⚡ Flash Summary
Shaffi Chemical Industries Limited’s 2025 annual report reveals a company in significant financial distress, despite attempts at revival through diversification into furniture manufacturing and trading. The company experienced a substantial after-tax loss of Rs. (29.107) million, doubling from Rs. (14.984) million the previous year. An independent auditor’s report expressed an adverse opinion, citing a net capital deficiency of Rs. 70.545 million. While management seeks to address the dire financial straits, the company’s ability to continue as a going concern is highly questionable.
đź“Ś Key Takeaways
- 📉 Significant Loss: The company reports a loss after taxation of Rs. (29.107) million in 2025, compared to Rs. (14.984) million in 2024.
- ⚠️ Adverse Audit Opinion: The independent auditor expresses an adverse opinion on the financial statements.
- ⛔️ Net Capital Deficiency: The company faces a net capital deficiency of Rs. 70.545 million.
- đź”» Revenue Increase: Sales revenue increased to Rs. 23.661 million from Rs. 20.238 million the previous year.
- furniture🪑Business Shift: The company diversified into furniture manufacturing and trading, aiming for revival.
- ⬆️ Authorized Capital Increase: Authorized capital increased from Rs. 120 million to Rs. 400 million to facilitate rights issue fundraising.
- âž– Operating Profit Decline: Gross profit decreased to Rs. 3.653 million from Rs. 4.240 million.
- âž– EPS Decline: Earning per share is Rs. (2.43) compared to Rs. (1.25) for the preceding year.
- 🏛️ Ongoing Litigation: The company is contesting winding-up petition and disputed cases related to First Capital ABN AMRO equities.
- 🏦 Loan Increase: Loan from associated company increase to Rs. 4.481 million from Rs. (3.705) million in the prior year.
- 🚧 Non-Compliance: The company faces non-compliance issues regarding independent directors and other corporate governance matters.
- ❗Material Uncertainty: The auditor highlights material uncertainty related to the company’s ability to continue as a going concern.
🎯 Investment Thesis
Given the financial distress, adverse audit opinion, and substantial risks, a SELL recommendation is warranted. There is a high probability of further downside. Any investment is purely speculative. No price target or meaningful time horizon can be assigned given the severe financial instability.
Disclaimer: AI-generated analysis. Not financial advice.