SHADAB TEXTILE MILLS LIMITED

VALUATION REPORT

Instructor: Mr. Abdul Khaliq Daudpota

Group Members:

Asad Ali

Zeeshan Haider

Siraj Ahmed
 SHADAB TEXTILE MILLS LIMITED

We initiate our coverage on MLCF with ‘Hold’ rating:

HOLD
Calculation of DCF model provided the target price of Rs.
40.09/sh. Implies low upside potential from current price level of Target Price 40.09
Rs. 35.00/sh. After the pandemic crashes of COVID-19 Last Closing (25-02-2021) 35.00
resumption of activities of business, expected growth of the KSECode SHDT
Pakistan economy and changes in the government policies will
regarding doing business and export or trade would be Profile
opportunity for SHDT to take advantage and grape the market
MARKET CAP (000's) 551,120.00
share in future.
SHARES 16,600,000
Exports as major tool to drive revenue: FREE FLOAT 40.00%
Easing in the policies due to the motive of current government of 12M High | Low (PKR) 14.90 | 41.11
Pakistan to boost exports to cover current account deficit is an Major Shareholder Directors and CEO
opportunity for textile companies like SHDT. Facilities are being
Source PSX
provided due to corona like deferment of electricity bills etc.
through this company could export more to get more revenue.

Increase production capacity:

As in directors report of annual report of SHDT has defined that

they are expending the production unit by implementing one
more pant in January 2021. This will add to meet the increasing
demand of the domestic market and foreign market as it will have
more exports in future as expected.
 SHADAB TEXTILE MILLS LIMITED

Table of Contents
Company Overview .................................................................................................................................... 3
Company Information ............................................................................................................................... 3
Discussion of Business Segments .............................................................................................................. 4
Competitive advantages: .......................................................................................................................... 4
Economic Overview .................................................................................................................................... 4
Industry Analysis ........................................................................................................................................ 5
Competitive Position ................................................................................................................................... 6
Financial Analysis ....................................................................................................................................... 7
Historical Financial Overview .................................................................................................................... 7
Growth of the Company ........................................................................................................................... 8
Valuation ................................................................................................................................................... 9
Ratio Analysis .......................................................................................................................................... 10
Risk to Our Valuation .............................................................................................................................. 11
Week Competitive Position in the Industry ............................................................................................ 11
Political Instability of the Country........................................................................................................... 11
Unavailability of Raw Material ................................................................................................................ 11
Conclusion: ................................................................................................................................................ 12
Appendix: Balance Sheet .......................................................................................................................... 13
Appendix: Income Statement................................................................................................................... 14
Appendix: DCF Calculations ................................................................................................................... 14
Appendix: DDMtimw Calculations ........................................................................................................ 15
Appendix: Residual Income Model Calculations ................................................................................... 16
Disclaimer: ................................................................................................................................................. 17
Contact Us.................................................................................................................................................. 17
Supervisor ............................................................................................................................................... 17
Students .................................................................................................................................................. 17
 SHADAB TEXTILE MILLS LIMITED

Company Overview
Shadab Textile mills was incorporated in August 1979 and it was listed on stock exchange on
1985. It is the public limited company. This company is purely manufacturing company and
engages in selling, buying, and dealing in the yarn of all types.

Shadab Textile mills set up spinning at Punjab district Sheikhupura and the company has the
machinery and other production material is of excellent quality. The company is operating with
minimized cost and they offer highly competitive products. It produced highly innovative in the
industry of blended Yarn manufacturers as to meet the excellent future quality demanded product.
They have modern technology with modern techniques and most advance control system and
quality professionals.

Company Information

BOARD OF DIRECTORS

MIAN AAMIR NASEEM Chief Executive Officer

MIAN FARRUKH NASEEM Director
MR. SAAD NASEEM Director
MR. YASIR NASEEM Director
MR. HAMZA NASEEM Director
MRS. FATIMA AAMIR Director
MR. FAHAD SHAFIQ Independent Director
MR. GHAZANFER FEROZE Independent Director

CHIEF FINANCIAL OFFICER Mr. Muhammad Aslam

Auditors M/S: Fazal Mehmood & Company (Chartered Accountant)
Legal Advisor Mian Muhammad Jahangir (Advocate High Court)
COMPANY SECRETARY Mr. Khurram Zahoor
Bank Al-falah Limited
BANKERS
Bank Al-Habib Limited
Mr. Fahad Shafiq
AUDIT COMMITTEE Mian Farrukh Naseem
Mr. Hamza Naseem

Company has two plants/mills: Unit # 1: Nasimabad, Shahkot, District Nankana Sahib. Unit # 2:
Habibabad, Pattoki, District, Kasur.
 SHADAB TEXTILE MILLS LIMITED

Discussion of Business Segments

The segments of Shadab Textile Mills information are given below. The segment contains the
various production of Yarn and its export. The procedure of production is also given below that
steps are taken by the company to produce the Yarn and the procedure.

COUNT WISE PC YARN COUNT WISE CVC YARN

10/S PC YARN 21/S PC YARN 31/S PC YARN (F.R.) 10/S CVC YARN 30/S CVC YARN
12/S PC YARN 22/S PC YARN 31/S PC YARN 12/S CVC YARN 31/S CVC YARN
16/S PC YARN 24/S PC YARN 38/S PC YARN (F.R.) 20/S CVC YARN 38/S CVC YARN
20/S PC YARN 23/S PC YARN 38/S PC YARN 24/S CVC YARN 30/S CVC YARN
40/S PC YARN 45/S PC YARN 60/S PC YARN
COUNT WISE PC YARN (EXPORT) 10/S PC YARN (65:35)

Competitive advantages:
There is quality work being done into the production plant by the skilled workers and the
machinery is embedded with modern technology and due to this the company is performing at low
cost and It produced highly innovative in the industry of blended Yarn manufacturers as to meet
the excellent future quality demanded product. The different production of Shadab Textile Mills
is producing Yarn at their full capacity by using the modern techniques and quality work with most
advance control professionals and this is the sustained competitive advantage to the Shadab textile
mills.

Economic Overview
Due to the tension at the border Pakistan is not
doing trade with its neighbor India, it most of
the trade is with China. Other neighbors
Afghanistan and Iran economy un stability
issues at the currently and the economy Pakistan
is not well established. Gross domestic product
of Pakistan was 5.53% in 2018 after adjusting
for inflation. The GDP of Pakistan has growth
rate of -0.39% in 2020 the negative growth rate
 SHADAB TEXTILE MILLS LIMITED

is because of outbreak of COVID-19,

Pandemic. The government is maintaining
the economy as the State Bank has decrease
the policy rate by 100 basepoints in 2020 to
7% to increase the investment opportunities
and people or investors will surely invest
because of lower interest rate of saving. It is
expected (through a survey of IMF,
published in October 2020, source: imf.org,
ID: 383729) that the GDP of the country
will be grow due to its relationship with China, reverse of the activates after pandemic and changes
in the government policies. Given graphs shows the inflation rate of next year and GDP growth
rate for next five years of Pakistan. As expected, that the inflation from 2021 is likely to be reduced,
due to this there would be more chances of the consumption and so the consumer market will also
increase.

Industry Analysis
Textile is the second industry in today's era to provide the largest jobs after the agriculture sector
in most developed and developing countries. The World Trade Organization is expected to
increase global trade in textiles by 3.3% this year, and it is expected to rise by 4% next year. The
share of technical textiles in the total world exports is also steadily growing day by day, which is
the reason for forcing the promotion of the textile industry. The share of technical textiles in total
worldwide textile exports is around 27 percent.

South Asia is considered as hub of textile industries where major contributors are Bangladesh,
India, and Pakistan. Pakistan is the world’s 4th largest producer of cotton. Since Independence,
Pakistan's textile sector has been the heart and soul of this country. It is Pakistan's largest
manufacturing sector. $3.5 billion in exports (6.5 percent of the world's total exported cotton) in
2017-18. Pakistan is Asia's 8th biggest exporter of textile commodities. Economic contributions
are equivalent to approximately 8.5 percent of total GDP. The Textile Industry employs
approximately 45 percent of the nation's total labor force. Textile exports increased by $4.4 billion
 SHADAB TEXTILE MILLS LIMITED

in the year 2017-18. Pakistan is also the world's 3rd biggest consumer of cotton. There are 464
total textile mills in Pakistan, of which 5 percent are on the PSX. 316 textile units out of 464 in
Punjab, 116 in Sindh. Pakistan's exports are threatened primarily by regional competitors because,
compared to Pakistan's government, the governments of these countries support their textile
industry a lot.

Textile exports for Jan2021 saw a rise of 11 percent Y/Y clocking in at USD1.3bn, as per the latest
data disclosed by PBS. As a consequence of the US-China trade war and supply chain disturbances
in Bangladesh and Vietnam, this is due to a change in orders to Pakistan. The order book for textile
companies is therefore filled for FY21. Textile exports sequentially decreased by 6 percent M/M
due to the high base effect of USD1.4 billion in Dec2020, which reported the highest textile
exports. In contrast to USD8.1bn at the same time last year, this brings the total figure to
USD8.8bn, up 8 percent Y/Y.

Competitive Position EV/EBITDA Price/Earning Price/ Book Value

SHDT 1.36 x 13.5 x 0.62 x
In the textile spinning sector of Pakistan stock
Shadab Textile Mill has 1.42% of the market GADT 4.73 x 154.32 x 0.76 x
share. Market leader is Gadoon textile mills IDYM 6.02 x 11.36 x 0.85 x
limited with 280 million capital and 28 million
JKSM 2.11 x 3.01 x 0.6 x
shares also, with the 18% of the market share.
NATM 2.09 x 34.62 x 0.45 x
On the second number, Indus dyeing and
manufacturing company having 16% percent of
Average 3.26 x 43.36 x 0.61 x
market share. As per the market share Shadab Median 2.11 x 13.50 x 0.61 x
textiles has good relative values in comparison
with their competitors. It is not above the
industry average but to do this it has increase
its market share and reduction in its cost as its
competitors are doing. Gadoon textile and
Indus dyeing are following these strategies as
per the news of textile reports.
 SHADAB TEXTILE MILLS LIMITED

Financial Analysis

Historical Financial Overview

Financial Performance (PKR IN MILLIONS) 2020 2019 2018 2017 2016 2015 CAGR
Sales 2290.54 2813.43 2271.53 2042.32 1861.58 1852.80 3.60%
Gross profit 130.14 198.99 99.31 85.96 101.00 83.62 7.65%
Operating profit 51.40 124.33 40.94 34.68 57.13 42.60 3.18%
Net Profit After Tax 40.85 78.05 24.70 18.94 32.81 25.45 8.21%
Total Assets 1376.46 779.03 763.74 720.66 717.24 769.23 10.18%
Total Equity 854.60 489.35 416.26 399.15 393.33 370.72 14.94%
Source: Annual Reports of the company

In previous six years, 8.21% growth in net income along with 3.60% growth in sales indicates that
company is managing it cost efficiently. Company has less profit in 2017 because company issued
new stock in that year and decreased its long-term debt. Again, huge decline in 2020 profits is due
to two reasons. First, it declined due to right share issue in the year. Second, the profitability of the
company has been affected mainly due to the sudden outbreak of pandemic COVID-19 in the
country followed by lock down of business by the Government, resulting closure of mills (Unit)
from 24.03.2020 to 15.05.2020. The company has suffered production loss 2.917 million kgs.
converted to 20/s and after this the yarn sale in the market was not stable at that time. Moreover,
during the year the prices of raw material remained on higher side and other input costs due to
devaluation of Pak rupees.

Shadab Textile profits have not faced

much fluctuation from 2015 to 2018. Its
profit is substantially grown in 2019 due
to increase in exports of textile which
was caused by the positive changes in
the policies of the government regarding
trade or exports. Again, in 2020 their
profits are affected by the outbreak of
COVID-19 in the country, which caused
closer of the borders and shutdown of the mills due to lockdown.
 SHADAB TEXTILE MILLS LIMITED

Growth of equity (i.e., 14.94%) is more than the growth of assets (i.e., 10.18%), which indicates
that the company's liabilities are decreased over the six years.

Dividends paid by the company are not consistence with its earnings and are very less regardless
of high earnings in some time periods
which are never gone more than Rs.5 in
last six years. It indicates that the
company is more intended to finance
internally rather than going for external
financing and raising its debt. On average
its payout ratio is 31.24% over the six
years.

Growth of the Company

Textile business is much affected by the economic condition and policy changes. The growth of
the companies is affected by them and could be predicted through these measures as they both go
with same direction. Shadab Textile is also following the same trend. Due to this we have predict
the growth of the company looking at
growth of the economy which is defied
by the GDP growth and the industry
growth within the country. In addition
to that other factors are also considered
like the changes in political actions.

Company growth has always in the

same direction with the growth in GDP
over the previous years. Due to this we
have made our assumptions of growth
of the company likewise. As it expected (through a survey of IMF, published in October 2020,
source: imf.org, ID: 383729) that GDP of Pakistan will grow up to 5.02% till 2025. So, we have
assumed that the company growth will be between 4% to 8% from 2021 to 2024, growth is also
 SHADAB TEXTILE MILLS LIMITED

affected by industry and policies which will be discussed shortly. For 2025, to terminate analysis
we have taken constant growth rate of the company's average of last 10 years from 2015 to 2024.
Following is the graph showing the relation of company and GDP growth previous and expected:

Demand for Textile is raising by 2.5% around the world. Share of the Pakistan Textile is expected
to be 3.78%. As per international exports reports Pakistan has opportunity in the exports of textile
during the period of 2020 to 2025. Due to COVID-19 Textile companies are subsided by deferring
electricity bills and loan payment. Moreover, the government of Pakistan is also favoring the
exports-oriented companies and the textile is one of the major export commodities of Pakistan.
Textile Policy draft of 2020-2025 claims that Pakistan's export of textile will be increased to $25.9
billion by 2025. And they have goal to reach $50 billion textile exports in next 10 years.
Government of Pakistan is also providing facilities to the farmers, as the textile production is very
costly. It seems a positive stimulus for the more production of textile.

Historical average growth of the company of last five years is 5.3%. Due to huge decline in 2020
(i.e., -18.59%) in growth will cause it to increase at lower rate. As it is affected by the political
changes as discussed earlier company may face a little decline in growth after 2023 due the
expected election of Pakistan will cause reduction in activates. To adjust the fluctuations, we have
taken the constant growth rate as average of 10 years. Looking at the above situation of economy,
industry, and company through the top to bottom approach we have calculated following growth
rates for the company from 2021 to 2025:

2021 2022 2023 2024 2025

Growth
4.00% 6.00% 8.00% 7.00% 5.74%

Forecasting of the financial statements is based on these growth rates.

Valuation
We have used three models to find intrinsic price: FCF, DDM and Residual Income model.
FCFF/FCFE and DDM models have provided the prices which do not have +20% upside potential
or 10% below the current price. Target price we have found is Rs. 40.09 (through DDM it is Rs.
35.07) and current market price is Rs. 35 (@ 25th February 2021). Residual income model is
 SHADAB TEXTILE MILLS LIMITED

different from these models but strong market directions fits with these models. Therefore, we
have recommended to hold the stock. (Refer to Appendix).

Risk free rate used is 10 years PIBs rate. Market rate is found by taking 10 years average return of
KSE 100 index, risk premium is equal to 8.09% (Refer to Appendix). Beta is calculated by finding
the slope of daily return of KSE 100 index and market return
Valuation Parameters
of last five years.
Risk Free Rate 8.01%
Free cash flows are discounted using WAAC in FCF model
Market Rate 16.01%
and required rate of return is used in DDM model. Required
Beta 0.191
rate of return is found through CAPAM model and cost of rs 9.55%
debt (rd) is calculated by taking the weighted average of rd 11.07%
long-term debt with respect to their rates. For taxation we Ws 62.09%
Wd 37.91%
have used Pakistan corporate tax rate in our forecasted
WAAC 8.91%
analysis. Terminal Growth Rate 5.74%
Tax rate 29%
Ratio Analysis

2020 2021 2022 2023 2024 2025

Profitability Ratios
EBIT Margin(%) 3.23% 3.23% 3.23% 3.23% 3.23% 3.23%
PBT Margin(%) 2.77% 2.73% 2.71% 2.69% 2.67% 2.65%
PAT Margin(%) 1.78% 1.94% 1.92% 1.91% 1.90% 1.88%

Liquidity Ratios:
Current Ratio 201.97% 205.86% 211.57% 219.10% 225.67% 231.05%
Quick Ratio 188.76% 192.39% 197.73% 204.77% 210.91% 215.93%

Performance Ratios:
Return on Asset (RoA) 2.97% 3.20% 3.17% 3.16% 3.13% 3.10%
Return on Equity (RoE) 4.78% 5.22% 5.31% 5.53% 5.69% 5.78%
Return on Capital Employed (RoCE) 4.60% 5.02% 5.12% 5.33% 5.49% 5.59%

Solvency Ratios:
Leverage Ratio 61.06% 60.00% 59.80% 60.31% 60.56% 60.63%
Interest Coverage Ratio 695.04% 650.77% 621.05% 603.86% 581.71% 553.78%

Shareholder Ratios
EPS 3.27 2.79 2.93 3.14 3.34 3.49
DPS 1.25 0.88 1.17 1.41 1.50 1.75
 SHADAB TEXTILE MILLS LIMITED

In the past the company has high performance in 2019, relative to that in 2020 performance of the
company is not so good because it affected by the pandemic. As we have provided already the
analysis of EV/EBITDA, P/E and P/BV company is not above the industry average as there are
huge player in the market. Looking at the past it is also has faced more fluctuations but always
remained less than the top competitors in the market like Gadoon textiles.

Risk to Our Valuation

Week Competitive Position in the Industry

Looking at the market share of the company, there are giant market players are in competition to
it they have huge market share and Shadab textile only have round about one and half percent of
the market. Among the 65 players in textile spanning sector of PSX only 5 players enjoy more
than 5% of the market each. Other 60 have less than 5% of the market in their pocket each. As
they have substantial influence, they may take the advantage of making curtail and force down the
growth of small business firm. For example, they may control over the exports and let no other to
do that as they are the big players. Therefore, there are chances that they may not perform as
expected.

Political Instability of the Country

Textile industry is highly sensitive to external factors, one of them is political instability. As it is
the most export sector of Pakistan and which affect by the political policies changes. If the relation
with the other countries is not good with the other countries than exports of the textile will be
reduced by it. This could affect the growth of the company. Pakistan political stability is very much
affected due to tension with India and Afghanistan on borders. Due to any reason will change the
policies of the government and restrict companies to do the business transaction with other
countries.

Unavailability of Raw Material

Most of the raw material comes from the agriculture sector and in current times this sector is in
crises in Pakistan due to many diseases and government of Pakistan unable to tackle them.
production of cotton is very expensive, and farmers could not afford it due to the spread of these
 SHADAB TEXTILE MILLS LIMITED

diseases. This is causing the shortage of raw material for the firms, which could affect the firms to
increase their operations. Hence, it may affect our company and reduce it growth of the future.

Conclusion:
Company has week position in the market but if we are looking at the ratios it will be sustained on
it. It has faced fluctuations in past due to debt requirement but now the company is more regulated
on the equity as it has issued shares in 2017 and pay of its debt to change its capital structure.
Current capital structure is not its optimal but near to its optimal level of capital structure.

Political instability could cause obstacle, but relationship of the country is not seeming to be isolate
due to CPEC. Therefore, the second route could be used to deal with problem of instability of
policies and these policies are made for the long term.

Company has made and it will be doing agreements in advance with the farmers of Panjab to get
cotton on time to meet the increasing demands as defined annual reports of the company.
 SHADAB TEXTILE MILLS LIMITED

Appendix: Balance Sheet

SHADAB TEXTILE MILLS LIMITED
BALANCE SHEET
AS AT JUNE 30

(RUPEES IN THOUSAND)
2020 2021 2022 2023 2024 2025
ASSETS

NON - CURRENT ASSETS

Property, plant and equipment 374,019.00 404,967.47 429,265.52 463,606.76 496,059.24 524,538.55
Right of use asset 14,993.00 14,993.00 14,993.00 14,993.00 14,993.00 14,993.00
Long term deposits 2,434.00 2,434.00 2,434.00 2,434.00 2,434.00 2,434.00
391,446.00 422,394.47 446,692.52 481,033.76 513,486.24 541,965.55

CURRENT ASSETS
Short term Investments 236,000.00 245,440.00 260,166.40 280,979.71 300,648.29 317,908.84
Stores, spares and loose tools 64,430.00 67,007.20 71,027.63 76,709.84 82,079.53 86,791.81
Stock in trade 224,545.00 233,526.80 247,538.41 267,341.48 286,055.38 302,478.14
Trade debts 116,616.00 121,280.64 128,557.48 138,842.08 148,561.02 157,090.08
Loans and advances 11,113.00 11,557.52 12,250.97 13,231.05 14,157.22 14,970.00
Trade deposits and prepayments 72,450.00 75,348.00 79,868.88 86,258.39 92,296.48 97,595.32
Other receivables 8,060.00 8,382.40 8,885.34 9,596.17 10,267.90 10,857.40
Cash and bank balances 251,798.00 261,869.92 277,582.12 299,788.68 320,773.89 339,189.88
985,012.00 1,024,412.48 1,085,877.23 1,172,747.41 1,254,839.73 1,326,881.47

TOTAL ASSETS 1,376,458.00 1,446,806.95 1,532,569.75 1,653,781.17 1,768,325.96 1,868,847.02

LIABILITIES

NON - CURRENT LIABILITIES

Lease liabilities 1,262.00 1,262.00 1,262.00 1,262.00 1,262.00 1,262.00
Deferred liabilities 32,899.00 32,899.00 32,899.00 32,899.00 32,899.00 32,899.00
34,161.00 34,161.00 34,161.00 34,161.00 34,161.00 34,161.00
CURRENT LIABILITIES
Trade and other payables 248,737.00 258,686.48 274,207.67 296,144.28 316,874.38 335,066.49
Unclaimed dividend 654.00 654.00 654.00 654.00 654.00 654.00
Accrued mark-up 775.00 806.00 854.36 922.71 987.30 1,043.98
Line of Credit 0.00 28,735.06 69,743.85 140,250.96 203,524.81 256,807.49
Sponsors loan 160,600.00 160,600.00 160,600.00 160,600.00 160,600.00 160,600.00
Short term borrowings 37,478.00 37,478.00 37,478.00 37,478.00 37,478.00 37,478.00
Current portion of long term liabilities 5,091.00 5,091.00 5,091.00 5,091.00 5,091.00 5,091.00
Provision for taxation 34,358.00 34,322.00 34,358.00 34,358.00 34,358.00 34,358.00
487,693.00 497,637.48 513,243.03 535,247.99 556,042.68 574,291.47

EQUITY

SHARE CAPITAL AND RESERVES

Issued, subscribed and paid-up share capital 166,000.00 166,000.00 166,000.00 166,000.00 166,000.00 166,000.00
Capital reserves 204,000.00 204,000.00 204,000.00 204,000.00 204,000.00 204,000.00
Revenue reserves 484,604.00 516,273.41 545,421.87 574,121.21 604,597.47 633,587.06
854,604.00 886,273.41 915,421.87 944,121.21 974,597.47 1,003,587.06

TOTAL EQUITY & LIABILITIES 1,376,458.00 1,446,806.95 1,532,569.75 1,653,781.17 1,768,325.96 1,868,847.02
 SHADAB TEXTILE MILLS LIMITED

Appendix: Income Statement

SHADAB TEXTILE MILLS LIMITED
INCOME STATEMENT
FOR THE YEAR ENDED JUNE 30

(RUPEES IN THOUSAND)
2020 2021 2022 2023 2024 2025

Sales - net 2,290,540.00 2,382,161.60 2,525,091.30 2,727,098.60 2,917,995.50 3,085,520.87

Cost of sales 2,160,400.00 2,246,816.00 2,381,624.96 2,572,154.96 2,752,205.80 2,910,213.00
GROSS PROFIT 130,140.00 135,345.60 143,466.34 154,943.64 165,789.70 175,307.87

Administrative and general expenses 73,267.00 76,197.68 80,769.54 87,231.10 93,337.28 98,695.88
Selling and distribution expenses 5,470.00 5,688.80 6,030.13 6,512.54 6,968.42 7,368.48
78,737.00 81,886.48 86,799.67 93,743.64 100,305.70 106,064.36
OPERATING PROFIT 51,403.00 53,459.12 56,666.67 61,200.00 65,484.00 69,243.51

Finance costs 10,644.00 11,822.70 13,131.94 14,586.15 16,201.41 17,995.53

Other charges 4,975.00 5,174.00 5,484.44 5,923.20 6,337.82 6,701.68
35,784.00 36,462.42 38,050.29 40,690.65 42,944.78 44,546.30

Other income 27,552.00 28,654.08 30,373.32 32,803.19 35,099.41 37,114.51

PROFIT BEFORE TAXATION 63,336.00 65,116.50 68,423.61 73,493.84 78,044.19 81,660.81
Taxation 22,486.00 18,883.78 19,842.85 21,313.21 22,632.81 23,681.63

PROFIT AFTER TAXATION 40,850.00 46,232.71 48,580.77 52,180.63 55,411.37 57,979.17

2021 2022 2023 2024 2025

Dividend Paid 14563.304 19432.307 23481.283 24935.118 28989.587
Retained Earnings 31,669.408 29,148.460 28,699.346 30,476.256 28,989.587

Appendix: DCF Calculations

All amounts are Rupees in Thousands, except Per Share Price and Current Share Price
Free Cash Flows

2020 2021 2022 2023 2024 2025

EBIT 76,939.20 81,555.55 88,080.00 94,245.60 99,656.34
Depriciation 45,807.98 69,856.89 74,048.30 79,972.17 51,342.13
122,747.18 151,412.44 162,128.30 174,217.76 150,998.47
(WCInv) 3,313.12 5,168.47 7,304.77 6,903.00 6,057.87
(FCInv) 100,805.36 98,346.35 114,313.41 83,794.60 118,962.21
Free Cash Flows 18,628.70 47,897.62 40,510.12 83,520.15 25,978.39

Horizon/Terminal Value
819203.1

FCF_2021/(1+WACC)^1 FCF_2022/(1+WACC)^2 FCF_2023/(1+WACC)^3 FCF_2024/(1+WACC)^4 FCF_2025+Horizon Value/(1+WACC)^5

Present Value of Cash flows
17104.31 40379.43 31356.88 59358.61 551525.45

Value of the Firm 699724.68

(Value of Debt) 34161.00
Value of the Equity 665563.68
Number of Shares Outstanding 16600.00
Per Share Price (PKR) 40.09
Current Price (PKR) 35.00
 SHADAB TEXTILE MILLS LIMITED

Working Capital Investment

Year 2020 2021 2022 2023 2024 2025
Current Assets 83,603.00 86,947.12 92,163.95 99,537.06 106,504.66 112,619.21
Current Liabilities 43,344.00 43,375.00 43,423.36 43,491.71 43,556.30 43,612.98
NWC 40,259.00 43,572.12 48,740.59 56,045.35 62,948.36 69,006.23

Change in NWC (Current - Previous) 3,313.12 5,168.47 7,304.77 6,903.00 6,057.87

FC Investment
Year 2020 2021 2022 2023 2024 2025
Net PP&E at the end of the Current Year 374,019 404,967 429,266 463,607 496,059 524,539
Net PP&E at the end of the previous Year 374,019 404,967 429,266 463,607 496,059
Depriciation 69,857 74,048 79,972 51,342 90,483
FC Investment 100,805 98,346 114,313 83,795 118,962

Appendix: DDM Calculations

2021 2022 2023 2024 2025 Horizon Value
Dividend 14563.30 19432.31 23481.28 24935.12 28989.59 804090.77
Present Value Of Cash Flows 13293.34 16190.97 17858.49 17310.46 18370.19 509538.08

Total PV of CF's 592561.54

Per Share Value 35.70
 SHADAB TEXTILE MILLS LIMITED

Appendix: Residual Income Model Calculations

Book Value
2020 2021 2022 2023 2024 2025
BV Beginning / Share 53.4 56.17 58.08 59.83 61.56 63.40
EPS 3.27 2.79 2.93 3.14 3.34 3.49
(DPS) 0.5 0.88 1.17 1.41 1.50 1.75
BV Ending/Share 56.17 58.08 59.83 61.56 63.40 65.14

Residual Income Model

2021 2022 2023 2024 2025 T.V
EPS 2.79 2.93 3.14 3.34 3.49
(Equity Charge) 5.37 5.55 5.72 5.88 6.06
Residual Income -2.58 -2.62 -2.57 -2.54 -2.56 20.36

PV -2.36 -2.18 -1.96 -1.77 -1.62 12.90

Sum of PV 3.01
BV Beginning 53.40
Intrinsic Value 56.41
Current Price 35 BUY
 SHADAB TEXTILE MILLS LIMITED

Disclaimer:
This report has been prepared by students of Sukkur IBA under the supervision of Mr. Abdul
Khaliq Daudpota – Assistance Professor (Finance) and is provided for information purposes only.
Under no circumstances this is to be used or considered as an offer to sell or solicitation of any
offer to buy. While reasonable care has been taken to ensure that the information contained therein
is not untrue or misleading at the time of publication, we make no representation as to its accuracy
or completeness and it should not be relied upon as such. In particular, the report takes no account
of the investment objectives, financial situation, and particular needs of investors, who should seek
further professional advice or rely upon their own judgment and acumen before making any
investment. The views expressed in this report are those of Students of Business Administration
Department- SIBA and do not necessarily reflect those of Sukkur IBA or its faculty.

Contact Us

Supervisor
Mr. Abdul Khaliq Daudpota

Assistance Professor (Finance) khaliq@iba-suk.edu.pk

Students
Asad Ali 013-17-0039 asadnihal.ba17@iba-suk.edu.pk

Zeeshan Haider 013-17-0169 zeeshanhaider.ba17@iba-suk.edu.pk

Siraj Ahmed 013-17-0156 sirajahmed.ba17@iba-suk.edu.pk