Lahore: Nishat Mills Ltd. (NML) announced its financial results for the third quarter of the fiscal year 2025, revealing a profit of PkR696 million, equivalent to earnings per share of PkR1.98. This is a significant improvement from a loss of PkR286 million (LPS: PkR0.81) during the same period last year, but the results fell short of market expectations due to lower-than-anticipated gross margins.

Revenue for the quarter increased by 5% year-on-year to PkR45.3 billion, compared to PkR43.3 billion in the same period last year. This growth was driven by higher export volumes and improved pricing, with readymade garment exports rising 13% year-on-year, according to the Pakistan Bureau of Statistics.

Gross margins improved to 10.4%, up from 8.9% in the corresponding period last year, supported by higher export prices and lower power costs, as coal prices declined and grid tariffs were reduced. Despite this improvement, margins remained below expectations.

Distribution expenses rose by 3% year-on-year to PkR2.0 billion, attributed to increased export volumes. Meanwhile, other income fell by 23% to PkR1.8 billion, primarily due to lower interest income from a subsidiary loan amidst falling interest rates.

Finance costs decreased by 36% year-on-year to PkR1.9 billion, thanks to an 891 basis points drop in average KIBOR rates, which mitigated the impact of a 23% increase in total borrowings. The effective tax rate stood at 63%, influenced by turnover tax amid reduced profitability.

For the first nine months of fiscal year 2025, NML's earnings amounted to PkR4.8 million (EPS: PkR13.76), a 10% decline from PkR5.3 billion (EPS: PkR15.21) during the same period last year.

Despite the mixed performance, AKD Securities Limited maintains a 'BUY' stance on NML, citing expected future earnings growth from a recovery in textile exports and improved retention prices, declining finance costs supporting the bottom line, and the stock trading at a 56% discount to its portfolio value.