Key Highlights

  • Jerash shares are trading down 8.72% at $7.12 versus a prior close of $7.80.
  • Fiscal second quarter Revenue grew 19.8% to $50.3 million.
  • Net income rose to $2.2 million, or $0.16 per share, from $0.04 a year ago.
  • Third quarter gross Margin is guided to 16% to 17% from 18.2%.
  • A $0.05 quarterly Dividend was declared.

Jerash Holdings (NASDAQ:JRSH) is trading down 8.72% at $7.12 after a quarter that lifted profit sharply but came with a lower margin outlook. Peer Gildan Activewear (NYSE:GIL) is trading down 2.86%, a smaller move than Jerash.

Profit Nearly Triples

Fiscal second quarter revenue grew 19.8% to $50.3 million from $42 million a year ago, driven by higher shipments to its major U.S. customer and others. Gross Profit increased 45.4% to $9.1 million, and gross margin rose 320 basis points to 18.2% on higher U.S. shipments, automation, early raw material purchases and tighter wastage controls.

Operating income nearly tripled to $3.1 million. Net Income rose 4.5 times to $2.2 million, or $0.16 per diluted share, compared with $0.04 a year ago.

Lower Tax Rate Helps

The effective tax rate fell to 15.7% from 24.3% after Jordan cut its corporate rate from 20% to 10%. Management said the lower rate will persist until the authority changes it.

Third Quarter Guide Weighs

For the fiscal third quarter ending December 31, revenue is guided to about $49 million to $51 million and gross margin to 16% to 17%. Management pointed to higher Import logistics costs and the temporary impact of onboarding new workers. That is below the 18.2% margin posted in the second quarter.

Capacity Is Booked Through June

Facilities are fully booked with confirmed orders through June 2027. Expansion plans include new lines at two facilities by December, adding about 8% more capacity, and a converted Facility with 500 sewing machines and about 1,100 foreign workers by September 2027, adding another 15% to 20%. A third satellite factory will add about 500 local jobs, and a two-shift trial is planned with minimal Capital spending.

Management also said it completed product development with Hansoll, its strategic partner in Korea, for a potentially significant winter jacket order, with production that could begin at the start of fiscal 2028. A trial order for an iconic American apparel Brand is in production.

Cash and Dividend

Cash was $16.9 million, and a $0.05 quarterly dividend was declared. DA Davidson maintained a Buy rating with a $10 target, the only analyst covering the stock.

Margin Recovery Decides the Next Leg

The shares have run strongly, so the margin guide matters. Investors will watch whether third quarter gross margin lands in the 16% to 17% range and whether onboarding costs fade by the fourth quarter. They will also watch how fast the new lines and the converted facility add output, and whether the winter jacket order and trial order convert into production.