HATM

⚡ Flash Summary

Hamid Textile Mills Limited reports its unaudited financial results for the first quarter ended September 30, 2025. Sales increased by 21.67% to Rs. 250.103 million compared to the corresponding period. Despite this increase, the company incurred a net loss after taxation of Rs. 10.095 million, compared to a loss of Rs. 8.693 million in the previous year. The management is negotiating with the bank for a settlement of the bank loan to regularize financial limits, and the company is working to increase production to stabilize the unit.

📌 Key Takeaways

• 📈 Sales increased by 21.67%, reaching Rs. 250.103 million.
• 📉 The company experienced a net loss after taxation of Rs. 10.095 million.
• 📉 Loss per share is (0.76) compared to (0.66) for the prior year quarter.
• 💰 Gross profit increased to Rs. 5.277 million from Rs. 1.974 million.
• 💼 Management is focused on optimizing operations to meet fixed costs.
• ⚠️ Unfavorable external environmental factors have increased the cost of doing business.
• 🏦 The company faces liquidity problems due to ongoing litigation with the bank.
• ⛔️ Working capital financial facilities from the bank remain expired.
• 🤝 Management is negotiating with the bank for a loan settlement.
• 🌱 The settlement aims to regularize the financial limits.
• 🏭 Plans are in place to increase production and make the unit more stable.
• 🛠️ The management intends to make regular investments in plant and machinery.
• 📊 Depreciation charged as expenditure is Rs. 9.22 million.

🎯 Investment Thesis

Given the current financial challenges and ongoing litigation, I recommend a HOLD rating. While the increase in sales is a positive sign, the company’s inability to translate this into profitability and its liquidity issues raise concerns. A potential settlement with the bank and successful restructuring could improve the company’s prospects, but until these uncertainties are resolved, a cautious approach is warranted. Price target is difficult to establish given the limited financial information and the current loss making position. Time horizon is medium term, contingent on the successful resolution of financial challenges.

⚡ Flash Summary

Hamid Textile Mills Limited’s 2025 Annual Report reveals a challenging year marked by a substantial loss after taxation of Rs 40.218 million, despite a revenue increase of 24.52% reaching Rs 960.746 million. The company faces liquidity constraints from long-standing litigation, restricting access to formal banking facilities. While external auditors raise going concern issues due to the unresolved litigation with National Bank of Pakistan (NBP), management emphasizes operational resilience and improved financial performance over the past seven years. Despite external challenges, the company is exploring renewable energy solutions and continues to implement a strategic mix of self-production and conversion operations.

📌 Key Takeaways

• 📉 Loss after taxation significantly increased to Rs 40.218 million in 2025, compared to Rs 26.244 million in 2024.
• 📈 Revenue grew by 24.52%, reaching Rs 960.746 million in 2025, up from Rs 771.550 million in 2024.
• 📊 Gross profit margin improved to 3.45% (Rs 33.158 million) in 2025, a significant increase from 1.089% (Rs 8.402 million) in 2024.
• 💸 Operating loss reduced to Rs 11.770 million in 2025, compared to Rs 24.595 million in 2024.
• 🔒 Liquidity constraints persist due to long-standing litigation, restricting access to working capital financing.
• 🏭 Company managed to improve gross margins despite escalating conversion costs through efficient procurement and operational efficiency.
• 🏦 Finance costs significantly increased due to securing loans from non-banking companies at fixed rates.
• 🚫 Auditors continue to issue an adverse opinion on the financial statements due to going concern issues related to unresolved litigation with NBP.
• 🌱 Management secured an unsecured loan of Rs 20 million from non-banking sources to meet working capital requirements.
• ⚡ The company is considering expanding its solar energy facility to reduce electricity costs.
• 🚫 Diversity is at 0% for women in the workforce with commitment to improve inclusivity in the future, while female representation on the Board is 42.85%.
• ⚖️ Trade negotiations resulted in reduced tariffs on Pakistani exports to the US, from 29% to 19%.
• 🌿 The Company’s property, plant, and equipment have a carrying amount of Rs 543.777 million.
• cotton arrivals at ginning factories sharply declined to 593,821 bales compared to 844,257 bales.
• tariff for the industrial electricity in Pakistan is significantly higher than in other textile exporting countries.

🎯 Investment Thesis

Given the ongoing financial challenges, external auditor’s adverse opinion, and significant uncertainties, a HOLD rating is appropriate for HATM. Further profitability improvements and resolution of the NBP litigation are key to a potential upgrade in the recommendation. The price target rationale depends significantly on debt settlement and the possibility of further operations which could potentially improve the company’s value and attract investment. Considering the very constrained situation, it is challenging to set any clear price target. Time horizon is medium term, contingent on developments.