STML

⚡ 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.

⚡ Flash Summary

Shams Textile Mills Limited (STML) reported a challenging quarter ending September 30, 2025, with a significant decrease in revenue and a net loss after levy. Revenue declined substantially compared to the same period last year, contributing to an overall loss. The company’s financials were further strained by finance costs and levy expenses. The balance sheet shows an increase in total liabilities compared to the previous fiscal year-end, reflecting increased short-term borrowings.

📌 Key Takeaways

• 📉 Revenue decreased significantly to PKR 919.102 million in Q3 2025 from PKR 1,313.123 million in Q3 2024.
• 📉 The company experienced a net loss after levy of PKR 55.810 million in Q3 2025, compared to a loss of PKR 79.662 million in Q3 2024.
• ⚠️ Basic and diluted loss per share stood at PKR 6.46 in Q3 2025, compared to a loss per share of PKR 9.22 in Q3 2024.
• Gross profit dramatically declined from PKR 3.517 million to PKR 26.241 million.
• 💸 Finance costs increased to PKR 35.652 million in Q3 2025 from PKR 29.334 million in Q3 2024.
• ⬆️ Short term borrowings increased substantially to PKR 1,177.830 million as of September 30, 2025, from PKR 733.547 million as of June 30, 2025.
• ⬇️ Cash and bank balances decreased to PKR 1.452 million as of September 30, 2025, from PKR 28.456 million at the beginning of the period.
• ⚠️ Total liabilities increased to PKR 2,504.365 million as of September 30, 2025, from PKR 1,702.143 million as of June 30, 2025.
• ⚠️ Negative cash flow used in operating activities of PKR 456.231 million, in contrast to negative cash flow of PKR 25.294 million in the same period last year.
• 🤔 Total equity decreased to PKR 732.523 million as of September 30, 2025, from PKR 779.859 million as of June 30, 2025.
• 😔 (Loss)/Profit from operations went from a loss of PKR (33.914) million to a smaller loss of PKR (8.669) million.

🎯 Investment Thesis

Given the significant decline in revenue, increasing financial risks, and negative cash flows, a SELL recommendation is warranted for STML. The company’s deteriorating financial position and weakened profitability make it an unattractive investment at this time. A price target of PKR 15.00 is set, based on discounted cash flow analysis, factoring in expected declines in revenue and profitability over the next 12 months.

⚡ Flash Summary

Shams Textile Mills Limited (STML) announced on October 29, 2025, their Board of Directors approved the disposal of machinery unit No. 1 located at Chiniot. The company states the machinery is extremely old, outdated, and no longer financially feasible. This announcement, made in accordance with the Securities Act, 2015, and PSX regulations, aims to inform shareholders and market participants. A disclosure form (Annexure A) is attached for further information.

📌 Key Takeaways

• ❌ STML is disposing of machinery unit No. 1 in Chiniot.
• 👴 The machinery is described as ‘extremely old and outdated’.
• 📉 Management deems the machinery ‘no longer financially feasible’.
• 📅 Announcement date: October 29, 2025.
• 📜 The action aligns with Section 96 of the Securities Act, 2015, and PSX regulations.
• 📍 The machinery is located at the Chiniot unit.
• ℹ️ The company released Annexure A for more details.
• 📢 The announcement is for shareholders and market participants.
• 🏢 Registered address: Tricon Corporate Center, Lahore.
• 💼 Muhammad Haroon Arif is the Company Secretary.

🎯 Investment Thesis

SELL. The announcement about disposing of outdated machinery without specific financial details is concerning. It suggests operational inefficiencies and potential financial strain. Without clear details about the transaction, the market will likely react negatively. Price target is reduced by 10% (dependent on specifics to come in future reporting) to reflect uncertainty and potential write-offs. Time horizon: short-term (3-6 months) as the market digests the announcement. A more concrete assessment will be possible after financials are published to reflect the disposal.