⚡ Flash Summary

Ghazi Fabrics International Limited (GFIL) reported a gross loss of PKR 289.056 million for the year ended June 30, 2025, a 41% decrease from the PKR 408.877 million gross loss in 2024. The loss after tax decreased by 77% to PKR 376.845 million, and loss per share improved to PKR 11.55 from PKR 20.42. The Board is selling inefficient spinning unit assets to repay director’s loans and acquire new technology to enhance operational efficiency and sustainability. Despite losses, management believes the company is a going concern due to planned improvements and financial support. The auditor highlights that they have issued an unqualified audit report with an emphasis of matter paragraph.

📌 Key Takeaways

• 📉 Gross loss decreased by 41% from PKR 408.877 million to PKR 289.056 million.
• 📉 Loss per share improved to PKR 11.55 from PKR 20.42.
• 🏭 Selling old spinning unit plant and machinery to reduce operational capacity but improve efficiency.
• 💰 Proceeds from asset sales will be used to repay Director’s loan and invest in new technology.
• ⚙️ Plans to invest in new technology to increase efficiency and reduce energy consumption.
• ⚠️ Auditor notes material uncertainty about going concern, but management confident in steps taken.
• 🏭 Main activity is manufacturing of Yarn and Grey Fabrics.
• 🌏 Sales declined significantly, with local sales at PKR 571.006 million vs. PKR 3,952.785 million last year and export sales at PKR 23.025 million vs. PKR 428.685 million last year.
• ⚡ Power prices are elevated due to shift to imported Re-liquefied Natural Gas (RLNG).
• ❌ Sector unable to pass on increased production costs, resulting in margin pressure.
• ⚠️ Dependent on the textile industry remains subdued due to underperformance of cotton yarn and cotton fabric
• 🌍 Developing new seed is a time taking task, therefore imports of suitable cotton seed must occur until the production level is achieved.
• 🤝 Board comprises two independent directors, three non-executive directors, and two executive directors.
• 🏦 Loan for capital expenditure from directors increased to a significant level, reflecting increasing financing requirement.

🎯 Investment Thesis

Given the consistent losses, revenue decline, and going concern risk noted by the auditor, a HOLD recommendation is appropriate. Management’s planned asset sales and investments in new technology are positive steps, but significant uncertainty remains about whether these strategies will be successful. Any potential price target is difficult to establish given the financials and uncertainty.