⚡ Flash Summary

Nagina Cotton Mills Limited’s 2025 annual report reveals a challenging year marked by increased power tariffs and a textile value chain recession. Despite these headwinds, the company maintained profitability with an after-tax profit of Rs. 50.4 million. However, sales revenue decreased by 2.89% to Rs. 19.86 billion, impacting earnings per share which fell to Rs. 2.70. The board recommends a final cash dividend of Rs. 1 per share, indicating confidence in the company’s long-term prospects.

📌 Key Takeaways

• 📉 Sales revenue decreased by 2.89% YoY to Rs. 19.86 billion due to lower sales volume and per unit selling price.
• ✅ After-tax profit stood at Rs. 50.4 million, representing 0.25% of sales.
• 📉 Earnings per share (EPS) decreased to Rs. 2.70 from Rs. 4.12 in the previous year.
• ⬆️ Gross profit margin improved to 8.10% due to reduced raw material costs.
• ⚡ Operating expenses increased to 3.08% of sales.
• 💸 Finance costs decreased to 3.63% of sales, reflecting better cash flows and lower policy rates.
• 🏭 The company invested Rs. 216.15 million in BMR/Expansion to enhance spinning productivity.
• ☀️ Installation of a 1.6 MW solar plant is underway to reduce costs and enhance green energy.
• ⚠️ The textile industry faces challenges due to global and domestic market slowdowns and US tariffs.
• 🌧️ Heavy rains and floods may adversely impact cotton crops and lead to inflationary pressures.
• ✅ Removal of cotton yarn from the Export Facilitation Scheme (EFS) will benefit local spinners.
• 🏦 SBP reduced the policy rate to 11% from a peak of 20.5%, offering some relief to businesses.
• 💰 The board recommended a final cash dividend of Rs. 1 per share (10%).
• 🌱 The company strongly believes in integrating Corporate Social Responsibility into its business.

🎯 Investment Thesis

I recommend a HOLD rating for Nagina Cotton Mills Limited. The company demonstrated resilience in a tough environment by maintaining profitability, but faces downside risks. A continued focus on cost management, strategic market positioning and diversification would be essential. The dividend payment and investments in operational efficiency are positive factors.