Karachi: Nishat Mills Ltd. (NML) has released its financial results for FY24, showing a significant downturn in earnings, which fell 48% year-over-year to PKR 6.4 billion, with an earnings per share (EPS) of PKR 18.1. This decline was largely due to reduced gross margins and a 51% increase in finance costs compared to the previous year.

According to AKD Securities Limited, the fourth quarter of FY24 saw NML earning PKR 1.0 billion (EPS: PKR 2.9), maintaining a flat growth year-over-year. The pressure from shrinking gross margins was somewhat mitigated by higher other income. The results surpassed expectations, primarily due to financial charges being lower than anticipated. Alongside its earnings report, NML announced a dividend of PKR 3.0 per share, which exceeded the projected PKR 2.0 per share.

Sales in the fourth quarter amounted to PKR 40.0 billion, marking an 8% increase from the same period last year, fueled by a rise in exports. Pakistan Bureau of Statistics, the country's value-added exports grew by 10% year-over-year during this period. However, gross margins contracted to 10.5%, down from 13.0% in the same period last year, primarily due to lower international selling prices and high cotton costs.

Other income for NML increased by 30% year-over-year to PKR 2.6 billion, boosted by higher dividend income, including a 50% increase in dividends from MCB, as well as dividends from NML’s power subsidiaries and associates such as NPL, PKGP, and LPL.

Finance costs showed a slight decrease of 2% year-over-year to PKR 2.4 billion, lower than the anticipated PKR 2.8 billion. This reduction is attributed to a decrease in the company's borrowings, which stood at PKR 77.9 billion (debt-to-equity ratio: 0.75) as of the March 2024 financial statements. Further details are awaited.

AKD Securities maintains a 'Buy' stance on NML with a target price of PKR 140 per share for June 2025, suggesting a potential upside of 123%.