Lahore: Nishat Mills Limited (NML) held a corporate briefing session to discuss its fiscal year 2024 financial results and outline future strategies amidst challenging market conditions. The company reported a 48% decline in net profit after tax (NPAT) to PKR 6.4 billion, attributed to decreased gross margins and increased financial charges.
According to AKD Securities Limited, the decline in gross margins to 10.8% from 14.9% in the previous year, along with the impact of super tax and higher financial charges, significantly affected the company’s bottom line.
The company’s revenue stream comprises various textile products, including yarn, greige cloth, processed cloth, made-ups, towels, and garments, with respective revenue shares of 27%, 20%, 20%, 16%, 7%, and 10%. Regionally, 59% of revenue is generated domestically, while exports and processing segments contribute 37% and 4%, respectively, with Europe and the USA being key export destinations.
In response to current challenges such as high input costs and soft demand in major markets like the US and Europe, NML aims to enhance its focus on the value-added sector by investing in denim wear. The company plans a capital expenditure of PKR 12 billion for denim and PKR 3 billion for work-wear lines. Additionally, the company is committed to reducing its reliance on imported fuels by transitioning to solar and biomass captive generation, with a 13.8 MW solar power generation capacity expected to become operational next month.
NML also aims to achieve sales of US$10 million through its subsidiary in Denmark, Wernerfelt A/S plc, and expects a modest impact from rising gas tariffs due to its shift to alternative energy sources. Shareholders have approved an increase in equity investment in Nishat Sutas Dairy Ltd to PKR 5 billion and the establishment of new subsidiaries in Turkey and Bangladesh to strengthen its presence in Europe and South Asia.
Furthermore, the Board of Directors approved the sale of its wholly-owned subsidiary Nishat Hospitality Pvt. Ltd for PKR 1.75 billion to support the company’s working capital needs. Despite the challenges, AKD Securities Limited maintains a 'BUY' stance on NML, with a target price of PKR 140 per share by June 2025, indicating a potential upside of 96%.