Redco Textiles Limited is specially a niche oriented company which is highly demand product is grey fabric. Their total revenue generated by local demand and due to the high demand company dedicated to its business and continuously increasing revenue. First to analyze the latest quarter of the company for understanding the latest business operations.
3rd Quarterly Report Analysis:
When It comes to the revenue company have generated the PKR 488.2 million 14.1% increase YOY. It very low amount of percent when it compared to previous year this period it generated PKR 428. 1 million from PKR 218 million almost 95.4% high of last year. 2% increase in QoQ from PKR 478.2 million. It means that company have struggling in sale in latest period. Also Cost of good sold have increased of PKR 479 million of 26.6% YOY from PKR 378 million same period last year. It increase 17% from previous quarter of PKR 406 million. Its reflect the company haven’t much enough sale compared to its material in flows. When its about operating profit its 95% YOY down last years period from PKR 42 million to PKR 1.9 million and 97% down from previous period of PKR 64 million. Its because company not generated enough sale in this period as compared to its expenses arises more percentage of amount. When analyzing the whole scenario company had facing this problem usually every on one period. But the company have potentially able to generate sales because if history of reinvestment and containing cost cutting. There are interesting thing happen in third quarter of FY 2025 is the profit before tax company reported have PKR 3 million or after tax is PKR 41 million which is very strange in this period. It is because of company have claim some amount tax receivable which is very is benefit and received which increased the net profit and net margin. It is usually not happening all the time. By adding tax receivable amount in earning before tax its PKR 41 million a 20% increase YoY. But its not comparable with previous quarter because of extra tax amount added in net profit so our team decided not to adjust and compare its net profit. It is also of because of company haven’t transparent and talk about such type of accounting adjustment.
When It comes to balance sheet first thing to notice is the small declining of non-current asset because of decreasing plant, property equipment. It is because of selling some irrelevant properties of the companies. But it also consider about company have increasing their long term investment. which reflect the management take serious decision to maintain its position in future. Company also increasing its cash, short term investment and decreasing trade debt or receivable which is directly hit the non current asset to maintain its increasing trend. The company have quietly decreasing its long term liability by decreasing its defered taxation amount . But there is twist around short term liability where we found the short term loan on behalf of directors its also in declining trend in this period but it might be trouble for company and shareholders in future. Overall short liability increasing by increasing payable amount, short term borrowing and short term borrowing by directors. Shareholders equity also increasing by increasing the other reserve GL.
When its comes to cash flows it is in negative outflows of PKR 20 million because high Loans, advances, other receivables & trade deposits section if PKR 381.9 million outflows in this period. It usually very high amount which negatively effect the company cash flows. Company haven’t compromises about reinvesting on CAPEX through property plant and equipment and also capital work in progress in solar system installation. Overall cash of the quarter is PKR 165 million in this period.
Why Redco Textile Limited Have Performed Best In Recent Year Quietly?
First thing is that its not about one years its about how company aims to move from there to where. That’s exactly same thing happen in this company. Its is acknowledgeable that the company some dark history because of their management corruption. But there is still chance for improving and at the result company provide exclusively returns year on year and quarter on quarter on quarter for their shareholders. Second is that company not reported its FY 2024 revenue increasing reason but it reflects through cash flows. It reflects that company have taking more market share of grey fabric in Pakistan because of new market strategies, product quality, customer satisfaction, and covering all of the customer demands. The main thing that company have maintain its demand is the reinvestment policy and company have significantly increasing its reinvestment rate yearly. In FY2022 company decide to install 20 Toyota Airjet looms for better and high production due to high demand. FY2023 their counting 20 to 36 Toyota Airjet looms for more production. This high amount CAPEX on machinery is representing the company have high demand for its product. After this company have decided to install 4 Megawatt project of Solar plant due to increasing high energy expenses. After this high amount of reinvestment company have shrinking their expenses and increasing margin in upcoming years.
Future Prospect ?
In 31 June 2025 the company ended their year and announced its annual earning in August 2025. Some analyst have report their earning expected sales grow by 15% due to previous years quarterly track record of the company. So if the company have increased its sales 15% in 4th quarter which means that annual sales is PKR 1.9 billion which means that annual sales increased by 34%. So at the end the Company have potential for gaining more market share and providing returns to therir shareholders.
