The parent company of the group Wah Nobel (Pvt) Ltd was setup by the Pakistan Ordinance Factories in collaboration with Bofors Sweden which is now known Saab and is the global leader in providing products, services and solutions to military and civil security. The group has played a pivotal role in development of some of the mega projects in the country such as Tarbela Dam, Mangla Dam, Karakom Highway, Motorways and various hydro projects.
The group has diversified over the years and has now has five companies active in various fields. The group companies include Wah Nobel Acetates Ltd, Wah Nobel Balochistan Explosives (Pvt) Ltd, Nobel Energy Ltd and Wah Nobel Gilgit Baltistan (Pvt) Ltd.
Wah Nobel Chemicals has installed capacity of 30,000 metric tons per annum for Formaldehyde, 19,000 metric tons per annum for Urea/Phenol Formaldehyde and 4,000 metric tons per annum for Urea Formaldehyde Moulding Compound. These products are used in numerous industries such as textile, leather, food, sugar, paint, dyeing and pharmaceutical.
Historical Performance Last five years' performance of Wah Nobel Chemical has closely mirrored the overall improvement in the economy. The company's top-line went up from 698 million in 2011 to over a billion rupees for the first time in 2012. The best year for the company was in 2013 when it was able to achieve growth on all metrics. Gross and net margins also hit the sweet spot. Margins improved as weakness of the rupee led to less import of competitive products and the company was able to take full advantage of the situation.
Since 2013 the performance of the company has been steady with not much growth as competition has spurred up. Margins of the company have also dropped in face of decline UMFC prices. In 2016 although the sales of the company declined compared to the preceding year but overall profitability increased as the company was able to manage their sales mix and cut down costs. Finance cost also helped the company in bolstering up its bottom-line.
Q1FY17 Snapshot During the first quarter of the financial year, the net sales of the company went up by 5 percent. The earnings of the company went up by 50 percent. The positive change has been due to start of many infrastructure projects across the country which has helped the top-line of the company.
Gross margin of the company improved by 2 percent as control of energy costs kicked in. While net margin also saw a significant increase from 4 to 7 percent as finance cost of decline by 120 percent, while distribution and administrative expenses went down by 28 and 22 percent respectively.
Shareholding Pattern The majority of the shareholding (55 percent) of Wah Nobel Chemicals is with its parent company Wah Nobel (Pvt) Ltd. State Life Insurance owns 10 percent while NIT has 7 percent holding in the company. The general public only owns about 21 percent of the company. Out of 9 million outstanding shares, the free float of the company is about 2 million shares.
Performance vs. KSE-100 The performance of the stock (PSX: WAHN) against the benchmark KSE-100 index has been really good. The stock has outperformed the index since April 2016. Significant surge in the stock price came when the company announced its first quarter result for fiscal year 2017. As the company's earnings went up 50 percent, the stock also took off as investors flocked towards it. With only 2 million shares in free float and demand from investors running high, the stock went on a spree of caps (upper-circuit 5%). The 52-week low of the stock is 41 rupees and the 52-week high is 161 rupees.
Future Outlook The outlook for Wah Nobel Chemicals seems positive as the company is set to benefit from a growing economy. Infrastructure spending has picked up from the last few years and construction boom can be seen all over the country. The products of the company are used in industries which are also expanding. On the other hand, competition is getting stiffer by the day and margins could get under pressure if costs are not controlled.
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Pattern of Shareholding (As of June 30, 2016)
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Wah Nobel (Pvt) Ltd 55.2%
State Life Insurance Corporation Of Pakistan 9.6%
CDC-Trustee National Investment (Unit) Trust 6.8%
WNPL Employees Provident Fund 1.0%
WNCL Employees Provident Fund 0.4%
WNPL Employees Provident Fund (WNDL) 0.1%
Directors and their Spouses and minor Children 0.0%
Financial and Insurance Companies* 21.4%
Foreign Shareholding 0.1%
General Public & Others 21.8%
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(*some shareholders are repeated) Source: Company Accounts, Zakheera
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Wah Nobel Chemicals Q1FY17 Snapshot
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PKR ('000) Q1FY17 Q1FY16 YoY
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Net Sales 235,007 223,900 5%
Cost of Sales 194,001 189,962 2%
Gross Profit 41,006 33,938 17%
Gross Margin 17% 15% -
Distribution Costs 8,195 10,524 -28%
Admin expenses 2,684 3,273 -22%
Other charges 2,065 1,188 42%
Finance cost 2,286 5,023 -120%
Profit before tax 25,938 14,181 45%
Taxation 8,897 5,588 37%
Net Income 17,041 8,593 50%
Net Margin 7% 4% -
EPS 1.89 0.95 50%
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Source: Company Accounts
Copyright Business Recorder, 2017