TATM

⚡ Flash Summary

Tata Textile Mills Limited (TTML) reported a decrease in revenue for the year ended June 30, 2025, with revenue decreasing by 10% to PKR 41,239.93 million compared to PKR 45,823.70 million in the previous year. However, the company saw a significant increase in profit after tax, reporting PKR 1,113.15 million compared to a loss of PKR 553.91 million in the previous year. This positive turnaround is also reflected in the earnings per share, which increased from a loss of PKR (9.89) to a profit of PKR 19.88. The company attributes some of the improvements to digital transformation and sustainability efforts, including expansion of solar energy capacity.

📌 Key Takeaways

• 1. 📉 **Revenue Decline:** Revenue decreased by 10% from PKR 45,823.70 million to PKR 41,239.93 million.
• 2. ⬆️ **Gross Profit Improvement:** Gross profit decreased but improved as a percentage of sales, from 7.3% to 5.6% which contributed to the turnaround.
• 3. 🚀 **Profit Turnaround:** Profit after tax surged to PKR 1,113.15 million from a loss of PKR (553.91) million.
• 4. 🌟 **EPS Boost:** Earnings per share increased from a loss of PKR (9.89) to a profit of PKR 19.88.
• 5. 💰 **Operating Efficiency:** Some improvements in operating expenses were observed, though finance costs remain significant.
• 6. 💡 **Other Income Surge:** Other income increased significantly by 86% from PKR 2,578.686 million to PKR 4,785.914 million.
• 7. ☀️ **Sustainability Initiatives:** Expanded solar energy capacity to 11.14 MW, contributing to cost savings and environmental benefits.
• 8. 🏆 **Awards & Recognition:** TTML secured the First Position in the Textile Category for its Annual Report 2024.
• 9. 🏭 **Capacity Enhancement:** Continued BMR (Balancing, Modernization, and Replacement) to enhance capacity and cost optimization.
• 10. 📊 **Improved Liquidity:** Current ratio slightly improved from 1.20 to 1.23.
• 11. 🌍 **Global Certifications:** Maintains various certifications and compliances related to textile standards.
• 12. 🌱 **Sustainability Focus:** Planted 10,379+ trees around the manufacturing facility in the last two years.
• 13. 🤝 **Diamond Award:** TTML received the “Diamond Recognition Award” for Skills Development Employers.

🎯 Investment Thesis

Based on the improved profitability and positive EPS, a HOLD recommendation is appropriate. The company needs to demonstrate sustainable revenue growth in the coming periods. A price target will be determined with further analysis of peer valuations and future growth prospects, with a time horizon of medium term.

⚡ Flash Summary

Tata Pakistan’s Q1 2025 report reveals a mixed performance. Revenue slightly decreased YoY due to a reinstated sales tax on imported yarn. However, gross profit significantly improved due to optimized cotton procurement and renewable energy utilization. A substantial increase in other income led to a considerable surge in profit before taxation. The company faces challenges from rising energy costs and regional competition but focuses on cost optimization and renewable energy integration.

📌 Key Takeaways

• 📉 Revenue slightly decreased to Rs. 11,879 million from Rs. 11,908 million YoY.
• ✅ Gross profit surged by 44.5% to Rs. 795 million, driven by optimized cotton procurement.
• ⚡ Renewable energy utilization contributed to enhanced profitability.
• 💰 Other income skyrocketed to Rs. 2,684 million, boosting overall profit.
• ⬆ Profit before taxation soared to Rs. 2,327 million from Rs. 81 million YoY.
• ❗ Finance costs decreased by 11% due to the reduction in the State Bank of Pakistan’s policy rate.
• ⚠️ Reinstatement of 18% sales tax on imported yarn impacted revenue.
• 🏆 Received a ‘Diamond Recognition Award’ for Skills Development Employers.
• ☀️ Focus on integrating renewable energy solutions for cost optimization.
• 🤝 Strong emphasis on sustainability and corporate social responsibility initiatives.
• 🌍 Economic challenges persist due to geopolitical conflicts and volatile oil prices.
• 🏛️ Company emphasizes continuous learning and skill development.
• 🌱 Strategic initiatives in Balancing, Modernization, and Replacement (BMR) aim to bolster resilience.

🎯 Investment Thesis

I recommend a HOLD rating for Tata Pakistan. The company’s improved profitability metrics are encouraging. However, the revenue headwinds and external economic risks warrant caution. A potential upside exists if the company successfully executes its cost optimization and renewable energy strategies. However, this could take time to realize. A potential buy point might materialize with a better entry position or further improvement in financial and operational performance.