Service Industries Limited’s sales increased 56% to Rs44 billion in the nine months ending September 30, 2022, compared with Rs28 billion in the corresponding period of 2021. Similarly, the firm’s gross profit increased 75% to Rs8 billion in 9MCY22 from Rs4.6 billion in 9MCY21. However, the gross profit was significantly lower than the enormous revenues since the cost of sales was higher than expected.

The profit-before taxation during the nine-month period of CY22 dropped to  Rs656 million from Rs677 million in the corresponding period of CY21. Other operational expenses led to a decrease in this profit. The profit-after taxation also showed a massive 162% decrease as the net profit plunged to Rs281 million in 9MCY22 from Rs452 million in 9MCY21, reports WealthPK.

Earnings growth analysis

The company’s earnings growth kept declining from 2018 to 2021. Recently, Service Industries Ltd (Rs12.84) had the largest drop in its share prices in absolute terms along with Al-Abbas Sugar Mills Ltd (Rs11.91) and Abbott Laboratories Ltd (Rs11.74).

Industry comparison

The companies that have been considered the competitors of Services Industries Limited are Gul Ahmed Textile, Kohinoor Textile Mills, Service Global Footwear, and Bata Pakistan. Services Industries Limited’s price/earnings (PE) ratio stood at 483.12, which was the highest in the industry. The firm had the second-largest market capitalisation in the industry at around Rs12.9 billion. In comparison to its rivals, Service Industries Limited appears to be overvalued, which is not good news for investors. Investors are drawn to companies with low PE ratios.

Profitability

The year 2021 proved to be challenging for the company as its net profitability hit the lowest ebb at 1.09% and gross profit margins at 16.09%. Net profit and gross profit margins serve as illustrations of a company’s profitability.
Service Industries Limited buys, manufactures and sells technical rubber products, tyres and shoes. The company has production units in Gujrat and Muridke, Punjab. Gujrat complex produces footwear, tyres and tubes, and technical rubber goods, while Muridke unit is specified for manufacture of shoes.

Credit: Independent News Pakistan-WealthPk