Suraj Cotton Mills Limited is Cotton , Greige Fabric and Yarn making business model. It is a B2B business which is large consumer in Pakistan. First analyze about how company perform in 2nd quarter of FY2025. Revenue decreased by 11% of PKR 6.7 billion QoQ and 15% YoY. Company have reported that sales have decreased because of low production by shutting down its Nooriabad plant because of negative operations. But the net margin increased by 88% og PKR 352.4 million because of high operational and net margin or low cost. Net margin in recent quarter is 5.21% increased from 2.45% in Q1 FY2025. Operational profit or EBITDA is PKR 736.5 million with a margin of 10% in Q2 increased from 5% in Q1. Gross Margin also improve by 9.81% of PKR 662 million increased from 6.37% in Q1. Company settle their operational because of three reason one is company have report report low administrative expense in Q2, decreasing their other expenses by 45% and last increased its other expenses almost 2x in Q2. Due to shutting down the Nooriabad plant company have decreased its over all margins. But the impact of high taxation still on site.
Company have improving their cash flow with operational cash flow is increase PKR 818.5 million of 32.4 % QoQ and decreased by 34.7 % YoY. Cash generating from investing is net inflows of of PKR 239.3 million due to high cash generated sale investment, capital expenditure is also increased by 12.4% QoQ and 41x YoY. Which signals the company have high reinvestment to get better returns from business. While cash from financing if net outflows of PKR 1 billion due to high long term loan amount repayment and short term financing through business.
Sales By Category :-
Company have three main product. First is yarn which is PKR 2.2 billion in Q2 decreased from PKR 4.7 billion in Q1 of FY2025, decreasing 5% QoQ and 41% YoY. Yarn is related to spinning business model in textile industry. Second is greige fabric which is used mostly in household suits where their sales is PKR 4.4 billion increased by 8% QoQ and 7.8% YoY. Also most of the part of sales have the making cotton which is up to PKR 6.4 million and sales of waste of about PLK 464.5 million.
Pricing :
| Pricing Method | Q1 FY2025 | Q2 FY 2025 |
|---|---|---|
| P/E Ratio | 33x | 17.3x |
| P/B Ratio | 0.48x | 0.46x |
| EV / EBITDA | 24.5x | 12.5x |
Conclusion :-
Seeing the above pricing valuation indicates the confidence of investors in market. But the company have focusing their margins which is s good signal tracking the research deep down of the company their demand and supply of their products. Mostly the business behavior of related product. Pricing should not enough for any investment. The above multiples have should also reflect the demand and supply of that stock in market.
