⚡ Flash Summary
Shams Textile Mills Limited (STML) reported a significant decrease in yarn production and sales for FY 2025, with a 32% and 38% decline, respectively. The company faced a net loss of PKR 137.194 million, a stark contrast to previous years’ profits. Key profitability ratios, such as gross profit margin and operating profit margin, also declined significantly. The company’s equity and reserves have also seen a dip compared to previous year. High energy costs, unreliable cotton supply, and economic pressures contributed to these challenges.
📌 Key Takeaways
- 📉 Yarn production decreased by 32% from 193,592 bags in 2024 to 131,820 bags in 2025.
- 📉 Yarn sales declined by 38% from 202,660 bags in 2024 to 125,869 bags in 2025.
- 💰 Net loss of PKR 137.194 million in 2025 compared to a net loss of PKR 33.895 million in 2024.
- 📉 Gross profit margin decreased from 3.91% in 2024 to 2.24% in 2025.
- 📉 Operating profit margin declined from 0.77% in 2024 to 0.20% in 2025.
- 📉 Return on average equity dropped from -3.73% in 2024 to -17.92% in 2025.
- 💸 Finance costs increased from PKR 90.503 million in 2024 to PKR 105.650 million in 2025.
- 📉 Loss per share significantly decreased from PKR -3.92 in 2024 to PKR -15.88 in 2025.
- 📉 Break-up value per share decreased from PKR 107.8 in 2024 to PKR 90.3 in 2025.
- 🏭 High energy costs are affecting production.
- ⚠️ Unreliable local cotton supply and dependence on expensive imports.
- 🌍 Economic pressures, including inflation and fluctuations in the rupee.
- 🏢 Strong global competition and changes in export demand or geopolitical conditions.
- 📜 Regulatory changes and financial risks, including credit and liquidity.
🎯 Investment Thesis
Given the substantial losses, declining revenue, and various operational and financial risks, a SELL recommendation is appropriate for STML. The company’s financial health is concerning, and a turnaround is uncertain in the current economic environment. Price target to be determined after further sector comparison.
Disclaimer: AI-generated analysis. Not financial advice.