SKL's Numbers Don't Lie, But Management's Words Might

What Management's "Strong Year" Really Looks Like

The Company had a strong 2025 which was generally characterised by strong growth. - SKL Management, FY2025 Commentary

That sentence was written about a year in which net profit fell 59%. It is the most concise demonstration of the transparency problem at the heart of this report.

Introduction

When ApexHub Insights published its inaugural valuation of Shri Krishana Overseas PLC in July 2025, the verdict was unambiguous: the company was a watchlist stock, not a buy. The DCF implied a fair value of KES 4.39 per share against an IPO price of KES 5.90, a 25.6% premium to intrinsic value before a single trade had been executed. The caution was explicit: "Unless SKL can significantly outperform projections, there may be more downside than upside."

The market ignored the warning. SKL now trades at KES 9.42, which is 59.7% above the IPO price and a staggering 115% premium to the ApexHub Insights DCF value. Investors who bought at listing have been rewarded handsomely on paper. What they have not been rewarded with is the business performance that would justify those returns.

The FY2025 financial statements, published alongside a management commentary that reads more like a public relations exercise than an honest account of a difficult year, tell a story the share price has not yet processed. That gap between what management is saying, what the numbers show, and what the current valuation demands, is the subject of this note. Investors deserve the unvarnished version.

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The Scorecard Before We Begin

Metric	FY2024	FY2025	Change
Revenue	KES 309.9M	KES 351.1M	+13.5%
Gross Profit	KES 97.8M	KES 87.8M	-10.2%
Gross Margin	31.6%	25.0%	-660 bps
Operating Profit (EBIT)	KES 40.5M	KES 23.2M	-43%
Net Profit	KES 10.2M	KES 4.1M	-59.3%
Earnings Per Share	KES 10.07	KES 4.10	-59.3%
Current Ratio	0.97×	0.90×	Deteriorated
Net Working Capital	-KES 4.5M	-KES 26.7M	-493%
Total Borrowings	KES 107.9M	KES 162.4M	+50.5%
Share Price	-	KES 9.42	+59.7% vs IPO
Trailing P/E	-	~116×	Unjustifiable

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1. Revenue Grew. Everything Else Didn't.

Starting with the number management leads with: revenue grew 13.5%, from KES 309 million to KES 351 million. That is real. But revenue is not profit, and in SKL's case, the revenue growth was purchased at the cost of virtually every margin in the income statement.

Cost of sales grew 24.1%, which is nearly double the rate of revenue growth. That single fact renders the revenue headline meaningless.

Metric	FY2024	FY2025	Change
Revenue	309.9	351.1	+13.3%
Gross Profit	97.8	87.8	-10.2%
Operating Profit	40.5	23.2	-42.7%
Net Profit	10.2	4.1	-59.8%

Gross margin compressed from 31.6% to 25.0%, a 660 basis point deterioration that reversed the most significant financial improvement SKL had made in four years of operating history, the very margin expansion that the ApexHub IPO analysis had identified as evidence of "enhanced operational efficiency."

The damage cascaded downward. Operating profit fell 43%. Net profit collapsed 59.3%. EPS fell from KES10.07 to KES4.10. At KES9.42, the company now trades at approximately 115× trailing earnings, a multiple that is not justifiable under any conventional valuation framework for a small-cap Kenyan manufacturer that just posted its worst earnings year since listing.

To be clear: SKL is not a failing business. Revenue growth is genuine. The corrugated box operation serves real demand from real sectors, herbs, dairy, edible oils, pharmaceuticals. The commercial engine is running. The problem is that it is running at the expense of the company's balance sheet, its working capital, and its creditors.

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2. The EBIT Lie of Omission

The management commentary attributes the 43% EBIT decline "majorly to costs related to being publicly listed in addition to the aforementioned margin squeeze." This is the most analytically misleading claim in the entire report.

The arithmetic that management does not provide:

Driver	KES Millions	% of EBIT Decline
Gross profit collapse (margin compression)	9.9M	57%
Other operating cost increases	3.9M	22%
Admin expense increase (incl. listing costs)	3.6M	21%
Total EBIT decline	17.4M	100%

Administrative expenses, the line most likely to contain listing fees, legal costs, and compliance charges, rose by KES 3.6 million. The total EBIT decline was KES 17.4 million. Listing-related costs explain, at most, 21% of the EBIT deterioration. The primary driver was the collapse in gross profit from margin compression.

By attributing the decline "majorly" to listing costs, management invites investors to conclude that the earnings weakness is one-time, non-recurring, and will normalise once the company settles into its public listing. That would be a dangerous conclusion to draw. Gross margin compression from 31.6% to 25.0% is not a listing cost. It is a structural cost problem.

Tax policy changes were real, particularly the input VAT reclassification proposals, is a genuine cost threats to the packaging sector & SKL management attributes it entirely to the 10% decline in gross margin. But tax policy cannot explain a 660 basis point gross margin swing in isolation. The Middle East disruption, which kept Suez Canal volumes approximately 60% below pre-crisis levels through mid-2025, rerouted vessels around the Cape of Good Hope, and directly raised the cost of imported inputs across East Africa, receives two mentions in the management commentary and zero quantification. For a manufacturer dependent on imported raw materials, that omission is not an oversight. It is a choice.

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3. Working Capital: The Number Management Buried

There is one figure in the FY2025 balance sheet that investors must understand before anything else:

Net current assets: negative KES 26.7 million.

SKL's current liabilities exceed its current assets by KES 26.7 million. The prior year gap was negative KES 4.5 million. In one year, the working capital deficit nearly sextupled. The company ended FY2025 with KES 7.2 million in cash against KES 261.3 million in current liabilities, a current ratio of 0.90×.

Component	FY2024	FY2025	Change
Inventory	24.2	62.5	+158%
Receivables	124.1	164.1	+32.2%
Cash	2.3	7.2	+213%
Trade Payables	112.7	213.9	+90%

Management's explanation, that cash flow was "notably less strong" due to receivables growth, VAT input increases, and "increased inventory holding done to take advantage of emerging opportunities", is the most artfully constructed sentence in the report.

What the commentary omits is the mechanism behind the KES 37.5 million in reported operating cash flow: trade payables nearly doubled, from KES 112.7 million to KES 213.9 million. The company is funding its operations by pushing payment obligations onto its suppliers. That is not operational strength. It is deferred liquidity risk, and it is the kind of working capital management that ends badly when suppliers start pushing back.

The inventory framing deserves particular scrutiny. A KES 38 million inventory build, a 158% increase, described as "taking advantage of emerging opportunities" when the company simultaneously has near-zero cash, negative working capital, and a delayed construction project consuming capital is not a credible strategic rationale. It is a liability described as optionality.

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4. Kisaju: The Delayed Catalyst That Holds Everything Together

No analysis of SKL is complete without confronting the Kisaju project, and no confrontation of the Kisaju project is complete without acknowledging what a 12-month delay means for the investment case.

The ApexHub Insights IPO analysis built its DCF on an assumption of 30% revenue growth in FY2026, driven by commissioning of the new 22,000-tonne Kisaju plant in Q3 2025. That commissioning has not happened. The plant is now expected to commence from Q3 2026 - twelve months behind schedule.

"Construction of the Company's new manufacturing plant is progressing well although it is running behind schedule." , SKL Management, FY2025 Commentary

These two characterisations cannot coexist.

Metric	FY2024	FY2025	Change
Total Borrowings	107.9	162.4	+50.5%
Net Profit	10.2	4.1	-59.8%
Debt-to-Profit Ratio	10.6×	39.6×	+273%

The original ApexHub analysis estimated that terminal value accounted for approximately 63% of SKL's enterprise value, meaning the overwhelming majority of the company's worth depends on Kisaju being built, commissioned, and ramped to meaningful utilisation. Every quarter of delay compresses that future value in present terms. Meanwhile, the KES 120 million in long-term borrowings accrued to fund this project is not waiting. Interest costs of KES 14.8 million hit the FY2025 income statement in full, contributing materially to the 59% net profit collapse, with no corresponding revenue benefit yet visible.

Investors in a listed company are entitled to know: what caused the delay? What is the revised budget? What are the contractual commissioning milestones? When does the loan facility require repayment or refinancing? The FY2025 financial statements provide none of this. The Kisaju section totals approximately 100 words.

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5. Political Stability: A Claim That Didn't Survive the Year

Management opens the Business Environment section with a claim of "improved political stability." This is, to put it plainly, false.

The Gen Z protests that shook Kenya in June 2024 did not end when the Finance Bill was withdrawn. They reignited in June 2025, triggered by the death of a protester in police custody, and spread across multiple counties, targeting state violence and the broader political order. President Ruto issued a public apology to Kenyan youth as late as May 2025. A movement that prompted a presidential apology, multiple rounds of street protests across 47 counties, and ongoing opposition mobilisation ahead of the 2027 elections is not a picture of improved political stability. It is one of managed instability.

The contradiction is embedded within the report itself. Management simultaneously claims "improved political stability" and then, two sentences later, describes an operating environment "affected by tight liquidity in the domestic market, driven by delayed payments across the value chain and cautious spending by manufacturers." Cautious spending by manufacturers is, in part, the economic fingerprint of political uncertainty. Management cannot claim stability and its economic effects in the same paragraph without the logic collapsing on itself.

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6. What the Price Demands and Why the Maths Doesn't Work

At KES9.42, the market is capitalising SKL at KES 476 million. Against FY2025 net profit of KES 4.1 million, that implies a trailing P/E of approximately 116×.

As the original ApexHub analysis noted, even at IPO the company's P/E of 29.28× placed it "far above the peer median of 7.14×" for African packaging comparables. At 116×, there is no comparable in any packaging market on any continent that provides support for this valuation.

The market is making one of two bets. The first is that Kisaju commissions in Q3 2026, ramps rapidly to high utilisation, and produces a step-change in earnings that makes the trailing multiple irrelevant within 18 months. The second is that retail investors on the NSE SME segment do not read income statements. Both bets may prove correct simultaneously.

The credibility of the first bet depends entirely on Kisaju delivery, already 12 months late, being funded by a company with KES 7.2 million in cash and KES 26.7 million in negative working capital. The margin of error is essentially zero. Any further construction delay, any tightening of credit terms by suppliers, any customer payment failure, and SKL faces a liquidity event requiring either a dilutive equity raise or a debt restructuring. Neither outcome is currently priced into the shares.

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7. The Transparency Deficit

The cumulative problem with SKL's FY2025 management commentary is not that any single claim is an outright fabrication. It is that the commentary is constructed to be technically defensible while being substantively misleading. Revenue did grow. Tax policy did change. The liquidity environment was difficult. The plant is still being built. The shilling was stable.

But the picture assembled from these true facts is one of a company navigating manageable external headwinds on its way to a transformational capacity expansion. The picture assembled from the financial statements is one of a company that:

• Posted its worst earnings year since listing
• Allowed working capital to deteriorate to near-critical levels (current ratio 0.90×)
• Delayed its transformational project by twelve months
• Is servicing KES 162 million in total debt on KES 4.1 million of annual earnings
• Described a 59% net profit collapse as "strong growth"

A company with nothing to hide would have disclosed listing costs as a specific line item. It would have quantified the Middle East input cost impact. It would have provided a revised Kisaju budget and timeline with milestones. It would have addressed the current ratio directly rather than burying the working capital position under a vague reference to "less strong" cash flow management.

SKL may yet become the high-quality compounder the ApexHub analysis identified as the upside scenario, one that "could emerge by 2027+" if Kisaju commissions, margins recover, and leverage recedes. That outcome remains possible. But investors should demand it be earned in the numbers before they price it into the shares. At KES9.42, they are paying for a future that management has already proven, in one full year of public disclosure, it cannot reliably predict.

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Verdict

ApexHub DCF fair value	KES 4.39
IPO price	KES 5.90
Current price	KES 9.42
Premium to DCF	+115%
Trailing P/E	~116×
Sector median P/E	7×
Kisaju delay	12 months
Net profit change YoY	−59.3%

⚠ WATCH. NOT BUY.

The original verdict, issued when the stock was KES5.90 and the business was performing better, stands more firmly today than it did at listing.

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ApexHub Insights provides data-driven research and equity narratives on African markets. This note is provided for information purposes only and does not constitute financial advice. All figures sourced from SKL PLC FY2025 audited financial statements and the ApexHub Insights IPO research note published July 2025. Consult your financial adviser before making investment decisions. Full disclaimer: apexhubinsights.com/disclaimer