📉 KOSM: SELL Signal (8/10) – Presentation For Annual Corporate Briefing Session for The Financial Year 2025

📌 Key Takeaways

• 🚨 Increased Operating Loss: Operating loss increased from Rs 171 million in 2024 to Rs 203 million in 2025.
• 📉 Deeper Net Loss: Loss after tax widened from Rs 375 million to Rs 494 million.
• 📉 Loss Per Share (LPS): LPS deteriorated from Rs 0.91 to Rs 1.13.
• 📉 Equity Erosion: Equity decreased substantially from Rs 563 million to Rs 206 million.
• 📉 Declining Return on Equity: Return on Equity (ROE) decreased from 150% to 128%.
• 🏭 Operational Challenges: Pakistan’s spinning sector is facing challenges due to high energy costs and reduced consumer spending.
• 🌱 Diversification Efforts: The company is considering diversification to mitigate the unviable spinning sector conditions.
• 🧵 Yarn Trading: KSM has started purchasing and selling yarn, in line with its memorandum of association.
• 📜 Regulatory Compliance: Amendments to the Memorandum and Articles of Association have been approved to allow business diversification.
• ⚠️ Uncertain Outlook: The future for Pakistan’s spinning mills is uncertain due to declining local cotton production.
• ⚡️ High Energy Costs: High energy costs continue to pose a significant challenge to the company.
• 📊 Current Ratio: Current ratio worsened from 0.24 in 2024 to 0.16 in 2025, showing declining liquidity.

🎯 Investment Thesis

Given the sustained losses, declining equity, and challenging industry conditions, a SELL recommendation is warranted. The company faces significant operational and financial risks, with little prospect of near-term improvement. The negative outlook for the spinning sector in Pakistan, coupled with KSM’s weakened financial position, makes it an unattractive investment.