SZTM

⚡ Flash Summary

Shahzad Textile Mills Limited (SZTM) reported a significant turnaround in its financial performance for the quarter ended September 30, 2025. The company achieved a pre-tax profit of Rs. 117.069 million, a stark contrast to the Rs. 5.265 million loss reported in the same period last year. Net sales also saw a substantial increase, reaching Rs. 3,354.647 million compared to Rs. 2,227.070 million in the corresponding quarter of the previous year. This positive shift is attributed to effective management strategies and a focus on operational efficiency.

📌 Key Takeaways

• 💰 Pre-tax profit soared to Rs. 117.069 million, reversing a Rs. 5.265 million loss YoY.
• 📈 Net sales jumped to Rs. 3,354.647 million from Rs. 2,227.070 million YoY.
• 🌞 Planned investment in a 2 MW solar energy system for enhanced efficiency.
• ⏳ Expected payback period for the solar investment is approximately 1.75 years.
• 🧑‍🎓 Focus on developing human capital through targeted training programs.
• 🤝 Strategic relationships reinforced with key stakeholders for market expansion.
• ⭐ Earnings per share (EPS) stood at Rs. 3.67, compared to a loss of Rs. 1.60 per share YoY.
• 🏭 ISO 9001:2015 certification underscores commitment to quality standards.
• 💼 Intention to arrange financing from financial institutions for strategic initiatives.
• 🌳 Strong focus on long-term sustainable growth and operational efficiency.
• ⚡ Management is proactively assessing strategic options to combat rising input costs and energy prices.
• 🌱 Company continues to reinforce strategic relationships with key stakeholders to expand market footprint and promote innovation.

🎯 Investment Thesis

BUY. SZTM has demonstrated a remarkable turnaround in its financial performance, driven by increased sales and improved operational efficiency. The planned investment in a solar energy system should lead to sustained profitability. The company’s focus on human capital development and strategic relationships enhances its long-term growth potential. The price target is Rs. 55, based on an expected P/E of 15x FY26 EPS of Rs. 3.67, implying roughly 30% upside. The time horizon is medium term.

⚡ Flash Summary

Shahzad Textile Mills Limited reported a positive turnaround in its financial performance for the year ended June 30, 2025. Despite challenging macroeconomic conditions in Pakistan’s textile sector, the company achieved a 3.24% increase in revenue, reaching Rs. 11.371 billion. This growth, coupled with effective cost management and improved operational efficiencies, enabled the company to post a profit of Rs. 158.025 million, a significant recovery from the previous year’s loss. The company’s strategic focus on value-added segments, export diversification, and sustainability practices positions it for continued growth and resilience.

📌 Key Takeaways

• ✅ Revenue increased by 3.24% to Rs. 11.371 billion, showcasing growth in a tough market.
• ✨ The company returned to profitability with a net profit of Rs. 158.025 million, a substantial turnaround.
• 🚀 Export sales from the socks division surged by 33.57% to Rs. 1.435 billion, indicating strong export performance.
• 📉 No exports from the spinning unit (compared to prior year Rs 29.281 million) due to reduced global competitiveness.
• 🌱 A new Employees’ Provident Fund Scheme was established, enhancing employee benefits.
• 💡 The Company plans to install a Solar Energy System with a payback period of 1.75 years to reduce energy costs.
• 📚 Earnings per share (EPS) significantly improved to Rs. 8.79 from a loss per share of Rs. (5.50).
• 🚫 No dividend was declared due to capital expenditure requirements.
• 🌐 ISO certifications (ISO 9001:2015 and ISO 45001:2018) were maintained, reinforcing product quality.
• ⚠️ Exposure to foreign exchange, liquidity, and credit risks are actively managed.
• 🤝 Emphasis on fostering partnerships with suppliers, customers, and stakeholders.
• 🎯 Aims to increase female representation in the workforce to 2% within three years.
• 🏢 Plans to dispose of assets (Office in Tricon Corporate Centre) for minimum consideration of Rs 170 million towards capital investment
• 🔋 Plans towards capital investment in the installation of a Solar Energy System at the Company’s mills site

🎯 Investment Thesis

Given the company’s recent turnaround, improved EPS, and focus on sustainable practices, a BUY rating is warranted. Key initiatives, such as the Employees’ Provident Fund Scheme and planned Solar Energy System installation, demonstrate management’s commitment to long-term value creation. The proposed asset disposal and shift towards value-added segments provide further upside potential. The financial risk are being actively managed which should give more comfort to potential investors.