Textile sector shines in Oct-Dec quarter: CAL Securities report

Infographic: TBS

Listed textile firms posted robust growth in both revenue and profit in the October-December quarter of FY25, driven by increased demand from the US and Europe, along with currency depreciation that boosted their topline.

CAL Securities Limited, a prominent brokerage firm, recently published a research report titled "Textile Sector Update", analysing the unaudited reports of 30 listed textile firms for the second quarter of this fiscal year.

According to the report, companies in the listed textile sector achieved robust year-on-year revenue growth of 20%, reaching Tk4,400 crore in the second quarter, with apparel exporters and spinning mills leading the way.

According to the segment-wise performance, apparel exporters spearheaded the surge with a 43.1% year-on-year increase. Spinning mills, contributing nearly half of the sector's revenue, saw a solid 23.5% year-on-year growth, while dyeing recorded a 29.2% growth, fabric grew by 11.4%, and denim secured an 8.3% growth.

However, the home textile segment saw a 2.4% decline in revenue during the second quarter, according to the research findings.

Moreover, textile firms posted a net profit surge of 72% year-on-year, driven by topline growth, leading to a 170-basis-point expansion in net profit margin.

The research report stated that listed textile companies reported a net profit of Tk220 crore in the second quarter, up from Tk130 crore a year ago. Net margins improved to 5% from 3.5% year-on-year, though elevated interest rates weighed on overall profitability.

CAL Securities noted that lower cotton prices primarily boosted their profitability.

The brokerage firm highlighted that the country's readymade garment exports posted a 12% year-on-year growth in the first half of FY25, despite disruptions from political transitions and labour unrest.

Following a year of decline in FY24, exports rebounded in the first half of FY25, even surpassing FY23 levels. This recovery was fueled by increased demand from the US and Europe, bolstered by declining inflation and monetary easing in developed markets, the report added.

Regarding the future outlook for textile firms, the securities firm stated that higher US tariffs on Chinese imports would lead to more orders shifting to other emerging markets. However, Bangladesh needs to ramp up value addition to stay competitive.

It further noted that despite a 2.6% year-on-year increase in US apparel imports in 2024, Bangladesh's US market share grew by just 0.7%. This was driven by a 4.9% year-on-year volume increase but offset by a 4.1% year-on-year decline in unit selling prices.

To fully capitalise on the China-plus-one strategy, focusing on export diversification and the expansion of high-value products is crucial, it said.

Segment-wise top performers

Malek Spinning led the spinning segment, posting a 24% growth in revenue to Tk713 crore and securing a 21% growth in profit to Tk50 crore in the October-December quarter. It was followed by Square Textile and Matin Spinning, both of which achieved double-digit growth in revenue and profit.

The apparel segment was led by Esquire Knit Composite, which posted an 80% growth in revenue to Tk309 crore. The company reported a net profit of Tk3.8 crore, a significant turnaround from a loss in the same quarter a year ago. Other notable performers included Queen South Textile, Monno Fabrics, and Rahim Textile.

Envoy Textile led the denim segment with a 22% growth in revenue to Tk458 crore and a 158% surge in net profit to Tk35 crore during the October-December quarter. However, ShaSha Denim did not achieve revenue growth, while Argon Denim secured growth in both revenue and profit.

Paramount Textile and Fareast Knitting both achieved robust growth in revenue and profit. In contrast, Evince Textile and Hwa Well Textile underperformed during the second quarter.

Besides, Shepherd Industries and ML Dyeing performed well in the dyeing segment.