Faisalabad: Interloop Ltd. (ILP) released its financial results for the third quarter of fiscal year 2025, revealing a significant drop in profitability. The company reported a profit of PKR 1.3 billion, or PKR 0.95 per share, marking a 68% decrease from the same period last year. The decline was attributed to reduced exports and contracting gross margins.

Revenue for the quarter increased by 6% year-on-year to PKR 41.4 billion, primarily due to higher exports in the Denim and Apparel segments. Despite this growth, gross margins shrank to 20.1% from 29.1% in the same period last year. The margin contraction was linked to lower product prices, increased salary expenses due to a rise in the minimum wage, and higher costs associated with the underutilization of a new apparel line.

Operating expenses rose by 11% year-on-year to PKR 4.0 billion, driven by elevated distribution costs amid increased export volumes. Conversely, the company's finance costs decreased by 22% to PKR 2.0 billion, benefiting from declining interest rates despite higher outstanding borrowings.

A shift in tax regimes resulted in a surge in the effective tax rate to 32%, up from 12% in the same period last year. This change impacted the company's overall profitability, bringing the nine-month fiscal year 2025 profit to PKR 2.7 billion, a 79% decline from the previous year's PKR 13.1 billion.

Despite these challenges, AKD Securities Limited maintains a 'BUY' stance on Interloop Ltd., with a target price of PKR 104 per share by December 2025. The recommendation is based on the company's potential for future growth, bolstered by its competitive product portfolio and ongoing expansions in its Hosiery, Denim, and Apparel segments. While there are near-term uncertainties, particularly concerning potential U.S. tariff impositions, the company is expected to sustain its long-term growth trajectory.