RCML

⚡ Flash Summary

Reliance Cotton Spinning Mills Limited (RCSML) announced its Corporate Briefing Presentation for 2025. The company invested Rs. 577 million in plant and machinery during the year. Sales increased to Rs. 15.816 billion, up from Rs. 15.069 billion in 2024. Net profit, however, decreased significantly to Rs. 708 million from Rs. 1,315 million in the previous year, impacting profitability margins.

📌 Key Takeaways

• ✅ RCSML’s total installed capacity is 59,232 spindles (44,590,590 Lbs.).
• 🏭 The company invested Rs. 577 million in plant and machinery.
• 📈 Total sales increased to Rs. 15.816 billion from Rs. 15.069 billion, a 4.96% increase.
• 📉 Gross profit decreased to Rs. 1.932 billion from Rs. 2.237 billion, a 13.64% decrease.
• 📉 Net profit decreased to Rs. 708 million from Rs. 1.315 billion, a 46.2% decrease.
• 📊 Gross profit margin decreased from 14.84% to 12.21%.
• 📊 Net profit margin decreased from 8.72% to 4.47%.
• 💰 Dividend paid increased to Rs. 64 million from Rs. 41 million, a 56% increase.
• 💸 Breakup value per share increased to Rs. 881 from Rs. 839, a 5% increase.
• 🏢 Total Assets increased to Rs. 18.998 million from Rs. 17.724 million.
• 🏦 Shareholder equity increased to Rs. 9.379 million from Rs. 8.631 million.
• ⬆️ Consolidated sales reached Rs. 17.836 billion compared to Rs. 15.069 billion in the prior year.
• ⚠️ Finance costs decreased from Rs. 970 million to Rs. 643 million.
• 🌱 Profit after taxation increased to Rs. 2.921 billion from Rs. 1.637 billion.
• Looking forward, management focuses on strengthening the company’s future by driving innovation, enhancing operational efficiency, and maintaining financial discipline.

🎯 Investment Thesis

Given the decreased profitability and uncertainties in the textile industry, a HOLD recommendation is appropriate. While revenue has increased and the company is investing in its operations, the declining profit margins need to be addressed. Investors should monitor RCSML’s ability to improve its profitability and manage costs effectively before considering a BUY rating. Price target: remain at current levels. Time horizon: Medium Term.

⚡ Flash Summary

Reliance Cotton Spinning Mills Limited (RCML) reported a decrease in sales for the first quarter ended September 30, 2025, with revenue falling to Rs. 3.95 billion compared to Rs. 4.26 billion in the same period last year. Profit from operations also declined from Rs. 600.80 million to Rs. 483.50 million. The company’s after-tax profit decreased to Rs. 240 million, down from Rs. 310 million in the previous year, while EPS decreased to Rs. 22.52 from Rs. 30.12. Management cites subdued market demand, cost challenges, and heavy taxation as factors impacting performance.

📌 Key Takeaways

• 📉 Sales decreased to Rs. 3.95 billion from Rs. 4.26 billion YoY.
• ⚠️ Profit from operations declined to Rs. 483.50 million from Rs. 600.80 million YoY.
• 💸 Finance costs increased significantly to Rs. 178.52 million from Rs. 97.79 million YoY.
• 🧾 Taxation decreased to Rs. 65.07 million from Rs. 192.97 million YoY.
• 😔 Profit after taxation decreased to Rs. 239.91 million from Rs. 310.04 million YoY.
• 📉 EPS decreased to Rs. 22.52 from Rs. 30.12 YoY.
• ⚠️ Gross profit margin decreased to 15.32% from 17.98% YoY.
• 🏭 Cost of sales decreased to Rs. 3,345.78 million from Rs. 3,492.09 million YoY.
• ⚠️ Distribution costs decreased to (74.98 million) from (89.72 million) YoY.
• ⚠️ Administrative expenses increased to (93.24 million) from (65.18 million) YoY.
• 🏦 Finance cost increased to (178.52 million) from (97.79 million) YoY.
• ⚠️ Management acknowledges margins are under pressure due to market demand and sustained costs.

🎯 Investment Thesis

HOLD. RCML’s Q1 2025 results indicate a challenging operating environment. While the company is focused on operational efficiency, the contraction in revenue and profitability warrants caution. Given the market headwinds and earnings decline, a HOLD recommendation is appropriate until there’s a clear turnaround in performance or a more favorable economic outlook.

⚡ Flash Summary

Reliance Cotton Spinning Mills Limited (RCML) released its annual report for the year ended June 30, 2025. The company experienced a 5.0% increase in sales, reaching Rs. 15.82 billion, but a decrease in gross profit margin to 12.21%. Profit after tax decreased to Rs. 708 million, and EPS fell to Rs. 66.43. The Board has recommended a final cash dividend of 60%.

📌 Key Takeaways

• Sales increased by 5.0% year-over-year, reaching Rs. 15.82 billion.
• Gross profit margin decreased to 12.21% from 14.84% in the previous year.
• Profit after tax decreased to Rs. 708 million from Rs. 1,315 million in the previous year.
• Earnings per share (EPS) decreased to Rs. 66.43 from Rs. 127.72 in the previous year.
• A final cash dividend of 60% has been recommended by the board.
• Net sales: 15,816,270 (Thousands Rupees)
• Profit from operations: 1,745,803 (Thousands Rupees)
• Profit after taxation: 707,612 (Thousands Rupees)
• Finance Cost: 642,461 (Thousands Rupees)
• Gross profit %: 12.21 %
• The company is considering a Scheme of Compromises, Arrangement and Reconstruction under Sections 279 to 283 read with Section 285 for Amalgamation/ Merger of Reliance Cotton Spinning Mills Limited (RCSML) and its members with and into Sapphire Fibres Limited subject to obtaining necessary shareholders, creditors and regulatory approvals and sanction of the Scheme by the Honorable High Court of Sindh at Karachi along with fulfilment of corporate, regulatory and legal formalities.
• The financial statements has been prepared in accordance with the accounting and reporting standards as applicable in Pakistan.

🎯 Investment Thesis

Given the current financials, I recommend a HOLD rating for RCML. The increased revenue is a positive, but the decreased profit margin and EPS raise concerns. The proposed merger with Sapphire Fibres Limited could introduce new opportunities or challenges that need more data to evaluate. A neutral stance is appropriate until more information becomes available.