Sonargaon Textiles financial analysis: qualified audit, no interest provision on classified loans, FY2026 EPS BDT 0.41 (Oct 2026)

Investment considerations: a qualified audit, no interest provision on classified loans, 17% utilisation and a first loan repayment

Sonargaon Textiles Ltd. was incorporated in 1984 and owns a cotton spinning mill of three units, Unit-1, Unit-2 and Unit-3, which make cotton yarn of different counts [1 p.11]. The factory and registered office are at Rupatali, Barishal, and the corporate office is at Khansons Centre, Kawran Bazar, Dhaka [1 p.11]. The quarterly accounts describe the company as a member of the Khansons group [6 p.1]. It is listed on the Dhaka and Chittagong stock exchanges and has 26,467,056 shares of BDT 10 [1 p.11] [1 p.29]. Commercial operation began on 21 December 1985; the notes say operation stopped for 14 months for technical reasons and restarted on 30 May 2021 [1 p.11].

The filings describe a small and stressed business. Turnover was BDT 631-856m a year in FY2017-FY2020 and BDT 109-455m a year in FY2021-FY2025 [5 p.17] [2 p.15]. The company made a loss in six of the nine years to FY2025, including a BDT 353.3m loss in FY2021 that came mainly from a BDT 150.1m write-off of damaged raw cotton and a BDT 148.7m loss on a stock-lot sale of waste [4 p.107]. Gross margin in FY2025 was negative, at -3.3% [1 p.8] [14]. Retained earnings were BDT -158.5m at June 2025, and equity of BDT 485.7m included a revaluation reserve of BDT 319.6m, which leaves BDT 166.1m of equity outside the revaluation [1 p.7] [14].

Two items in the accounts set Sonargaon apart from the two peers compared in Exhibit 22, Saiham Textile Mills and Matin Spinning Mills. First, the auditor qualified the FY2025 opinion and drew attention to a material uncertainty on going concern; the same three elements appeared in the FY2024 report, according to the DSE notice of 3 December 2024 [1 p.2] [1 p.3] [8]. Second, the BDT 672.4m of term loans from Bangladesh Development Bank (BDBL), Rupali Bank and Mutual Trust Bank (MTBL) are under money suits or classified, and the company makes no interest provision on them [1 p.3] [1 p.31] [6 p.9]. FY2025 financial expenses were BDT 0.1m, made of lease interest, an FX loss and bank charges [1 p.39].

FY2026 shows changes on both lines. The company paid BDT 120.7m of the BDBL loan in the nine months to March 2026, the first loan repayment in the cash-flow statements we read since FY2021 [6 p.6] [6 p.9]. Nine-month turnover rose 41.3% to BDT 355.4m, while gross margin fell to 5.4% [6 p.4] [14]. The board then announced FY2026 EPS of BDT 0.41, NAV per share of BDT 20.74 and NOCFPS of BDT 9.90, and a 5% cash dividend for general shareholders only [8]. The FY2026 audited accounts are not yet in our corpus, so the auditor's FY2026 opinion is not known.

Business: one product, three units in Barishal, and a decade of shrinking volume

How the mill makes money. Sonargaon buys raw cotton, spins it into yarn and sells the yarn and the waste cotton. The company reports one segment and one product, cotton yarn, made to customer orders [2 p.36] [1 p.43]. All FY2025 raw cotton, spares and packing were bought locally; the import column in the purchase note is empty [1 p.46]. Exports were US$252,750, or BDT 30.5m, about 9% of FY2025 turnover [1 p.46] [1 p.47]. Power comes from the grid: the directors' report says the company depends totally on West Zone Power Distribution Company, Khulna, for electricity [2 p.37].

Nine years in brief. In FY2017-FY2019 turnover was BDT 794-856m and gross margin 14-18% [5 p.17] [14]. FY2020 turnover fell to BDT 631m with a BDT 98.6m loss [5 p.17]. FY2021 turnover was BDT 109m, the year of the 14-month stoppage and the BDT 298.8m of inventory write-offs [4 p.107] [1 p.11]. FY2022 brought a rebound to BDT 455m and a BDT 8.8m profit; the directors put this down to higher production and sales and lower finance costs, and reported production of 1,081 MT [4 p.36] [4 p.37]. Turnover then fell to BDT 284m in FY2023 and BDT 199m in FY2024 before rising to BDT 325m in FY2025 [2 p.15].

The FY2023 equity step. Equity rose from BDT 302.0m at June 2022 to BDT 504.0m at June 2023 in a year with a BDT 6.2m loss. The statement of changes in equity shows the reason: an 'Adjustment in Bank Interest' of BDT 210.9m credited straight to retained earnings [3 p.106]. In the same year long-term loans fell from BDT 963.3m to BDT 672.4m and directors' and other loans of BDT 27.7m left the balance sheet [3 p.104]. The loan note says MTBL settled its liabilities at BDT 8 crore and allowed a substantial remission of interest [1 p.31]. The adjustment did not pass through profit or loss, so FY2023 EPS stayed at BDT -0.23 [3 p.105].

Capacity and output. The capacity note gives installed capacity of 5,953 MT a year and actual FY2025 production of 1,040 MT, a utilisation of 17.47%; the licence does not state a capacity [1 p.46]. The yarn-stock note gives FY2025 production of 1,490,000 lbs, which converts to about 676 MT at 0.4536 kg per lb, so the two notes in the same accounts do not agree [1 p.37] [14]. In FY2022 the directors reported production of 1,081 MT [4 p.36]. On either FY2025 figure, more than four-fifths of the installed capacity was idle. The filings do not give spindle counts by unit, the count mix or the age of the machines in text that our corpus can read; the PPE schedules at the end of the FY2025 statements are rotated scans [1 p.53].

The industry as the directors describe it. The FY2025 directors' report says spinning mills faced falling orders from export-oriented garment makers, that yarn prices were downward, and that selling prices did not cover production and overhead costs, with mills losing 40 to 50 cents a unit [2 p.36]. It cites 1,863 textile mills in Bangladesh, including 527 spinning mills [2 p.43]. It names falling demand, power shortages, worker shortages, worker unrest and raw-material shortages among the company's risks [2 p.37]. These are the board's own descriptions; the filings do not quantify the company's market share or name its customers.

FY2025 by quarter. The annual report's quarterly table shows turnover of BDT 47.1m, BDT 77.3m, BDT 126.9m and BDT 74.0m in the four quarters, and a fourth-quarter loss after tax of BDT 21.5m that took the year to a BDT 21.2m loss [2 p.37]. The directors say profit fell in the last two quarters because of production cost and other expenses and an unstable market [2 p.37]. The March quarter of FY2025 was the only profitable quarter of that year, at BDT 5.8m [6 p.4].

Line items: electricity at 35% of turnover, cost above revenue in FY2025, and almost no finance cost

Turnover. FY2025 turnover rose 63.3% to BDT 325.3m on 1.85m lbs of yarn and waste sold, against BDT 199.2m on 1.58m lbs in FY2024 [1 p.36] [2 p.43]. Volume rose 16.9% and turnover per lb sold rose from BDT 126.2 to BDT 176.3 [14]. The filing does not split the sold quantity between yarn and waste or by count, so the per-lb figure mixes products. In the nine months to March 2026 turnover was BDT 355.4m, already above the whole of FY2025, and the March quarter alone was BDT 202.1m [6 p.4].

Cost of goods sold. COGS rose from BDT 170.9m to BDT 336.2m, which is 103% of FY2025 turnover [1 p.36] [2 p.43]. The directors attribute the rise to raw material, labour, fuel and power, and factory overheads [2 p.43]. Cost of production per lb produced rose from BDT 135.4 to BDT 235.3 [14]. Raw material consumed went from BDT 32.7m to BDT 139.8m. In FY2024 the company put only 183,725 lbs of raw cotton into production but reported 1,655,552 lbs of yarn produced; in FY2025 it put in 1,607,241 lbs and reported 1,490,000 lbs produced [1 p.36] [1 p.37]. The notes do not reconcile the FY2024 gap.

Electricity. Electricity is the largest overhead: BDT 100.4m in FY2024 and BDT 113.9m in FY2025, which was 50.4% and 35.0% of turnover [1 p.37] [14]. Per lb produced it rose from BDT 60.7 to BDT 76.5 as output fell [14]. Grid tariff changes move this line directly; in FY2025 each 1% of the electricity bill was BDT 1.1m, or 0.35% of turnover [14].

Wages and headcount. Factory salaries, wages and bonus rose from BDT 51.9m to BDT 59.3m while factory employees fell from 1,055 to 739 [1 p.37]. Lbs produced per factory employee rose from 1,569 to 2,016 [14]. Total staff was 801 at June 2025, 62 at head office and 739 workers [1 p.43]; the five-year table shows 1,316 in FY2021 [2 p.15].

Operating expenses, other income, finance cost and tax. Administrative expenses have stayed at BDT 20.7-22.0m a year since FY2021 [4 p.107] [1 p.8]. Other income of about BDT 1.1-1.4m a year is mainly the dividend from the CDBL shareholding [1 p.38]. Financial expenses fell from BDT 50.4m in FY2021 and BDT 38.0m in FY2022 to BDT 2.8m in FY2023 and BDT 0.1m in FY2025 [4 p.107] [3 p.105] [1 p.8]. Current tax in FY2025 was the minimum tax of 1% of revenue, BDT 3.3m, even with a pre-tax loss; a BDT 12.7m deferred-tax credit cut the after-tax loss to BDT 21.2m [1 p.35] [1 p.8]. The auditor qualified the deferred-tax figure because management did not consider the revalued PPE in computing it [1 p.2].

FY2026: loss for nine months, an implied June-quarter profit, and BDT 120.7m repaid to BDBL

FY2026 by quarter. The DSE announcements give Q1 EPS of BDT 0.005, half-year EPS of BDT -0.16 and nine-month EPS of BDT -0.19 [8]. The year's EPS of BDT 0.41 therefore implies a June-quarter EPS of BDT 0.60, or about BDT 15.9m of profit, against an implied BDT -0.83 a year earlier [8] [14]. The FY2026 annual report, which will show what produced the fourth-quarter profit, is not yet in our corpus.

Nine months to March 2026. Turnover was BDT 355.4m, up 41.3%; gross profit BDT 19.1m; and after administrative and selling costs of BDT 23.2m the operating loss was BDT 4.0m before financial expenses (BDT 4.2m after them, as printed) [6 p.4]. Current tax of BDT 3.6m took the after-tax loss to BDT 5.0m [6 p.4]. Inventory fell from BDT 549.9m at June 2025 to BDT 439.5m, receivables fell to BDT 7.9m, and collections from turnover were BDT 361.1m [6 p.3] [6 p.6]. Operating cash flow was BDT 120.7m and long-term loan repayment was BDT 120.7m, both in the same statement [6 p.6].

Year-end figures. NAV per share rose from BDT 18.16 at March 2026 to BDT 20.74 at June 2026, which implies equity of about BDT 548.9m, a rise of BDT 68.2m in the quarter [6 p.3] [8] [14]. The implied June-quarter profit accounts for about BDT 15.9m of that rise; the DSE disclosure does not explain the rest. Full-year NOCFPS of BDT 9.90 implies operating cash flow of about BDT 262m [8] [14].

Ratios: falling turnover, negative FY2025 gross margin, and inventory near 600 days of COGS

Growth and margins. Turnover fell at a compound -10.9% a year from FY2017 to FY2025 [14]. Gross margin was 14-18% in FY2017-FY2019, 11-15% in FY2020-FY2022, 6.2% in FY2023, 14.2% in FY2024 and -3.3% in FY2025 [14]. Net margin was positive in three of the nine years [14].

Returns. ROE on average equity ranged from -75.2% (FY2021) to 3.8% (FY2019); in FY2022-FY2025 it ranged from -4.3% to 3.0% [14]. Equity contains a revaluation reserve that was BDT 364.1m in June 2021 and BDT 319.6m in June 2025, and the reserve was larger than total equity in June 2021 and 2022, when equity excluding it was BDT -71.0m and BDT -49.9m [4 p.106] [1 p.7] [14].

Efficiency and working capital. Asset turnover was 0.47-0.49x in FY2017-FY2019 and 0.26x in FY2025 [14]. Inventory was 597 days of cost of sales at June 2025 and 358 days at March 2026 on annualised nine-month COGS [14]. Inventory was 43.7% of total assets at June 2025, and finished yarn of BDT 398.5m was 72% of inventory [1 p.28] [14]. Receivable days were 15 at June 2025 [14].

Leverage and cash conversion. Loans were 1.38x equity at June 2025 and 1.15x at March 2026; against equity excluding revaluation, 4.05x and 3.28x [14]. Interest cover is not meaningful because no interest is charged. Operating cash flow was positive in each of FY2021-FY2025 but below BDT 1.5m in three of those years; it was BDT 208.1m in FY2021, the year of the inventory write-offs and stoppage [2 p.15]. Payout: cash dividends of 3% (2019), 1% (2022) and 1% (2024) [7].

Balance sheet: BDT 552m of loans under suit or classified, inventory not verified, cash under BDT 1m

Loans by lender. The June 2025 note lists three loans: BDBL BDT 303.4m, MTBL BDT 1.2m and Rupali Bank BDT 367.8m (principal), all classified as non-current [1 p.31]. BDBL rescheduled its loan in 2019 for 10 years, filed a suit in the Artha Rin Adalat for BDT 346.3m, and the company says it is contesting the suit and seeking a settlement within BDT 20-24 crore [1 p.31]. Rupali rescheduled at BDT 301.8m in 2019 for 10 years, secured by mortgage of plant land, building and machinery and the personal guarantee of sponsor directors; the company seeks a settlement within about BDT 20 crore [1 p.31]. The emphasis-of-matter paragraph says "The banks are not charging interest on loans" and that Rupali has declared the loan classified [1 p.3]. The March 2026 note says the loans "do not provision any interest due to the ongoing litigation with the courts" and records BDT 120.7m paid to BDBL [6 p.9].

Audit opinion. The FY2025 opinion reads: "except for the possible effects of the matter described in the Basis for Qualified Opinion section of our report, the accompanying financial statements give a true and fair view" [1 p.2]. The first basis says "the company was unable to facilitate our stock-taking procedures" for inventories of BDT 549,892,922 and PPE of BDT 684,487,647 [1 p.2]. The second says that on raw-material purchases of BDT 140,665,886 "the company conducted a significant portion of transactions in cash" [1 p.2]. The going-concern paragraph cites negative retained earnings of BDT 158,476,553 and says "This situation raises concerns about the company's ability to continue as a going concern" [1 p.3]. Management's response in the annual report says the qualifications "are required to be solved as soon as possible" and that "The Board shall take appropriate measures in this regard" [2 p.38].

Inventory and receivables. Inventory at June 2025 was raw cotton BDT 146.0m, finished goods BDT 398.5m, work in process BDT 2.1m, waste BDT 2.8m, and spares and packing BDT 0.6m [1 p.28]. The note states that there are no damaged or slow-moving items [1 p.28]. The book value of closing yarn was BDT 137.2 a lb, against turnover per lb sold of BDT 176.3 [14]. Receivables were BDT 13.6m; the directors' report says a substantial part of receivables at June 2025 was "from its related Company", without naming it [1 p.29] [2 p.37]. The related-party note lists no transaction amounts [1 p.40]. Cash was BDT 0.59m [1 p.29].

Other liabilities. Unclaimed dividends were BDT 1.56m, of which BDT 1.37m dates from 2019 [1 p.32]. The WPPF balance of BDT 1.0m was not disbursed [1 p.2]. The deferred tax liability was BDT 57.8m at June 2025 [1 p.31]. The notes report no contingent liabilities [1 p.49]. The FY2025 note on the June 2025 subsequent events refers to the AGM "to be held on 29.12.2024", a date that had passed [1 p.49].

Plant and the revaluation reserve. PPE at cost was BDT 1,475.5m at June 2025 with accumulated depreciation of BDT 791.1m, leaving BDT 684.5m; there were no additions during FY2025 and the depreciation charge was BDT 35.4m [1 p.27]. The revaluation reserve is released to retained earnings in step with depreciation: BDT 10.0m in FY2025 and BDT 10.7m in FY2024 [1 p.30]. The cash-flow statements for FY2024 and FY2025 show no investing outflows [1 p.10]. With no additions and a release each year, the reserve fell from BDT 364.1m in June 2021 to BDT 312.5m in March 2026 [4 p.106] [6 p.3]. The auditor's key audit matter on PPE notes that it was 54.92% of total assets at June 2025 [1 p.4].

Governance: 44.45% sponsors, two bank-nominated directors, and a dividend that excludes sponsors

Ownership. Sponsors hold 11,764,497 shares, 44.45% of the company [1 p.30] [7]. Institutions held 8.78% at June 2025 and 21.46% at September 2026; general public holdings went from 46.48% to 34.09% over the same period [7].

Board. The FY2025 attendance table lists A.K.M Azizur Rahman (chairman), Bazlur Rahman (managing director), Rosy Rahman (director), Brig Gen Mohammed Abdul Halim (independent director), Md. Masum Sayeed (nominated director, 0 of 4 meetings attended) and Kabir Ahmed (nominated by BDBL, 3 of 4) [1 p.43]. The FY2021 annual report lists directors nominated by Rupali Bank and BDBL [5 p.16]. The remuneration table shows no remuneration for the chairman, managing director or Rosy Rahman [1 p.43]. Pintu Sikder was appointed company secretary from 20 January 2025 [8].

Dividends. The company paid 1% cash for FY2024, disbursed by February 2025, paid nothing for FY2025, and recommended 5% for FY2026 to general shareholders only. The FY2026 dividend covers 14,702,559 shares and costs BDT 7,351,280; sponsors and directors holding 11,764,497 shares are not entitled [8]. FY2026 EPS of BDT 0.41 on all 26.47m shares is about BDT 10.9m, so the dividend is about 68% of FY2026 profit [14].

Board decisions on capacity. The 24-month DSE news archive contains no board decision on capex, BMRE, expansion, a right issue or a loan settlement [8]. The FY2025 notes report no capital expenditure commitment at June 2025 [1 p.42]. The loan note describes settlement talks with BDBL and Rupali without a disclosed agreement [1 p.31].

Peers: a tenth of Saiham's revenue, the only negative gross margin, and no interest charge

Peers. Saiham Textile Mills (standalone) and Matin Spinning Mills are two listed cotton spinners with June year ends whose FY2025 statements we re-opened [9 p.65] [9 p.66] [10 p.151] [10 p.152]. On the same FY2025 basis Sonargaon's revenue was BDT 325m against BDT 3,415m and BDT 8,752m; its gross margin was -3.3% against 9.8% and 15.0% [14]. Sonargaon's printed finance cost was BDT 0.1m on BDT 672.4m of loans, against 8.4% and 6.8% of loans at the two peers [14]. Loans were 1.38x equity at Sonargaon, 0.42x at Saiham and 0.84x at Matin [14].

Multiples as facts. At BDT 117.4 Sonargaon traded at 6.40x June-2025 book and 18.7x book excluding revaluation, against 1.02x and 1.19x for the two peers [14]. Its market value was 9.6x FY2025 revenue, against 1.18x and 0.93x [14]. Its own June-end P/B ranged from 0.60x to 4.05x over FY2018-FY2025 [14].

What's next: record date, AGM, the FY2026 audit and the loan settlements

Which lines these move. The FY2026 annual report will give the audited June-quarter numbers behind the implied BDT 0.60 EPS, the auditor's opinion, and the loan balances by lender after the BDBL payment. A settlement with BDBL or Rupali within the ranges in the loan note (BDT 20-24 crore and about BDT 20 crore) would change the loan line and, as in FY2023, could move retained earnings [1 p.31] [3 p.106]. Interest charged by a court ruling or a lender would move financial expenses, which were BDT 38.0m in FY2022 on BDT 963.3m of loans [4 p.107] [4 p.106]. LDC graduation applies to the country's exporters; Sonargaon's direct exports were BDT 30.5m in FY2025 [1 p.47].

Key questions: the audit, the June quarter and the bank settlements

In short, the filings show a spinner whose volumes have shrunk since FY2020, whose cost of goods sold exceeded turnover in FY2025, and whose bank loans are under suit or classified and carry no interest charge in the accounts [2 p.15] [1 p.8] [1 p.31]. FY2026 added a BDT 120.7m repayment to BDBL, higher turnover and a full-year profit [6 p.6] [8]. The audited FY2026 report is the next filing that tests these numbers.

FAQ

What does Sonargaon Textiles make?

Cotton yarn of different counts from a three-unit spinning mill at Rupatali, Barishal [1 p.11].

When does Sonargaon Textiles' financial year end?

On 30 June [1 p.7] [7].

What was Sonargaon Textiles' EPS for FY2026?

BDT 0.41 as announced on the DSE on 28-Oct-2026, against BDT -0.80 in FY2025 [8]. The FY2026 annual report is not yet in our corpus.

What dividend did Sonargaon declare for FY2026?

5% cash for general shareholders only; sponsors and directors are not entitled. Record date 18-Nov-2026, AGM 29-Dec-2026 [8].

Was Sonargaon's FY2025 audit opinion qualified?

Yes. G. Kibria & Co. gave a qualified opinion with emphasis of matter and a material uncertainty related to going concern [1 p.2] [1 p.3].

How much does Sonargaon owe the banks?

BDT 672.4m at June 2025 and BDT 551.7m at March 2026, after BDT 120.7m paid to BDBL [1 p.31] [6 p.3] [6 p.9].

Why is Sonargaon's finance cost so low?

The company does not provision interest on its bank loans, citing litigation with the banks [6 p.9] [1 p.3].

Does LDC graduation affect Sonargaon?

Graduation was moved to 24-Nov-2029 on 29-Oct-2026 [11] [12]; Sonargaon's direct exports were BDT 30.5m in FY2025 [1 p.47].

Sources

1. Sonargaon Textiles Ltd. audited financial statements and auditor's report, year to 30-Jun-2025 (G. Kibria & Co.) · link · accessed 2026-11-01
2. Sonargaon Textiles Ltd. Annual Report 2024-25 (corpus key carries period_end 2024-06-30; the document covers FY2025) · link · accessed 2026-11-01
3. Sonargaon Textiles Ltd. Annual Report 2022-23 (year to 30-Jun-2023) · link · accessed 2026-11-01
4. Sonargaon Textiles Ltd. Annual Report 2021-22 (year to 30-Jun-2022) · link · accessed 2026-11-01
5. Sonargaon Textiles Ltd. Annual Report 2020-21 (five-year table FY2017-FY2021) · link · accessed 2026-11-01
6. Sonargaon Textiles Ltd. un-audited third-quarter financial statements, nine months to 31-Mar-2026 · link · accessed 2026-11-01
7. Dhaka Stock Exchange, Sonargaon Textiles company page (shareholding Jun-2025, Aug-2026, Sep-2026; dividend history; category; loan status), accessed 1-Nov-2026 · link · accessed 2026-11-01
8. Dhaka Stock Exchange news archive for SONARGAON, 1-Nov-2024 to 31-Oct-2026 (criteria=3), accessed 1-Nov-2026 · link · accessed 2026-11-01
9. Saiham Textile Mills Ltd. Annual Report 2024-2025 (standalone statements) · link · accessed 2026-11-01
10. Matin Spinning Mills PLC Annual Report 2024-2025 (statements of financial position and profit or loss) · link · accessed 2026-11-01
11. The Daily Star, 'Bangladesh gets 3 more years for LDC graduation' (30-Oct-2026) · link · accessed 2026-11-01
12. The Business Standard, 'Bangladesh gets 3 more years before LDC graduation' (30-Oct-2026) · link · accessed 2026-11-01
13. AnalystBro price data (TradingView feed): DSE:SONARGAON, DSE:SAIHAMTEX, DSE:MATINSPINN bars to 29-Oct-2026 · link · accessed 2026-11-01
14. AnalystBro model for this report (workbook tabs below) · link · accessed 2026-11-01