How is KOHC Expected to Perform in 4QFY26?
Introduction
Kohat Cement Company Limited (KOHC) is expected to report a stronger fourth quarter of FY26, with profitability benefiting from higher domestic dispatches, improved retention prices, lower finance costs and a one-off deferred tax credit adjustment following the reduction in the super tax rate. The company is scheduled to announce its 4QFY26 results on September 10, 2026. AL Habib Capital Markets estimates 4QFY26 profit after tax (PAT) at PKR 2.51 billion, translating into earnings per share (EPS) of PKR 2.73. This represents an expected increase of 34.1% quarter-on-quarter and 6.5% year-on-year.
| PKR mn | 4QFY26e | 4QFY25 | YoY | 3QFY26 | QoQ |
|---|---|---|---|---|---|
| Sales | 9,802 | 8,720 | 12.4% | 8,157 | 20.2% |
| Cost of sales | 6,228 | 6,000 | 3.8% | 5,318 | 17.1% |
| Gross profit | 3,574 | 2,721 | 31.4% | 2,839 | 25.9% |
| Finance cost | 49 | 80 | -39.0% | 36 | 35.6% |
| Other income | 776 | 1,303 | -40.5% | 621 | 24.9% |
| PAT | 2,507 | 2,354 | 6.5% | 1,870 | 34.1% |
Source: AL Habib Capital Markets estimates.
What is driving the expected increase in sales?
Net sales are projected at PKR 9.80 billion, up 12.4% YoY and 20.2% QoQ. The improvement is primarily attributed to higher retention prices. Domestic cement dispatches are estimated at 579,578 tons, representing growth of 4% YoY and 12% QoQ. Exports, however, are expected to remain nil because of the closure of the Durand Line.
Why are gross margins expected to improve despite higher coal prices?
KOHC‘s gross margin is estimated to expand to 36.5%, compared with 31.2% in 4QFY25 and 34.8% in 3QFY26. This represents an expansion of 530 basis points YoY and 170 basis points QoQ. The improvement is expected despite average coal prices rising to USD 113.29 per ton, up 26.5% YoY and 14.2% QoQ, alongside elevated transportation costs. The research attributes the stronger margin to improved retention prices, effective cost control and KOHC‘s diversified power mix, which includes CFB, waste heat recovery (WHR), solar and grid power. Solar capacity has increased to 17.66MW from 15.34MW previously.
| Margin | 4QFY26e | 4QFY25 | 3QFY26 | FY26 | FY25 |
|---|---|---|---|---|---|
| Gross margin | 36.5% | 31.2% | 34.8% | 34.3% | 39.2% |
| Net margin | 25.6% | 27.0% | 22.9% | 25.6% | 30.8% |
Why is the decline in finance costs an important positive?
Finance costs are projected to fall sharply to PKR 49 million in 4QFY26 from PKR 80 million a year earlier. This implies a decline of 39.0% YoY, although the expense is 35.6% higher QoQ from PKR 36 million. The expected YoY reduction reflects lower policy rates and continued balance-sheet deleveraging. Lower financing expenses should provide additional support to profitability at a time when the company is still facing elevated coal and transportation costs.
Why is other income a notable weakness in the quarter?
One of the more significant negative elements in the forecast is the decline in other income. Other income is estimated at PKR 776 million, down 40.5% YoY, although it is expected to increase 24.9% QoQ from PKR 621 million. This decline is important because it partly offsets the gains from stronger operating performance and lower finance costs. The research does not provide a detailed breakdown explaining the YoY reduction in other income, so no further attribution can be made from the report.
What does the FY26 outlook look like?
For the full financial year, KOHC‘s PAT is forecast at PKR 9.92 billion, down 14.3% YoY, while net sales are expected to rise 3.11% to PKR 38.7 billion. The disconnect between higher sales and lower earnings reflects pressure on gross profitability. FY26 gross margin is forecast at 34.3%, down 490 basis points YoY from 39.2%. Elevated coal prices and higher transportation costs are identified as the primary factors behind the margin contraction.
| PKR mn | FY26e | FY25 | YoY |
|---|---|---|---|
| Sales | 38,703 | 37,536 | 3.11% |
| Gross profit | 13,289 | 14,722 | -9.73% |
| Finance cost | 166 | 350 | -52.45% |
| Other income | 4,021 | 5,281 | -23.86% |
| PAT | 9,917 | 11,575 | -14.32% |
What is the key abnormal cost trend in FY26?
The most notable cost pressure is the sharp increase in coal prices. Average coal prices are estimated at USD 113.29 per ton, up 26.5% YoY. Transportation costs are also described as elevated. These factors are weighing on the full-year gross margin despite the expected improvement in 4QFY26. At the same time, finance costs are moving in the opposite direction, with FY26 finance costs forecast to decline 52.4% YoY because of lower policy rates and continued deleveraging. This provides a partial cushion against the deterioration in gross profitability.
What is happening with capacity utilization?
KOHC is expected to operate at 49.9% capacity utilization during the quarter, reflecting stronger domestic dispatches. The expected improvement in utilization is consistent with the forecast increase in domestic dispatches and supports the view that the quarter’s stronger performance is being driven by both pricing and volumes.
Conclusion
The research maintains a constructive view on KOHC, supported by resilient domestic cement demand, pricing discipline, low-cost power infrastructure and continued deleveraging. The key risks remain coal-price volatility, weaker-than-expected construction activity and any breakdown in pricing discipline. Overall, the 4QFY26 outlook points to a quarter of improved operating performance, particularly through higher retention prices, stronger domestic dispatches and better gross margins. However, the full-year picture remains weaker, with FY26 PAT expected to decline 14.3% YoY as higher input and transportation costs outweigh sales growth. Lower finance costs and balance-sheet deleveraging provide an important earnings cushion.
⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →
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