Nishat Chunian Ltd. (NCL) announced its 2QFY25 results, reporting earnings of PkR231mn (EPS: PkR0.96), compared to a loss of PkR911mn (LPS: PkR3.80) in SPLY. The turnaround is attributed to lower finance costs and improved gross margins. Earnings came largely in line with our expectations. Alongside the result, the company announced an interim dividend of PkR1.0/sh.

• Revenue increased by 3%YoY to PkR20.7bn, compared to PkR20.1bn in SPLY, driven by higher prices. On a sequential basis, revenue declined by 11%QoQ due to seasonal export slowdown.
• Gross margins improved to 11.5% vs. 10.7% in SPLY, as higher retention prices and lower energy cost outweighed increased salary expenses.
• Operating expenses dropped by 7%YoY to PkR618mn, compared to PkR667mn in SPLY, largely due to lower export volumes.
• Finance costs declined by 40% year over year to PkR1.3bn, driven by ~ a 11% year over year reduction in outstanding borrowings and lower interest rates.
• Effective tax rate stood at 53%, likely due to turnover tax amid lower profitability.
• This brings 1HFY25 earnings to PkR266mn (EPS: PkR1.11), compared to a loss of PkR395mn (LPS: PkR1.64) in SPLY.
• We maintain our ‘BUY’ stance on NCL with a Dec’25 target price of PkR64/sh, offering a potential upside of 75%. Our stance is supported by i) growth led by increasing exports, ii) ease in input prices supporting margins, and iii) reduced finance costs amid declining interest rates.

 Courtesy – AKD Research