Nishat Mills Sees Profit Growth But Falls Short Due to Heavy Taxation

Karachi: Nishat Mills Ltd. (NML) has released its financial outcomes for the fourth quarter of fiscal year 2025, showcasing a mixed bag of profit growth and unforeseen fiscal burdens. The textile conglomerate reported standalone earnings of PKR1.2 billion (EPS: PKR3.34), marking a 15% increase from the PKR1.0 billion (EPS: PKR2.90) achieved during the same period last year. However, these results fell short of anticipations, primarily due to an unexpectedly high tax burden.

Revenue for NML rose by 9% year-on-year, reaching PKR43.5 billion, driven by elevated export volumes and enhanced pricing strategies. The company’s readymade garment exports experienced a 7% increase during the quarter, according to data from the Pakistan Bureau of Statistics. This growth translated into improved gross margins, which climbed to 11.0% from the previous year’s 10.5%, thanks to reduced cotton prices and lower energy expenditures.

Nevertheless, the company faced challenges with its distribution expenses, which surged by 30% to PKR2.1 billion due to increased export activities. In contrast, other income fell by 15% to PKR2.2 billion, primarily impacted by decreased interest income on loans from subsidiaries amid falling interest rates. On a positive note, finance costs dropped by 18% to PKR2.0 billion, thanks to a decline in policy rates that helped mitigate the effects of a 16% rise in total borrowings.

A significant hurdle for NML was the higher-than-expected effective tax rate, which stood at 48% due to turnover tax amid lower profitability. This factor contributed to an overall decrease in FY25 earnings to PKR6.0 billion (EPS: PKR17.10), down 6% from the previous year’s PKR6.4 billion (EPS: PKR18.11).

Despite these setbacks, analysts remain optimistic about NML’s future prospects. The target price has been revised upward to PKR277 per share, effective June 2026, with a ‘Buy’ recommendation maintained. This adjustment reflects an increase in the company’s portfolio value, buoyed by recent market rallies.

The company has also declared a final cash dividend of PKR2.0 per share, with a payout ratio of 12%, as it navigates through a challenging fiscal landscape.