Servis Industries (SRVI): Earnings Boosted by Tax Reversal

Servis Industries (SRVI) announced its 2Q CY25 results, posting a profit of PKR 3.3 billion (EPS: PKR 70.4), which is more than double last year’s profit of PKR 1.4 billion. This jump wasn’t because of stronger operations alone; it was mainly due to a PKR 3.0 billion tax reversal booked in the quarter.

Key highlights

• Revenue Growth: Sales stood at PKR 37.7 billion, up 20% YoY and 16% QoQ, likely on the back of stronger volumes from SLM (Servis Long March).
• Margins Under Pressure: Gross margins slipped to 22.3% from 26.2% last year, showing pricing pressure despite higher sales.
• Costs & Expenses:
  • Selling/distribution costs rose 23% YoY due to higher sales activity.
  • Admin expenses also went up by 22% YoY.
• Lower Finance Cost: Financial charges declined 21% YoY to PKR 1.4bn, thanks to lower interest rates.
• Big Boost from Taxes: The game-changer was a PKR 3bn tax reversal; without it, earnings growth would have been much lower.

What does this mean?

While SRVI delivered record profits, investors should note that the exceptional jump came from a one-off tax reversal rather than stronger underlying operations. Margins are under pressure, and expenses are rising, even though sales are growing.

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The company’s future performance will depend more on how it manages costs and maintains sales growth once the tax benefit fades away.

Source: Insight Securities

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →