Investors giving Interloop’s zero credit for investments in growth

Interloop Limited (PSX: ILP) is having the kind of year every portfolio manager dreads. From 1 July 2024 through 23 May 2025, the country’s largest listed textile exporter has under-performed the KSE-100 index by a staggering 68 percentage points, according to the price-performance chart in Topline Securities’ latest company update. The share, which once traded above Rs84, now hovers near Rs57, even as the benchmark marches to record highs.

At first glance the market’s verdict seems rational: nine-month profit for the financial year ending June 30, 2025 collapsed 78% year-on-year after the company’s fledgling garment plant racked up heavy start-up losses and soaring interest rates chewed through free cash. But that same set of numbers also reveals why the sell-off may prove short-sighted.

Interloop has always been known for socks, not shirts. Hosiery still supplies roughly two-thirds of revenue and enjoys gross margins north of 30%. Yet in fiscal 2024 the company increased its apparel capacity by 53% to 34 million pieces, kicking off trial production at a gleaming LEED-certified apparel park outside Faisalabad. Utilisation, however, averaged only 44%, pushing apparel gross margins to –19%.

Those growing pains intensified in the current fiscal year. With output ramping to 60% utilisation on a still-learning workforce, apparel posted a gross loss of 26% in 9M FY 2025, dragging group margins down to 20.4% from 28% a year earlier. Investors recoiled; the stock followed.