⚡ Flash Summary

REDCO Textiles Limited’s quarterly report for September 30, 2025, reveals a mixed performance. Sales revenue decreased by 6.15% to Rs. 418.54 million due to a slowdown in local market demand and flood-related disruptions. However, the company improved its gross profit to Rs. 93.849 million through better cost management and operational efficiency, primarily driven by savings from its solar power system. Profit after taxation significantly decreased to Rs. 53.28 million compared to Rs. 86.46 million in the previous corresponding period.

📌 Key Takeaways

• 📉 Sales declined by 6.15% to Rs. 418.54 million compared to Rs. 445.99 million last year, impacting overall revenue.
• 💡 Gross profit improved to Rs. 93.849 million, up from Rs. 76.181 million, driven by cost efficiencies.
• ☀️ Solar power system contributed significantly to cost savings by reducing electricity expenses.
• ⚡️ High energy tariffs remain a challenge for profitability.
• 🚚 Stabilization of the exchange rate and decline in shipping costs are expected to provide some relief to exporters.
• 🌍 The company anticipates a gradual recovery in export orders for value-added products.
• 🏠 Domestic demand is expected to remain steady due to seasonal factors.
• 🌱 Management focuses on cost control, energy efficiency, and product diversification.
• 🤝 The Board acknowledges employees, customers, financial institutions, and shareholders.
• ⚠️ Profit before levies and taxation increased to Rs. 84.21 million from Rs. 73.88 million year-over-year.
• 🏢 Profit after taxation significantly decreased to Rs. 53.28 million compared to Rs. 86.46 million.
• ✔️ Basic and diluted earnings per share (EPS) decreased to Rs. 1.0809 from Rs. 1.7540.

🎯 Investment Thesis

Based on the decreased sales, decline in profit after tax, and existing challenges, a SELL recommendation is appropriate. The cost savings are not enough to offset the sales decreases. A revised price target should reflect these challenges, with a time horizon of medium term (6-12 months) to allow for potential recovery or further deterioration.