⚡ Flash Summary

Reliance Cotton Spinning Mills Limited (RCML) reported a decrease in sales for the first quarter ended September 30, 2025, with revenue falling to Rs. 3.95 billion compared to Rs. 4.26 billion in the same period last year. Profit from operations also declined from Rs. 600.80 million to Rs. 483.50 million. The company’s after-tax profit decreased to Rs. 240 million, down from Rs. 310 million in the previous year, while EPS decreased to Rs. 22.52 from Rs. 30.12. Management cites subdued market demand, cost challenges, and heavy taxation as factors impacting performance.

📌 Key Takeaways

• 📉 Sales decreased to Rs. 3.95 billion from Rs. 4.26 billion YoY.
• ⚠️ Profit from operations declined to Rs. 483.50 million from Rs. 600.80 million YoY.
• 💸 Finance costs increased significantly to Rs. 178.52 million from Rs. 97.79 million YoY.
• 🧾 Taxation decreased to Rs. 65.07 million from Rs. 192.97 million YoY.
• 😔 Profit after taxation decreased to Rs. 239.91 million from Rs. 310.04 million YoY.
• 📉 EPS decreased to Rs. 22.52 from Rs. 30.12 YoY.
• ⚠️ Gross profit margin decreased to 15.32% from 17.98% YoY.
• 🏭 Cost of sales decreased to Rs. 3,345.78 million from Rs. 3,492.09 million YoY.
• ⚠️ Distribution costs decreased to (74.98 million) from (89.72 million) YoY.
• ⚠️ Administrative expenses increased to (93.24 million) from (65.18 million) YoY.
• 🏦 Finance cost increased to (178.52 million) from (97.79 million) YoY.
• ⚠️ Management acknowledges margins are under pressure due to market demand and sustained costs.

🎯 Investment Thesis

HOLD. RCML’s Q1 2025 results indicate a challenging operating environment. While the company is focused on operational efficiency, the contraction in revenue and profitability warrants caution. Given the market headwinds and earnings decline, a HOLD recommendation is appropriate until there’s a clear turnaround in performance or a more favorable economic outlook.