Interloop Company Limited released its 2nd earning report of FY2025. Company increased its sales from previous year quarter PKR 35.4 billion to current quarter PKR to 44.6 billion with growth of 19% and half year sales increased from previous year quarter PKR 73.9 billion to PKR 87.3 billion of 18%. In this quarter business generate less margin as compared to previous year net margin. Current quarter net margin is 2% of PKR 1.1 billion (Q2 2024 net margin is 10% of PKR 3.8 billion).
Following are the half year sales by products :
1-Hosiery (Sales Q2 FY2025 PKR 57.7 billion increased from previous year quarter of 0.91%)
2-Yarn or Spinning (Sales Q2 FY2025 PKR 5.2 billion increased from previous year quarter of 21.9%)
3-Denim (Sales Q2 FY2025 PKR 10.5 billion increased from previous year quarter of 58.6%)
4-Apparel (Sales Q2 FY2025 PKR 9.4 billion increased from previous year quarter of 90.8%)
The reason of decreasing net margin because of business isn’t generate enough sales as compared to its cost of expense on that products. The Q2 2025 cost of good sold (Direct Cost) is PKR 35.6 billion which increased from previous year quarter PKR 25.5 billion by 39% . In the textile sector most of the companies have complained about their energy cost have taking almost 35% of that income. There is no doubt energy crises in Pakistan is the most import issue which hits the economy brutally. The second reason that reduce the margin is income tax which increased almost 6x times from previous year PKR 73.8 million (Q2 FY2024 PKR 11.8 million).
When it comes to in cash flow they have negatively behave of PKR 14.4 billion which signals the compare have heavy outflows of cash to operate its business. Cash investing is PKR 9.4 billion and financing of positive of PKR 23.5 billion with the ending cash balance of of PKR 1.2 billion which indicate that this quarter company have taken borrowed cash to run the business which is normal in some time. Company increased its current assets of 16.7% from previous year quarter.
How The Market Feels About This Company?
When It comes to the business of Interloop Limited one of the best company in textile sector in Pakistan. Its totally export oriented and their target customers have very rare. In short there were very bare to entry in this business. They contain giants business partner’s of the USA, UK and Europe. So let discuss shortly about their pricing valuation which will clear the idea about how the market sentiments had goes on
1- P/E Ratio : The current P/E ratio is 72x which mean that investors buy this stock 72 times higher than its earning of its quarter. When it compare to its first quarter of FY2025 the P/E ratio is 391x which indicate the most of the investor has loss their faith in this asset. It’s absolutely correct because the current market condition of the textile sector has brutally disturb because of inflation and economic downturn.
2- EV / EBITDA : In this quarter the EV / EBITDA is 20x which means that every investor have wanted to buy this whole business 20 times higher the amount of operating profit which the company generate in this quarter. When it compare to Q1 FY2025 the EV / EBITDA 21.7 x Which also hints investors loosing interest in asset. In finance the professional way is to compare the pricing valuation ratios to its peer but this post is to only quarterly analysis.
3- P/ Operating Cash Flow : Current P/OCF is negative – 6x . Negative sign is from operating cash flow due to excess of cash outflow instead from inflow because of finance cost and higher working capital in current quarter. It indicate that market value the stock higher than its business operational cash flow.
