Nishat Chunian Ltd. Sees Earnings Boost as Borrowing Costs Fall

LAHORE: Nishat Chunian Ltd. (NCL) reported a significant increase in earnings for the third quarter of fiscal year 2025, largely attributed to reduced borrowing costs. The company announced earnings of PkR481 million, equivalent to an earnings per share (EPS) of PkR2.00, marking a 26% year-over-year growth from PkR381 million (EPS: PkR1.59) in the same period last year.

Despite the earnings growth, NCL experienced a 3% decline in revenue, which fell to PkR23.4 billion from PkR24.2 billion in the same period last year. This drop is likely due to a decrease in export volumes, with estimates suggesting a 23% year-over-year decline in exports to US$32 million. However, on a sequential basis, revenue increased by 13% due to a seasonal rise in exports.

Gross margins narrowed to 10.5% from 12.2% in the prior year, mainly influenced by lower sales volumes. Operating expenses saw a 25% reduction, falling to PkR562 million from PkR745 million, driven by a substantial 39% decrease in distribution expenses amid the lower exports.

Finance costs decreased by 46% to PkR975 million, supported by a 12% reduction in outstanding borrowings and lower interest rates. The effective tax rate remained constant at 39%, although it was significantly higher in the second quarter of fiscal year 2025 at 53%.

For the first nine months of fiscal year 2025, NCL reported earnings of PkR747 million (EPS: PkR3.11), a notable turnaround from a loss of PkR24 million (LPS: PkR0.10) in the same period last year.

Analysts at AKD Securities Limited continue to recommend a ‘BUY’ stance on NCL, with a target price of PkR64 per share by December 2025, offering a potential upside of 90%. This recommendation is based on expectations of improved exports, easing input prices supporting margins, and reduced finance costs amid declining interest rates.