TITLE: Financial Performance Analysis of Publicly Listed

Companies: A Comparative Study

COURSE: Business Research And Methodology
CLASS: BSAF
SECTION: 6-A

SUBMITTED BY SUBMITTED TO
Ghazi Hussain 2147114 Dr Abdul Ghafoor Kazi
Israr 2147113
Zainab Mushtaq Ali 2147108
 INDEX
S.NO DESCRIPTION PAGES
1. INTRODUCTION
2. METHODOLOGY
I. SAMPLING

II. DATA COLLECTION

III. DATA ANALYSIS

IV. COMPARATIVE ANALYSIS

3. RECOMMENDATION
4. REFERENCES
INTRODUCTION
This report is related to the Financial Performance Analysis of Publicly Listed Companies of the textile
industries. The report compares the GulAhmed, Sapphire and Nishat Mills profitability, liquidity, and
solvency ratios. These companies belong to the Textile sector, which helps to analyse the company's
performance in the industry. The analysis of the financial performance of companies is essential for
investors, creditors, and other stakeholders to make informed decisions. Stakeholder incentives help the
company to generate revenue in the future.
The textile industry in Pakistan is one of the country's largest sectors, playing a significant role in its
economy and employing a substantial portion of the workforce. It is considered the backbone of
Pakistan's economy, contributing significantly to GDP, exports of more than 60% of the total exports,
employment generation and, the industry contributes around 46% to the total output produced in the
country.
The industry is vertically integrated, encompassing the entire textile value chain from spinning, weaving,
and knitting to dyeing, printing, and finishing. Pakistan is renowned for its production of cotton, making
it a key player in the global textile market.
Nishat Mills Limited, Sapphire Textile Mills Limited, and Gul Ahmed Textile Mills Limited are among
the leading textile companies in Pakistan.
Nishat Mills Limited:
Nishat Mills is one of the largest vertically integrated textile companies in Pakistan. Established in 1951,
it has grown into a diversified conglomerate with interests in textiles, cement, banking, and power
generation. Nishat Mills produces a wide range of textile products, including yarn, fabric, and garments,
catering to both domestic and international markets.
Sapphire Textile Mills Limited:
Sapphire Textile Mills is another prominent player in the Pakistani textile industry. Founded in 1969,
Sapphire has built a strong reputation for producing high-quality fabrics and garments. The company is
vertically integrated, with operations spanning spinning, weaving, processing, and garment
manufacturing. Sapphire exports its products to various countries around the world and is known for its
innovation and sustainability initiatives.
Gul Ahmed Textile Mills Limited:
Gul Ahmed is a well-established name in the Pakistani textile sector, with a history dating back to 1953. It
is one of the largest textile companies in the country, with a diverse product portfolio that includes
textiles, home furnishings, and apparel. Gul Ahmed is known for its focus on quality, design, and
customer satisfaction. The company exports its products to numerous countries and has a strong presence
in both domestic and international markets.
METHODOLOGY
I. SAMPLING
For the sampling of the project, we have chosen three 3 industries which are registered on the Pakistan
Stock Exchange the Textile sector Sapphire, Nishat Mills and GulAhmed. Pakistan Stock Exchange is a
reliable website on which all the public limited companies are registered. Also, on the website Annual
Reports are updated for the users and they contain detailed information about Financial Reports. The
website also provides information related to the stock price of the share daily for the existing stakeholders
and for those who want to invest their capital to earn dividends.

II. DATA COLLECTION

The source of the data collection is from PSX website which is run by the Pakistan Government. All the
Public Limited Companies are registered there. To calculate the profitability, solvency and, liquidity ratios
we have used the Profit and Loss Statements and Balance Sheets from the Annual Reports 2022 and 2023
of the 3 companies for three years.
PROFIT AND LOSS STATEMENTS
SAPPHIRE
NISHAT MILLS
GULAHMED
BALANCE SHEETS
SAPPHIRE
NISHAT MILLS
GULAHMED
III. DATA ANALYSIS
LIQUIDITY RATIOS
Current Ratio: This ratio measures the ability of a company to meet its short-term liabilities with its
short-term assets. It's calculated by dividing current assets by current liabilities. A high current ratio
indicates that a company has more current assets than current liabilities, suggesting that it is in good
financial health and can easily cover its short-term obligations.
Quick Ratio: Also known as the acid-test ratio, it's a measure of a company's ability to pay off its current
liabilities with quick assets. Quick assets include cash, cash equivalents, marketable securities, and
accounts receivable. The quick ratio excludes inventory from current assets because inventory may not be
easily converted into cash. A high quick ratio indicates a strong ability to meet short-term liabilities
without relying on the sale of inventory.
Cash to Current Liabilities Ratio: This ratio measures the proportion of a company's cash and cash
equivalents to its current liabilities. It provides a more conservative measure of liquidity compared to the
current ratio since it focuses solely on cash. A high cash-to-current liabilities ratio suggests that a
company has sufficient cash reserves to cover its short-term debts.

2021
SAFFHIRE NISHAT MILLS GULAHMED
Current Ratio 1.2 times 1.39 times 1.12 times
Quick Ratio 0.5 times 0.76 times 0.57 times
Cash to Current Liabilities 0.16 times 0.01 times

2022
SAFFHIRE NISHAT MILLS GULAHMED
Current Ratio 1.4 times 1.39 times 1.15 times
Quick Ratio 0.6 times 0.57 times 0.55 times
Cash to Current Liabilities 0.00 times 0.03 times

2023
SAFFHIRE NISHAT MILLS GULAHMED
Current Ratio 1.6 1.28 1.11
Quick Ratio 0.8 0.67 0.47
Cash to Current Liabilities 0.04 0.01
PROFITABILITY RATIOS
Gross Profit Ratio: This ratio measures the proportion of gross profit to net sales revenue. It indicates
the efficiency of a company's production and pricing strategies. A high gross profit ratio suggests that a
company is effectively managing its production costs and pricing its products competitively.
EBITDA to Sales Ratio: This ratio compares a company's EBITDA (Earnings Before Interest, Taxes,
Depreciation, and Amortization) to its total sales revenue. It reflects the company's operating profitability
before non-operating expenses are deducted. A higher EBITDA-to-sales ratio indicates better operational
efficiency and profitability.
Return on Capital Employed (ROCE): ROCE measures the efficiency with which a company generates
profits from its capital employed, including both debt and equity. It's calculated by dividing EBIT
(Earnings Before Interest and Taxes) by total capital employed. A high ROCE indicates that a company is
generating significant returns relative to the capital invested in its operations.
Return on Assets (ROA): ROA measures a company's profitability relative to its total assets. It indicates
how efficiently a company utilizes its assets to generate profits. ROA is calculated by dividing net income
by average total assets. A higher ROA indicates better asset utilization and profitability.
Return on Equity (ROE): ROE measures a company's profitability relative to shareholders' equity. It
shows how much profit a company generates with the money shareholders have invested. ROE is
calculated by dividing net income by shareholders' equity. A high ROE indicates that a company is
generating strong returns for its shareholders.
Net Profit to Sales Ratio: Also known as net profit margin, this ratio measures the proportion of net
profit to total sales revenue. It indicates the company's profitability after all expenses and taxes have been
deducted. A higher net profit margin indicates better profitability.

2021
NISHAT MILLS SAPPHIRE GULAHMED
Gross Profit Ratio 13.04% 14.3% 16.34%
EBITDA to Sales 15.59% 16.3% 12.87%
Return on Capital 9.26% 14.8% 19.36%
Employed
Return on Assets 9.2%
Return on Equity 7.54% 12% 21.46%
Net Profit to Sales 9.90% 8.3% 5.62%

2022
NISHAT MILLS SAPPHIRE GULAHMED
Gross Profit Ratio 14.97% 23.6% 17.32%
EBITDA to Sales 15.86% 22% 16.07%
Return on Capital 15.69% 29.5% 24.75%
Employed
Return on Assets 21%
Return on Equity 12.50% 26.6% 27.96%
 Net Profit to Sales 8.91% 14.2% 8.84%

2023
NISHAT MILLS SAPPHIRE GULAHMED
Gross Profit Ratio 14.87% 19.2% 14.90%
EBITDA to Sales 18.26% 11% 13.36%
Return on Capital 22.66% 24.3% 18.93%
Employed
Return on Assets 15.4%
Return on Equity 14.40% 18.5% 10.46%
Net Profit to Sales 8.58% 14.2% 3.56%

SOLVENCY RATIO
Debt-to-Equity Ratio: This ratio compares a company's total debt to its shareholders' equity. It indicates
the proportion of financing provided by creditors versus shareholders. A high debt-to-equity ratio suggests
that a company is highly leveraged and may be at risk of financial distress if it cannot meet its debt
obligations.
Interest Coverage Ratio: The interest coverage ratio measures a company's ability to cover its interest
payments with its earnings before interest and taxes (EBIT). It indicates the company's ability to service
its debt obligations. A higher interest coverage ratio indicates that a company has sufficient earnings to
cover its interest expenses.
Financial Leverage Ratio: This ratio measures the extent to which a company uses debt to finance its
operations. It's calculated by dividing the average total assets by the average total equity. A high financial
leverage ratio indicates that a company relies heavily on debt financing, which can increase financial risk.
Weighted Average Cost of Debt: This ratio compares the weighted average cost of debt to total debt. It
helps in evaluating the overall cost of debt financing for a company. A lower weighted average cost of
debt suggests that a company can borrow at lower interest rates, which can lead to lower financing costs.

2021
NISHAT MILLS SAPPHIRE GULAHMED
Debt-to-Equity Ratio 0.14 times 0.3 times 0.41 times
Interest Coverage Ratio 6.75 times 4.7 times 3.86 times
Financial Leverage Ratio 0.39 times 0.9 times 1.84 times
Weight Average Cost to 3.93% 5.6% 4.34%
Debt

2022
NISHAT MILLS SAPPHIRE GULAHMED
Debt-to-Equity Ratio 0.16 times 0.3 times 0.36 times
Interest Coverage Ratio 6.97 times 5.8 times 4.92 times
Financial Leverage Ratio 0.53 times 0.8 times 1.64 times
Weight Average Cost to 5.73% 9.5% 4.88%
Debt
 2023
NISHAT MILLS SAPPHIRE GULAHMED
Debt-to-Equity Ratio 0.13 times 0.2 times 0.33 times
Interest Coverage Ratio 3.22 times 4.6 times 2.11 times
Financial Leverage Ratio 0.69 times 0.5 times 1.33 times
Weight Average Cost to 13.18% 13.3% 9.50%
Debt
IV. COMPARATIVE ANALYSIS
Certainly! Let's conduct a comparative analysis of the three companies (Nishat Mills, Sapphire, and Gul
Ahmed) based on the provided financial ratios across different years, and then discuss the broader
implications for the Pakistan textile industry.
Liquidity Ratios
Current Ratio:

 Nishat Mills consistently maintains a healthy current ratio across all three years, indicating its
ability to cover short-term obligations with current assets.
 Sapphire also maintains a stable current ratio, suggesting good liquidity.
 Gul Ahmed shows a fluctuating trend, with a slight decrease in 2022 and a more significant
decrease in 2023, which could indicate potential liquidity concerns.
Quick Ratio:

 Nishat Mills consistently maintains a higher quick ratio compared to Sapphire and Gul Ahmed,
indicating a better ability to cover immediate liabilities with liquid assets.
 Sapphire and Gul Ahmed show lower quick ratios, indicating a relatively lower ability to cover
immediate liabilities with liquid assets.
Cash to Current Liabilities:

 Nishat Mills and Sapphire show varying but generally low ratios, indicating limited cash reserves
relative to current liabilities.
 Gul Ahmed shows a concerning decrease in cash to current liabilities ratio in 2023, possibly
indicating liquidity strain.

Profitability Ratios
Gross Profit Ratio:

 Sapphire consistently maintains the highest gross profit ratio, indicating efficient production and
cost management.
 Nishat Mills follows with a relatively stable gross profit ratio.
 Gul Ahmed lags with lower gross profit ratios across the years, potentially indicating
inefficiencies in production or higher costs.

Return on Capital Employed (ROCE):

 Sapphire consistently shows the highest ROCE, indicating effective utilization of capital to
generate profits.
  Nishat Mills follows with competitive ROCE figures.
 Gul Ahmed shows fluctuating ROCE figures, indicating an inconsistency in capital utilization
efficiency.
Net Profit Ratio:

 Sapphire consistently maintains higher net profit margins compared to Nishat Mills and Gul
Ahmed, indicating better profitability after accounting for all expenses.
 Gul Ahmed consistently shows the lowest net profit margins among the three, which could
indicate inefficiencies or higher operating costs.

Solvency Ratios
Debt-to-Equity Ratio:

 Nishat Mills consistently maintains a low debt-to-equity ratio, indicating a conservative approach
to debt financing.
 Sapphire follows with moderately low ratios.
 Gul Ahmed shows higher debt-to-equity ratios, indicating relatively higher reliance on debt
financing, which could pose a higher financial risk.
Interest Coverage Ratio:

 Nishat Mills consistently shows strong interest coverage ratios, indicating its ability to meet
interest obligations comfortably.
 Sapphire follows with relatively stable interest coverage ratios.
 Gul Ahmed has shown declining interest coverage ratios over the years, indicating potential
difficulties in meeting interest payments.

Financial Leverage Ratio

 Nishat Mills and Sapphire have maintained relatively stable financial leverage ratios over the
years.
 Gul Ahmed shows fluctuations, possibly indicating variations in capital structure or financial risk
management.

Comparative Analysis Summary:

 Sapphire emerges as the top performer in terms of profitability and efficiency metrics,
consistently outperforming its peers.
 Nishat Mills demonstrates stability and competitiveness across most ratios, indicating a strong
position in the industry.
 Gul Ahmed shows mixed performance, with some concerning trends in liquidity and profitability
ratios, warranting closer attention.
RECOMMENDATIONS
For Investors:
 Sapphire presents as a strong investment opportunity due to its consistently high profitability and
efficiency metrics.
 Nishat Mills could also be a favourable investment option due to its stability and competitive
position in the industry.
 Gul Ahmed may require further analysis and due diligence before investment, considering its
mixed performance and concerning trends.

For Stakeholders:
 Management of Gul Ahmed should focus on improving liquidity and profitability ratios to ensure
sustainable growth and mitigate financial risks.
 Industry-wide, there might be a need for monitoring and managing debt levels, especially for
companies like Gul Ahmed with higher debt-to-equity ratios, to ensure long-term financial
stability in the Pakistan textile industry.

Overall, while the Pakistan textile industry shows potential for growth, investors and stakeholders should
conduct a thorough analysis and risk assessment before making investment decisions.
REFERENCES
1. "Textile Industry of Pakistan." Ministry of Commerce, Government of Pakistan.
http://www.commerce.gov.pk/textileindustry.php
2. "Nishat Mills Limited - Company Profile." Pakistan Stock Exchange.
https://www.psx.com.pk/company/NML
3. "Sapphire Textile Mills Limited - Company Profile." Pakistan Stock Exchange.
https://www.psx.com.pk/company/SAPT
4. "Gul Ahmed Textile Mills Limited - Company Profile." Pakistan Stock Exchange.
https://www.psx.com.pk/company/GATM
5. Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management (15th ed.).
Cengage Learning.
6. Ross, S. A., Westerfield, R. W., Jordan, B. D., & Roberts, G. S. (2017). Fundamentals of
Corporate Finance (12th ed.). McGraw-Hill Education.