⚡ Flash Summary

Nagina Cotton Mills Ltd. (NCML) reported an increase in profit before levies and taxation by 42.18%, reaching Rs. 442.26 million in 2025 compared to Rs. 311.06 million in 2024, primarily due to reduced finance costs and higher other income. However, profit after tax decreased by 34.55% due to deferred tax and super-tax charges. The company’s short-term borrowings surged by 307.48% due to higher imported cotton procurement, necessitating increased working capital. While sales data is available, the announcement is more focused on balance sheet and profit variations.

📌 Key Takeaways

• ⬆️ Profit before levies and taxation increased by 42.18%, from Rs. 311.06 million in 2024 to Rs. 442.26 million in 2025.
• ⬇️ Profit after tax decreased by 34.55%, due to deferred tax and super-tax charges.
• ⬆️ Short-term borrowings increased significantly by 307.48%, driven by the procurement of imported cotton.
• 📈 Stock-in-trade increased by 97.97%, reflecting elevated inventory levels.
• 💰 Other receivables increased by 446.95%, influenced by a payment order related to the SGC refund.
• 📉 Other financial assets decreased sharply by 85.57%, due to divestments and reduced expected returns.
• 📊 Sales for the year 2025 stood at Rs. 19.86 billion, compared to Rs. 20.45 billion in 2024.
• 💸 Earnings per share (EPS) decreased from Rs. 4.12 in 2024 to Rs. 2.70 in 2025.
• ✔️ The SBP’s policy rate reduction to 11% is viewed positively, and a flexible exchange rate supports exporters.
• ⚠️ Raw material supply chain is impacted by climate change, requiring imports and substantial foreign exchange.
• 🏭 The company has 62,508 spindles and an annual yarn production capacity of approximately 24 thousand tons.

🎯 Investment Thesis

Given the mixed financial performance, increased borrowings, and external risks, a HOLD recommendation is appropriate. The company shows potential with increased profit before tax, but the drop in net profit and EPS necessitates caution. A price target of Rs. 55 is set, reflecting a more conservative valuation until the company stabilizes its earnings and manages its debt effectively. Time horizon: 6-12 months.