Nishat Mills (NML): Potential Accumulation Opportunity

NML is trading at a low P/E ratio below 4. And its price to book is at absurd level. Its book value per share is around four times of its market price. 

In addition to core earnings from its vertically integrated textile operations, Nishat Mills also benefits from substantial investment income generated by its portfolio of listed and unlisted securities.

One of its most notable holdings is DG Khan Cement (DGKC), in which NML holds over 31% of shares. The resurgence in cement demand and rising profitability in the sector are expected to boost DGKC's market price, increasing the value of NML's investment portfolio.

Furthermore, NML has a low weighting in major PSX indices. It has a small weight in the KSE100 Index and is not currently included in the KSE30. However, it has recently been added to the KMI30 index, that would be effective from June 14, 2024. That should boost the stock’s demand for inclusion in shariah compliant portfolios.

NML has underperformed the market rally. Compared to the over 70% rise in the KSE100 Index in one year, NML stock has only returned 13%. This suggests potential for NML to catch up. 

The recent weakness in price can be attributed to lower profits in the last quarter. This has created a buying opportunity.

See NML Valuation Note