📉 KSTM: SELL Signal (8/10) – Transmission of Annual Audited Accounts for The Year Ended June 30, 2025

📌 Key Takeaways

• ❌ KSTM’s net loss after taxation increased to Rs. (19.323) million in 2025 from Rs. (13.725) million in 2024.
• ⚠️ The company has ceased manufacturing operations since November 2013.
• 📉 Accumulated losses stand at Rs. 399.195 million as of June 30, 2025.
• 💰 Current liabilities exceed current assets by Rs. 183.024 million.
• ❓ Auditor issued a disclaimer of opinion due to concerns about the going concern assumption.
• 🚫 The company did not recognize mark-up expense of Rs. 16.791 million on short-term borrowings due to ongoing disputes.
• 🏦 The company couldn’t provide confirmations for Rs. 68.180 million in short-term borrowings.
• 📄 The company couldn’t provide confirmations for Rs. 153.895 million in long-term finances.
• 🧾 Trade and other payables totaling Rs. 77.342 million lack direct balance confirmations.
• ❌ The company failed to submit its income tax return for 2024 and 2023.
• Compliance issues with the Listed Companies (Code of Corporate Governance) Regulations, 2019 were identified.
• ❌ There is no Independent Director in the Company.
• 😬 The required number of Directors have not participated in the Director Training Program.
• The auditor noted that the company is not in compliance with IFRS and IAS standards.
• No dividend recommended by the board.

🎯 Investment Thesis

Based on the persistent losses, disclaimer of opinion, operational challenges, and compliance issues, a SELL recommendation is warranted. The company’s financial distress and unreliable financial reporting make it an extremely risky investment. The price target is below the current market level, based on the negative book value and very high uncertainty. The time horizon is short to medium term, as the company’s financial situation could deteriorate rapidly.