Nishat Mills (NML) said on Thursday its margins are improving on increased exports to Europe, helped by rivals from high-tariff countries shifting orders. The textile firm also laid out plans for capacity expansion, renewable energy investment, and new business lines.

Nishat Mills (NML) conducted its corporate briefing session, where the management discussed financial performance and the company’s future outlook.

Read More: Nishat Mills Profit up 15% in 4QFY25

Management mentioned that margins are becoming competitive in Europe as countries facing higher tariffs from the USA, such as Bangladesh, are now shifting exports to Europe.

Future plans include additional investment in renewable energy, with 38MW of solar already installed and another 4MW being planned. Proposed investments also include a 45TP steam boiler and battery-storage infrastructure.

The company plans to expand its open-end yarn capacity by adding 3,000 rotors, bringing the total to 13,000. Construction is underway for a workwear garments unit, commissioned in FY25, with a pilot project already set up to fully utilize its potential. The company is also investing in Nishat Sutas Dairy Limited, where up to Rs5bn has been approved and Rs3.9bn has been invested as of June 2025.

In FY25, NML’s fuel mix comprised 10% coal and biomass, 7% solar, and the remaining 83% from a combination of WAPDA/LESCO (15%), RLNG (9%) and FO (58%), depending on whichever source was cheaper. The weighted average fuel cost ranged between Rs35–38/kWh.

Electricity requirement for NML stands at 50MW per annum.

Management noted that costs rose significantly in FY25, driven by a Rs920mn increase in freight charges and a Rs30mn rise in commission due to higher sales and additional expenses incurred at the Red Sea. Other income declined mainly because of lower dividend income.

The company’s cotton procurement ratio is around 70/30 local to imported.

Despite sector-wide challenges, management stated that NML has maintained a normalized EBITDA amid global price pressures, higher minimum wages, local inflation and the withdrawal of subsidies. While FY26 may pose some challenges, the company has diversified its product portfolio into denim and technical textiles, which should help sustain margins and mitigate risk. NML also plans to strengthen its market presence by entering additional European and non-traditional textile markets.

Management expects gross margins to remain around 11%. Regarding dividends, they explained that payouts were lower due to rising working capital costs and equity investments.

NML’s sales mix is distributed as follows: 25% to Europe, 16% through direct exports, 16% to Asia, Africa and Australia, 30% to Pakistan and 13% to America.

By product, sales comprise 31% yarn, 16% processed cloth, 22% greige cloth, 15% made-ups, 10% garments and 6% towels.

According to management, future challenges include elevated gas and electricity tariffs compared to regional competitors, high borrowing costs and limited availability of local raw cotton.

We maintain a BUY call with NML trading at a FY26E/27F PE of 7.5/6.4x,” Topline analysts said.