.55% 14.15% 14.00% 13.00% 13.00% less 2%, then inlfation add 2%
Policy rate 16.00% 22.00% 22.00% 20.00% 18.00% 16.00% 14.00% less 2%, then inlfation add 2%
EFS / LTFF 13.00% 19.00% 19.00% 17.00% 15.00% 14.00% 14.00% less 2%, then inlfation add 2%
Tax rate % of EBT 2.99% 4.17% 15.10% 8.46% 7.93% 7.73% 7.73% 7.73% 7.73% 7.73% Historic pattern
Depreciation % of net PPE 8.99% 8.71% 8.70% 7.99% 5.48% 7.97% 7.97% 7.97% 7.97% 7.97% Historic pattern

12
 Account Head Forecast Method 2019A 2020A 2021A 2022A 2023A 2024E 2025E 2026E 2027E 2028E Comments Reference Source

Income Statement

Salaries & Wages have been steady at around 14 to

Financial Team
Salaries, wages & benefits % of sales 14.8% 19.6% 16.4% 14.9% 13.9% 15.9% 15.9% 15.9% 15.9% 15.9% 15% therefore, we expect the pattern to continue for
Statements Analysis
projected years

Base 14.8% 19.6% 16.4% 14.9% 13.9% 15.9% 15.9% 15.9% 15.9% 15.9%
Upside 14.8% 19.6% 16.4% 14.9% 13.9% 13.9% 13.9% 13.9% 13.9% 13.9% -2%
Downside 14.8% 19.6% 16.4% 14.9% 13.9% 17.9% 17.9% 17.9% 17.9% 17.9% 2%

Improved waste management: The waste is collected

and recycled that can be again used in mannufacturing Sustainability Team
Other COGS expenses % of sales 8.3% 11.3% 9.8% 7.9% 7.2% 8.7% 8.4% 8.2% 7.9% 7.7%
process. Therefore we expect reduction in COGs costs Report Analysis
by 0.25% each year

Base 8.3% 11.3% 9.8% 7.9% 7.2% 8.7% 8.4% 8.2% 7.9% 7.7%
Upside 8.3% 11.3% 9.8% 7.9% 7.2% 7.7% 7.4% 7.2% 6.9% 6.7% -1%
Downside 8.3% 11.3% 9.8% 7.9% 7.2% 9.7% 9.4% 9.2% 8.9% 8.7% 1%

The Company has developing good relations with its

clients and its focus on ESG has given the company an
edge. The Distribution cost has been in declining. We Financial Team
Distribution Costs % of sales 7.4% 5.5% 4.8% 3.7% 3.3% 3.3% 3.1% 3.1% 2.9% 2.9%
predict the same pattern in the future and assume Statements Analysis
that distribution cost would reduce by 20bps every 2
years

Base 7.4% 5.5% 4.8% 3.7% 3.3% 3.3% 3.1% 3.1% 2.9% 2.9%
Upside 7.4% 5.5% 4.8% 3.7% 3.3% 2.8% 2.6% 2.6% 2.4% 2.4% -0.5%
Downside 7.4% 5.5% 4.8% 3.7% 3.3% 3.8% 3.6% 3.6% 3.4% 3.4% 0.5%

Administrative expense has been steady over the

Financial Team
Admisitrative expenses % of sales 5.3% 6.1% 5.1% 5.2% 5.2% 5.4% 5.4% 5.2% 5.3% 5.3% years. We expect the trend to continue in the near
Statements Analysis
future.

Base 5.3% 6.1% 5.1% 5.2% 5.2% 5.4% 5.4% 5.2% 5.3% 5.3%
Upside 5.3% 6.1% 5.1% 5.2% 5.2% 4.9% 4.9% 4.7% 4.8% 4.8% -0.5%
Downside 5.3% 6.1% 5.1% 5.2% 5.2% 5.9% 5.9% 5.7% 5.8% 5.8% 0.5%

Company continue to focus on ESG and provide their

employees with benefits and charity for improving Financial Team
Other operating expense % of sales 2.1% 1.4% 1.7% 2.4% 2.3% 2.0% 2.0% 2.0% 2.0% 2.0%
society. The team expects other operating expense to Statements Analysis
remain at average % of sales

Base 2.1% 1.4% 1.7% 2.4% 2.3% 2.0% 2.0% 2.0% 2.0% 2.0%
Upside 2.1% 1.4% 1.7% 2.4% 2.3% 1.5% 1.5% 1.5% 1.5% 1.5% -0.5%
Downside 2.1% 1.4% 1.7% 2.4% 2.3% 2.5% 2.5% 2.5% 2.5% 2.5% 0.5%

Financial Team
Other Income % of sales 2.1% 1.4% 1.7% 2.4% 2.3% 2.0% 2.0% 2.0% 2.0% 2.0% Historic Trend
Statements Analysis

Base 2.1% 1.4% 1.7% 2.4% 2.3% 2.0% 2.0% 2.0% 2.0% 2.0%
Upside 2.1% 1.4% 1.7% 2.4% 2.3% 1.7% 1.7% 1.7% 1.7% 1.7% -0.25%
Downside 2.1% 1.4% 1.7% 2.4% 2.3% 2.2% 2.2% 2.2% 2.2% 2.2% 0.25%

The Company expects impressive revenue growth in

coming years because the company stands in growth
Financial Team
Dividends % Payout 27.6% 140.6% 34.6% 21.6% 22.8% 49.5% 49.5% 49.5% 49.5% 49.5% phase the company has anounced bonus dividends.
Statements Analysis
However, we expect the company to maintain the
past payout ratio of 73%.

Base 27.62% 140.64% 34.64% 21.60% 22.80% 49.5% 49.5% 49.5% 49.5% 49.5%
Upside 27.6% 140.6% 34.6% 21.6% 22.8% 44.5% 44.5% 44.5% 44.5% 44.5% -5%
Downside 27.6% 140.6% 34.6% 21.6% 22.8% 54.5% 54.5% 54.5% 54.5% 54.5% 5%

APPENDIX 7: NOPLAT AND FREE CASH FLOWS

Historic Historic Forecasted
2019A 2020A 2021A 2022A 2023A 2024F 2025F 2026F 2027F 2028F

NOPLAT Working

EBIT 6,402,246 3,153,992 7,856,989 15,859,296 26,953,154 35,048,844 43,880,563 54,384,731 65,394,923 76,595,778
Tax rate 2.99% 4.17% 15.10% 8.46% 7.93% 7.73% 7.73% 7.73% 7.73% 7.73%
Taxes: 191,718 131,615 1,186,173 1,341,345 2,136,363 2,709,174 3,391,840 4,203,782 5,054,837 5,920,631
NOPLAT 6,210,528 3,022,377 6,670,816 14,517,951 24,816,791 32,339,671 40,488,723 50,180,950 60,340,086 70,675,147

Add:
Depreciation 1,641,234 1,980,510 2,279,613 2,774,273 3,213,744 5,904,931 7,225,375 8,644,852 10,655,037 12,137,582
Gross Cashflow 7,851,762 5,002,887 8,950,429 17,292,224 28,030,535 38,244,601 47,714,098 58,825,802 70,995,122 82,812,728

Accounts Receivable 8,247,740 7,207,391 15,052,940 28,603,965 34,138,665 40,191,173 49,816,468 60,435,045 70,584,046 81,555,847
Inventory 5,900,916 7,170,150 9,873,149 12,475,424 25,008,465 22,219,785 28,734,781 35,591,978 42,940,313 49,747,617
Accounts Payable 3,576,861 3,031,231 5,551,641 9,084,790 12,003,908 11,911,818 13,894,723 15,360,438 17,630,608 20,220,235
Operating Working Capital 10,571,795 11,346,310 19,374,448 31,994,599 47,143,222 50,499,140 64,656,526 80,666,584 95,893,751 111,083,228

Change on Operating Working Capital 774,515 8,028,138 12,620,151 15,148,623 3,355,918 14,157,386 16,010,059 15,227,167 15,189,477

Capital Expenditure 4,487,765 3,448,790 8,537,353 23,920,471 15,404,750 16,560,106 17,802,114 25,210,357 18,593,063

FCF (259,393) (2,526,499) (3,865,280) (11,038,559) 19,483,934 16,996,606 25,013,629 30,557,598 49,030,188

13
APPENDIX 8: COST OF CAPITAL
WACC Calculation
Comparable Companies Unlevered Beta
Levered Debt/ Unlevered
Capital Structure
Company Beta Equity Beta
Share Price 65.91 as of 30th june 2023 Masood Textile Mills Limited 0.16 7.17 0.02
No. of Shares 1,401,446,864 Kohinoor Industries Limited 0.79 3.67 0.18
Market Value of Equity 92,369,363 PKR'000s Artistic Denim Mills Limited 0.75 2.23 0.25
Total Debt Value 57,497,813 Azgard Nine Limited 1.47 1.50 0.62
Value of Firm 149,867,176 The Crescent Textile Mills Limited 0.77 5.37 0.13
Kohinoor Textile Mills Limited 0.98 0.68 0.60

Check for Targer Capital Gul Ahmed Textile Mills Limited 0.93 2.96 0.25
Weight of Debt
38% ratio Sapphire Textile Mills Limited 0.30 1.60 0.12
Weight of Equity 62% Nishat Chunian Limited 1.04 6.25 0.15
Debt to Equity 0.62 Nishat Mills Limited 1.10 4.82 0.20

Cost of Equity Mean 0.25

Median 0.19
Risk free rate 21.50% 1- year Treasury bill
Market Risk Premium 7% industry Practice
Interloop Relevered Beta
Weightage
Mean
Beta (Investor Launge) 1.16 70% UnLevered Debt/ Relevered
Beta (Covariance Market) 0.44 10% Beta Equity Beta
Beta (Relevered) 0.40 20%
Beta (Weighted Average) 0.94 Relevered Beta 0.25 0.62 0.40
Regressed Beta
Cost of equity 28.0%
SUMMARY OUTPUT

Cost of Debt Regression Statistics

Multiple R 0.26689
Total Debt 57,497,813 R Square 0.07123
Adjusted R Square 0.053369
interest expense 5,527,536 Standard Error 0.107116
Cost of debt (Kd) 13.98%
Observations 54
according to topline
Tax rate research report on 7th ANOVA
7.8% sept 2023 df SS MS F Significance F
Regression 1 0.045758 0.045758 3.988037 0.05107
After Tax Cost of debt 12.89% Residual 52 0.596636 0.011474
Total 53 0.642394
WACC 22.2%
Coefficients
Standard Error t Stat P-value Lower 95%Upper 95%Lower 95.0% Upper 95.0%
Intercept 0.011608 0.0147 0.789621 0.433335 -0.01789 0.041106 -0.01789 0.041106314
Terminal Growth 3% % KSE 100 0.441467 0.221064 1.997007 0.05107 -0.00213 0.885065 -0.00213 0.885064707

APPENDIX 9: DISCOUNTED CASH FLOW METHOD

DCF DCF Summary
FY2024F FY2025F FY2026F FY2027F FY2028F
International GDP NOPLAT 32,339,671 40,488,723 50,180,950 60,340,086 70,675,147
Terminal g 3% growth rate
Change in Fixed Assets 15,404,750 16,560,106 17,802,114 25,210,357 18,593,063
WACC 22%
Change in Working Capital 3,355,918 14,157,386 16,010,059 15,227,167 15,189,477
No. of Years 5

Terminal Value 262,587,720 FCF 19,483,934 16,996,606 25,013,629 30,557,598 49,030,188

PV of Terminal Value 96,238,382 Value of Operations 168,910,183

Pv of FCFs 72,671,801 WACC 22.23%
PV of Terminal Value 96,238,382
Value of Operations 168,910,183 0.5698
PV of CashFlows 72,671,801
Add: non Operating Assets
Cash & Short term Securities 2044502
Long Term Investments 229559 Intrinsic Value 81.121

Enterprise Value 171,184,244 Target Price 72 as of 31 december

Less: Upside/Downside 12.67%
Debt 57,497,813 Under/over valued Undervalued
Value of Firm 113,686,431
÷ by
Decision HOLD
No. of Shares 1,401,447

Intrinsic Value 81.121

Target Price 72 as of 31 december

14
APPENDIX 10: RELATIVE VALUATION (LOCAL COMPETITORS)
Price Multiples Value Multiples Taking average of Price and Value Multiple
P/E P/B P/S EV/S EV/EBIT EV/EBITDA
Masood Textile Mills Limited 7.35
Kohinoor Mills Limited 0.09 Intrinsic Value 78.923
Artistic Denim Mills Limited 4.55 0.60 0.28 0.91 6.80 5.21
Azgard Nine Limited 3.24 0.36 4.09 Target Price 72
The Crescent Textile Mills Limited 2.89 0.13 0.08 0.52 5.71 4.83
Upside/Downside 9.62%
Kohinoor Textile Mills Limited 9.18 0.84 0.53 0.88 7.24 7.15
Gul Ahmed Textile Mills Limited 4.55 0.45 0.64 6.77 5.04 Under/Over Undervalued
Sapphire Textile Mills Limited 6.82 0.79 0.31 0.80 6.21 5.20
Nishat Chunian Limited 0.33 0.74 9.34 7.15 Decision HOLD
Nishat Mills Limited 2.26 0.31 1.13 7.15 6.17
Interloop Limited ILP 4.59 2.11 0.78 1.33 5.84 5.19

Average 4.79 0.48 0.26 0.80 6.67 6.01

Calculating Difference 0.96 4.44 3.03 1.65 0.88 0.86

Price 72.00

fair price 75 16 24 44 82 83
38.33 69.75

Alternate 1: Taking Average

Intrinsic Value 38 Intrinsic Value 70
-47% -3%
SELL SELL
(Average) (Average)

Alternate 2: Omitting Outliers

Intrinsic Value 49 Intrinsic Value 83
-31% 15%
SELL BUY
(Earnings, sales) (EBIT, EBITDA)

Alternate 3:
Intrinsic Value 75 Intrinsic Value 83
4% 16%
HOLD BUY
(Earnings) (EBITDA)

APPENDIX 11: RELATIVE VALUATION (INTERNATIONAL COMPETITORS)

Price Multiples Value Multiples
Taking average of Price and Value Multiple
P/Earnings P/BV P/Sales EV/sales EV/EBIT EV/EBITDA
Aimer Co Ltd 916.63 4.18 56.83 1.35 24.15 8.44
FUJIAN SEPTWOLVES INDUSTRY CO LTD 21.01 0.61 1.26 1.54 -713.40 17.90 Intrinsic Value 107.823
BIEM.L.FDLKK GARMENT CO LTD 24.68 3.99 6.22 4.61 16.61 11.72
ROO HSING CO LTD -0.68 0.70 0.17 0.53 -1.85 -5.99
ZHEJIANG WEIXING INDUSTRIAL DEVELOPMENT CO LTD 21.58 3.29 2.94 3.21 20.12 14.22 Target Price 72
Interloop Limited ILP 5.19 2.39 0.88 0.90 3.91 3.48 Upside/Downside 49.75%
Average 196.65 2.55 13.48 2.25 -130.87 9.26 Under/Over Undervalued

Calculating Difference 0.03 0.94 0.07 0.40 -0.03 0.38

Decision BUY
Price 74.75

fair price 2830 80 1147 187 -2504 199

1352.34 -705.99

Alternate 1: Taking Average

Intrinsic Value 1352 Intrinsic Value -706
1709% -1044%
BUY SELL
(Average) (Average)

Alternate 2: Omitting Outliers

Intrinsic Value 166 Intrinsic Value 206
122% 176%
BUY BUY
(Average) (Average)

Alternate 3: Excluding P/E, Ev/EBIT. And EV/EBITDA

Intrinsic Value 95 Intrinsic Value 120
28% 61%
BUY BUY
(sales) (sales)

15
APPENDIX 12: VALUATION SUMMARY (FOOTBALL FIELD)
DCF Sensitivity table : Terminal Growth and WACC
Football Field
Low Diff High Terminal Growth, Wacc Sensitivity to Share Price
52 week low - high 32.75 43.15 75.9 Terminal Growth
671874.00 1.0% 2.0% 3.0% 4.0% 5.0%
DCF 51.29 87.01 138.29
18.2% 106.89 113.29 120.53 128.79 138.29
Relative Valuation (Local Competitors) 68.84 23.70 92.54 20.2% 88.30 93.08 98.41 104.39 111.16

WACC
Relative Valuation (International Competitors) 92.02 37.16 129.18 22.2% 73.44 77.09 81.12 85.59 90.58
24.2% 61.33 64.17 67.28 70.70 74.48
26.2% 51.29 53.54 55.99 58.66 61.58
FootBall Field Valuation
Relative (Local) Sensitivity table : P/E and EV/EBIT
200 EV/EBIT, P/E Sensitivity to Share Price
180 EV/EBIT
160 4.73 5.25 5.84 6.42 7.06
138.29 3.72 92.54 90.01 87.72 85.85 84.15
140 129.18
4.13 87.91 85.38 83.09 81.22 79.52

P/E
120 4.59 83.75 81.21 78.92 77.05 75.35
100 92.54 5.05 80.34 77.80 75.51 73.64 71.94
75.9 5.56 77.24 74.70 72.41 70.54 68.84
80 92.02
60 68.84
40 Relative (International) Sensitivity table : P/S and EV/Sales
51.29
EV/Sales, P/S Sensitivity to Share Price
20 32.75 EV/Sales
0 0.73 0.81 0.90 0.99 1.09
52 week low - high DCF Relative Valuation Relative Valuation 0.71 129.18 121.76 115.08 109.61 104.64
(Local Competitors) (International 0.79 125.36 117.94 111.26 105.79 100.82

P/Sales
Competitors) 0.88 121.93 114.50 107.82 102.36 97.39
0.97 119.12 111.69 105.01 99.55 94.58
1.06 116.56 109.14 102.46 96.99 92.02

APPENDIX 13: DECISION

DCF Relative (Local Competitors) Relative (International Competitors)

Intrinsic Value 81.121 Intrinsic Value 78.923 Intrinsic Value 107.823

Target Price 72 Target Price 72 Target Price 72

Upside/Downside 12.67% Upside/Downside 9.62% Upside/Downside 49.75%
Under/over valued Undervalued Under/Over Undervalued Under/Over Undervalued

Decision HOLD Decision HOLD Decision BUY

Intrinsic
Weightage
Value
DCF 81.1 65%
Relative Local Competitors 78.9 10%
Relative International Competitors 107.8 25%

Intrinsic Value 87.577

Target Price 72
Upside/Downside 21.63%
Under/over valued Undervalued

Decision BUY

APPENDIX 14: SENSITIVITY ANALYSIS

Cotton,Yarn Price Sensitivity to EPS Cotton,Yarn Price Sensitivity to Share Price Cotton,Yarn Price Sensitivity to Gross Margins
Imported Cotton Price $ Imported Cotton Price $ Imported Cotton Price $
18.15 58 65 72 79 87 0.00 58 65 72 79 87 0.00 58 65 72 79 87
1396 24.34 24.10 23.83 23.57 23.27 1396 135.90 133.30 130.05 126.38 121.80 1396 39.7% 39.5% 39.2% 39.0% 38.7%
Yarn Price

Yarn Price

Yarn Price

1551 21.64 21.40 21.14 20.87 20.58 1551 112.72 110.12 106.87 103.20 98.63 1551 37.1% 36.8% 36.6% 36.3% 36.0%
1724 18.65 18.41 18.15 17.88 17.59 1724 86.97 84.37 81.12 77.45 72.87 1724 34.1% 33.9% 33.6% 33.3% 33.0%
1896 15.66 15.42 15.16 14.89 14.60 1896 61.22 58.62 55.37 51.70 47.12 1896 31.1% 30.9% 30.6% 30.4% 30.1%
2085 12.37 12.13 11.86 11.60 11.31 2085 32.89 30.30 27.04 23.37 18.80 2085 27.8% 27.6% 27.3% 27.1% 26.8%

Terminal Growth, Wacc Sensitivity to Share Price Cotton,Yarn Price Sensitivity to Share Price Grid & Gas Price Sensitivity to Share Price
Terminal Growth Local Cotton PKR Grid Cost Rs./kwh
0.00 1.0% 2.0% 3.0% 4.0% 5.0% 0.00 14681 16313 18,125 19938 21931 30.4 33.8 37.5 41.3 45.4
Gas Price $/mmbtu

18.2% 106.89 113.29 120.53 128.79 138.29 1396 136.23 133.30 130.05 126.80 123.22 9.0 87.83 85.14 82.15 79.17 75.88
Yarn Price

20.2% 88.30 93.08 98.41 104.39 111.16 1551 113.04 110.12 106.87 103.62 100.05 10.0 87.34 84.65 81.66 78.68 75.39
WACC

22.2% 73.44 77.09 81.12 85.59 90.58 1724 87.29 84.37 81.12 77.88 74.31 11.1 86.80 84.11 81.12 78.13 74.85
24.2% 61.33 64.17 67.28 70.70 74.48 1896 61.53 58.61 55.37 52.13 48.56 12.2 86.25 83.56 80.58 77.59 74.30
26.2% 51.29 53.54 55.99 58.66 61.58 2085 33.20 30.28 27.04 23.81 20.25 13.5 85.65 82.97 79.98 76.99 73.70

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APPENDIX 15: SCENARIO INPUTS
FY2019A FY2020A FY2021A FY2022A FY2023A FY2024F FY2025F FY2024F FY2025F FY2024F

Sales - Utilization

Hosiery 79% 80% 84% 85% 85%

Base 75% 70% 89% 84% 75% 79% 80% 84% 85% 85%
Upside 83% 84% 88% 89% 89%
Downside 78% 79% 84% 85% 85%

Spinning 84% 85% 86% 87% 88%

Base 89% 77% 84% 88% 81% 84% 85% 86% 87% 88%
Upside 88% 89% 90% 91% 92%
Downside 84% 85% 86% 87% 88%

Denim 71% 54% 57% 60% 64%

Base 57% 56% 77% 71% 71% 54% 57% 60% 64%
Upside 74% 56% 60% 63% 67%
Downside 70% 54% 57% 60% 64%

Apperal 29% 31% 33% 35% 37%

Base 0% 0% 0% 24% 19% 29% 31% 33% 35% 37%

Upside 30% 33% 35% 37% 39%
Downside 29% 31% 33% 35% 37%

Prices & Inflation

Global Inflation 5.40% 4.40% 4.00% 3.60% 3.60%

Base 5.40% 4.40% 4.00% 3.60% 3.60%

Upside 4.90% 3.90% 3.50% 3.10% 3.10%
Downside 5.90% 4.90% 4.50% 4.10% 4.10%

Local Inflation 23.55% 12.15% 12.00% 11.00% 11.00%

Base 12.60% 8.00% 12.30% 23.80% 26.90% 23.55% 12.15% 12.00% 11.00% 11.00%
Upside 21.55% 10.15% 10.00% 9.00% 9.00%
Downside 25.55% 14.15% 14.00% 13.00% 13.00%

Apperal 2.00% 1.00% 1.00% 1.00% 1.00%

Base 4% 2.00% 1.00% 1.00% 1.00% 1.00%

Upside 2.10% 1.05% 1.05% 1.05% 1.05%
Downside 2.00% 1.00% 1.00% 1.00% 1.00%

Exchange rate 164 168.25 157.8 205.5 286.6 308.1 331.2 356.0 382.7 411.5

Base 164 168.25 157.8 205.5 286.6 308.1 331.2 356.0 382.7 411.5
Upside 164 168.25 157.8 205.5 286.6 303.8 322.0 341.3 361.8 383.5
Dowside 164 168.25 157.8 205.5 286.6 315.3 346.8 381.5 419.6 461.6

Kibor 15% 21% 25.55% 14.15% 14.00% 13.00% 13.00%

Base 15.00% 21.44% 25.55% 14.15% 14.00% 13.00% 13.00%

Upside 15% 21% 25.55% 14.15% 14.00% 13.00% 13.00%
Downside 15% 21% 26.55% 15.15% 15.00% 14.00% 14.00%

Grid Energy Cost 33.93% 23.00% 10.00% 10.00% 10.00%

Base 33.93% 23.00% 10.00% 10.00% 10.00%

Upside 31.93% 21.00% 8.00% 8.00% 8.00%
Downside 35.93% 25.00% 12.00% 12.00% 12.00%

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