Can Renewable Energy Power Gadoon’s Next Growth Cycle?

Key takeaways

• Gadoon Textile posted a 6.2x YoY jump in earnings in 9MFY25, driven by lower finance costs.
  
• Gross margins improved from 7% to 9%, aided by a better raw material mix and renewable energy use.
  
• PAT surged to PKR 2 billion from PKR 278 million YoY, with EPS rising to PKR 71.45.
  
• The company is investing heavily in solar power and new machinery to control costs and improve efficiency.
  
• CAPEX rose to PKR 4.6 billion; EBITDA jumped 22% YoY.
  
• Despite headwinds like global slowdown and high operational costs, Gadoon’s operational strategy signals a forward-looking stance.
  

From yarn to yield: Gadoon’s transformation

Gadoon Textile Mills Limited (GADT), a member of the Yunus Brothers Group, has emerged as a rare outperformer in Pakistan’s challenged textile sector. In the first nine months of FY25, the company reported earnings per share (EPS) of PKR 71.45, a staggering 6.2x jump from PKR 9.91/share in the same period last year.

This transformation has not come by chance. It’s the result of a smart blend of cost optimization, strategic capital expenditure, and increasing dependence on renewable energy sources.

Margins power up, thanks to solar and smarts

While top-line growth remained modest at 2% YoY, reaching PKR 55 billion, gross margins expanded to 9%. This improvement stems from three critical levers:

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• Better raw material mix
  
• Improved pricing strategies
  
• Increased reliance on renewable energy
  

The company has installed a 16.94MW solar plant, with another 10.80MW in the pipeline—a move that helps reduce fuel costs and positions Gadoon as a sustainability-forward manufacturer.

Finance costs down, profits up

Finance costs dropped by 38% YoY to PKR 1.9 billion, thanks to lower interest rates, improved working capital management, and a diversified borrowing mix. This was the largest contributor to the bottom-line growth.

Net profit jumped to PKR 2 billion, while EBITDA rose to PKR 6.7 billion, and EBDA (EBITDA before depreciation and amortization) nearly doubled to PKR 3.8 billion.

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Strategic capex: investing in efficiency

Gadoon increased its CAPEX to PKR 4.6 billion, focusing on:

• Upgrading machinery to improve production efficiency
  
• Expanding renewable energy capacity to reduce long-term costs
  

This approach not only helps contain volatility in energy prices but also aligns the company with global ESG standards, critical for export-oriented manufacturers.

Challenges persist, but so does the plan

Despite its robust performance, Gadoon faces macro and sectoral headwinds:

• Rising operational costs
  
• A drop in export demand
  
• Continued reliance on imported cotton
  
• Unpredictable policy environment
  

Still, the management appears confident. The company’s future outlook centers on sustainability, cost control, and margin protection, themes that are likely to resonate with long-term investors.

A smart bet on operational resilience

Gadoon Textile isn’t just riding the solar wave, it’s redefining resilience in Pakistan’s textile sector. By investing in clean energy, optimizing cost structures, and navigating policy uncertainty with prudence, the company is setting itself up for a more stable and profitable future.

With earnings surging and a strong capital investment plan in place, GADT may offer investors both value and vision.

Source: Taurus 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 →