AKD Research recently covered the Gul Ahmed Textiles Mills Ltd. (GATM) analyst briefing and highlighted several key points:
The company reported sales of PKR 119.1 billion in the 9 months of FY25, reflecting a 13.3% year-over-year increase due to higher export sales. However, earnings declined to PKR 2.1 billion, a 7.5% year-over-year decrease, largely due to rising cost pressures. Gross margins contracted to 10.9% during this period, compared to 11.5% in 9MFY24. This decline is mainly attributed to higher energy costs.
Management is optimistic about achieving improved gross margins moving forward, supported by a strong order book, a focus on value-added products, and favourable expectations regarding U.S. trade terms, which are anticipated to enhance North American expansion. They project a 7-8% growth in export revenues this year, with a goal of closing FY25 with exports between US$380 million and US$390 million.
Management also noted that the gas bill has surged from PKR 350 million to PKR 1.1 billion over the past 2-3 years. In response, they are investing in solar, wind, and other renewable energy sources. By FY28, they aim to be fully self-reliant in power, gas, and water, with a target of recycling 95-100% of their water to address growing concerns about scarcity.
The company’s total power requirement is 40 MW, with an average energy cost of approximately US¢9 per kWh. Currently, 60% of GATM’s fuel mix consists of HFO, while 40% comes from gas and renewables, with plans to increase the renewable share to 35-40% by the end of next year.
Management stated that more than 80% of its cotton is imported from Brazil to meet quality standards for the export market. Regarding the IDEAS IPO, they indicated that it would be listed at the appropriate time.
Furthermore, management mentioned that current profits are being reinvested in expansion and sustainability projects. GATM aims for Zero Liquid Discharge by FY28 through upgrades to its Effluent Treatment Plant (ETP), targeting a recycling capacity of 1.1 million gallons per day (MGD) to help reduce its environmental impact.
Courtesy – AKD Research
