AKD Securities Limited has issued an upbeat outlook for Pakistan’s textile sector, projecting a 47 percent year-on-year jump in profitability during the fourth quarter of FY26. The brokerage attributes the growth to higher exports, gross margin expansion, and remeasurement gains on Sindh Infrastructure Development Cess (SIDC).

Revenue across the AKD Textile Universe is expected to rise 3 percent YoY, supported by a recovery in value-added exports, which increased 1 percent YoY in the quarter, according to PBS data. Gross margins are forecast to improve to 16.3 percent from 15.7 percent in the same period last year, aided by lower energy and input costs. Other income is projected to surge 81 percent YoY, driven by SIDC remeasurement gains.

Company-wise performance:

•  Interloop Limited (ILP): Earnings projected at PKR 3.7 billion (EPS: PKR 2.7), up 40 percent YoY, on stronger margins, higher other income, and reduced finance costs. Gross margins are expected to expand to 24.2 percent from 22.0 percent.
• Nishat Mills Limited (NML): Profitability is expected to rise 6 percent YoY to PKR 1.2 billion (EPS: PKR 3.5), supported by SIDC gains despite margin compression. Revenue is forecast at PKR 45.6 billion, up 5 percent YoY.
• Nishat Chunian Limited (NCL): Earnings expected to surge 17x YoY to PKR 715 million (EPS: PKR 3.0), with revenue climbing 16 percent YoY to PKR 20.9 billion and gross margins improving to 12.3 percent from 10.3 percent.

Investment stance:

AKD maintains an ‘Overweight’ view on the textile sector, citing earnings growth potential amid easing energy costs and lower interest rates. However, the brokerage cautions that ongoing Middle East conflict poses risks to export flows. AKD reiterates its ‘BUY’ calls on ILP, NML, and NCL, with December 2026 target prices of PKR 150, PKR 318, and PKR 84 per share, respectively.