KOHC: 1QFY26 Result Review — Royalty hike squeezes margins

Kohat Cement Company Ltd. (KOHC) announced its 1QFY26 financial results, reporting earnings of PkR2.9bn (EPS: PkR3.2), compared to PkR3.4bn (EPS: PkR3.7) in SPLY, down 14%YoY, due to a decline in gross margins. However, earnings were above our expectations due to higher-than-anticipated other income, said a report from AKD Research.

· Revenue inclined 2%YoY to PkR10.3bn, wherein, 18%YoY increase in offtakes overshadowed 13%YoY decrease in retention prices.

· Gross margins witnessed a decline to 33.9% from 42.8% in SPLY, driven by increase in royalty rates in KPK region. Notably, royalty rates in KPK region increased to PkR350/ ton compared to PkR250/ton during SPLY.

· Other income remained largely flat YoY to PkR1.5bn, where lower yields offset the impact of a 24%YoY increase in cash & short-term investments.

· Finance cost declined by 66%YoY to PkR40mn from PkR116mn in SPLY, owing to a reduction in outstanding debt and easing interest rates.

· Company recorded effective tax rate of 34% during 1QFY26, compared to 33% in SPLY and 33% in 4QFY25.

· We maintain a ‘Buy’ stance on KOHC with a Jun’26 DCF target price of PkR158.6/sh. Our bullish view is supported by i) the company’s attractive valuation, trading at the lowest EV/EBITDA in our universe, ii) an efficient energy mix to keep gross margins higher, and iii) a strong stream of other income.

https://research.akdsl.com/638972590905337333.pdf

AKD Research