ILP Reports Revenue Surge Amid Declining Profitability and Strategic Expansion

Karachi: ILP, a notable entity in the apparel industry, has reported a significant increase in revenue for the fiscal year 2024, reaching PkR156 billion, a 31% rise compared to the previous year. However, the company’s profitability has taken a downturn, falling to PkR16 billion from PkR20 billion in the same period last year, marking a 22% decline.

According to AKD Securities Limited, the decrease in profitability is primarily due to the appreciation of the Pakistani Rupee against the US Dollar, increased input and energy costs, a 20% rise in salaries, and the absence of exchange gains. Despite these challenges, the company has witnessed a varied regional sales performance, with increases in the USA and Europe markets and a decline in Asia and other regions.

The company’s management has projected ambitious revenue goals, expecting to surpass US$650 million in FY25 and US$700 million in FY26. The knitwear segment is anticipated to lead this growth, contributing significantly alongside denim. In line with these projections, ILP has commissioned the country’s largest LEED Platinum-certified apparel plant, which is operating at 60% capacity and aims for full utilization by FY26.

Future expansion plans include a hosiery plant with a US$58 million investment, a denim expansion with US$18.8 million, a yarn dyeing expansion costing US$13.2 million, and a solar plant with a US$2.1 million investment. These projects are expected to be completed between FY25 and FY26.

The company’s power needs are currently met through a mix of energy sources, with gas and biomass playing significant roles. Despite rising gas prices, ILP anticipates minimal impact due to this diversified energy strategy. Additionally, the company continues to import 50% of its cotton requirements, a trend expected to continue into FY25.

ILP’s financial strategy reflects an increased borrowing to support working capital needs for the apparel plant and cotton procurement, with no further borrowing foreseen due to improved liquidity. However, gross margins are expected to be lower in FY25 due to persistent cost pressures, with management expressing optimism for future margin improvements. AKD Securities maintains a ‘Buy’ stance on ILP, with a target price set at PkR75 per share by June 2025.

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