⚡ Flash Summary
Nagina Cotton Mills Ltd. reported strong first quarter results for FY26. Despite a challenging environment, the company managed to significantly increase its after-tax profit to Rs. 26.16 million, compared to Rs. 7.73 million in the same period last year, leading to a higher Earnings per Share (EPS) of Rs. 1.40 versus Rs. 0.41. Revenue also saw an increase of 11.79%, driven by higher sales volume, though gross profit margins slightly decreased. The directors expressed optimism about maintaining profitability through cost optimization and strategic initiatives.
📌 Key Takeaways
- 🚀 Profit Surge: After-tax profit soared to Rs. 26.16 million, a significant increase from Rs. 7.73 million in the same quarter last year.
- 📈 EPS Boost: Earnings per share (EPS) jumped to Rs. 1.40, up from Rs. 0.41 year-over-year.
- 💰 Revenue Growth: Sales revenue increased by 11.79%, reaching Rs. 5.14 billion compared to Rs. 4.60 billion SPLY.
- 📉 Margin Contraction: Gross Profit (GP) margin slightly decreased to 8.11% from 8.25% SPLY.
- 📉 Operating Expenses: Operating expenses decreased to 2.87% of sales, compared to 3.87% of sales SPLY.
- 💲 Finance Cost Reduction: Finance costs reduced to 3.55% of sales from 3.85% in SPLY.
- 🌾 Cotton Arrival Increase: Kapas arrivals up 49.24% to 3.044 million bales vs 2.040 million bales SPLY.
- ⚡ Energy Efficiency: Implementing measures to reduce energy costs, including expanding solar capacity.
- 🏦 Stable Policy Rate: State Bank of Pakistan maintained existing policy rate, contributing to better cost and revenue predictability.
- 📊 Positive Outlook: Management remains optimistic about maintaining profitability despite market challenges.
- 💼 Strategic Focus: Proactive measures focusing on cost optimization, marketing, and product diversification are in place.
- 🤝 Acknowledgement: Directors acknowledged staff and stakeholders for their continued support.
- ✅ Stable Cash Flows: Maintained stable cash flows ensuring timely settlement of operating liabilities.
🎯 Investment Thesis
BUY. Nagina Cotton Mills shows strong growth potential based on its impressive Q1 FY26 results. The significant increase in profitability, driven by higher revenue and reduced expenses, makes it an attractive investment. Despite industry-wide challenges, the company’s proactive measures to manage costs and optimize operations position it favorably for continued growth. The stock is undervalued based on current earnings. Increase price target to 60 PKR with a 12-month time horizon. Re-evaluate after the next quarter.
Disclaimer: AI-generated analysis. Not financial advice.