Verdict
Khyber Textile Mills Limited (KHYT) delivered a mixed FY2026 outcome for the year ended June 30, 2026. The operating direction improved: sales rose 10.2%, gross profit grew 19.7%, the gross margin expanded by 2.5 percentage points and the pre-tax loss narrowed by 17.6%. But the bottom line moved the other way because taxation swung from a net credit in FY2025 to a PKR 1.99 million charge. The audited net loss therefore widened 34.8% to PKR 7.85 million, or PKR 6.40 per share, and the board declared no dividend.
The central analytical point is that KHYT is no longer an operating textile manufacturer in economic substance, despite its exchange-sector classification. Textile production has remained suspended since July 2007. FY2026 revenue came from the agricultural livestock operation, while warehouse and building rentals supplied a second important income stream. Investors should therefore judge the result on the durability of livestock margins, rental income, positive cash generation and the unresolved banking litigation—not on conventional textile-sector volume or utilization metrics.
Results at a glance
Reporting basis: audited standalone financial statements for the year ended June 30, 2026, presented in Pakistani rupees. There is no consolidated reporting complication.
Net sales: PKR 22.79 million, up 10.2% from PKR 20.68 million.
Gross profit: PKR 7.15 million, up 19.7% from PKR 5.97 million. Gross margin improved to 31.4% from 28.9%.
Administrative expenses: PKR 21.15 million, down 4.8% from PKR 22.21 million.
Other operating income—rent: PKR 7.91 million, down 11.2% from PKR 8.91 million. Separately disclosed agriculture income was PKR 0.23 million versus PKR 0.22 million.
Loss before tax: PKR 5.86 million, an improvement from PKR 7.10 million.
Net loss: PKR 7.85 million versus PKR 5.83 million. Loss per share widened to PKR 6.40 from PKR 4.75.
Cash flow: operating activities generated PKR 4.76 million, compared with PKR 4.33 million. Year-end cash increased to PKR 19.46 million from PKR 17.05 million.
Dividend: nil.
AlphaGen model scores
The following are AlphaGen model outputs, not figures reported by KHYT. The current model release does not provide numerical readings for this company:
- Alpha QoQ Score: not available
- TTM Performance Score: not available
- 3Y Business Perf Score: not available
- Sector Leadership Score: not available
What improved
The livestock operation produced a better gross result. Sales increased by PKR 2.10 million, while cost of sales rose by only PKR 0.92 million. That combination lifted gross profit by PKR 1.18 million and expanded the gross margin to 31.4%. The cost note shows why the improvement should be interpreted carefully rather than attributed to a single unreported volume or pricing driver: animal purchases increased to PKR 11.79 million from PKR 10.36 million, but feed and medicines consumed fell to PKR 1.74 million from PKR 2.47 million. Sowing and harvesting expenses rose to PKR 1.02 million from PKR 0.92 million. The filing does not disclose unit sales, herd volumes or average selling prices, so it is not possible to separate volume, price and biological mix effects with confidence.
Management says it has expanded cattle housing, acquired livestock, planted crops, improved irrigation and water storage, and installed solar power. Crops grown on company land were used largely to support the livestock farm, reducing external fodder purchases. The audited cost data are consistent with lower feed consumption costs, but the precise saving attributable to internally grown fodder is not quantified. That distinction matters: the result supports a cost-efficiency improvement, but not a precise claim about its source.
Administrative expenses also moved in the right direction, falling PKR 1.06 million. Depreciation remained the dominant administrative cost at PKR 11.53 million, down from PKR 12.55 million. Fuel and power dropped to PKR 1.64 million from PKR 2.44 million, while repair and maintenance declined to PKR 0.62 million from PKR 0.80 million. These reductions more than offset increases in salaries, professional charges, printing, travel and audit costs. The solar system may support future energy efficiency, but the report does not quantify its FY2026 savings, so no causal amount should be assigned.
Together, the larger gross profit and lower administration bill narrowed the operating shortfall before rental and agriculture income. After PKR 7.91 million of rent and PKR 0.23 million of agriculture income, the pre-tax loss improved by PKR 1.25 million to PKR 5.86 million. Financial charges were immaterial at just PKR 2,059, reflecting that disclosed director funding is interest-free.
Cash conversion was stronger than the accounting loss suggests. Depreciation of PKR 11.90 million converted the pre-tax loss into PKR 6.04 million of operating profit before working-capital movements. After modest movements in animal feed inventory, rent receivables and payables, cash generated from operations reached PKR 5.93 million. Net operating cash after tax and financial charges was PKR 4.76 million, up 10.1%. This is a genuine positive, although it depends heavily on the non-cash depreciation burden created by the idle asset base.
What weakened / needs attention
Tax was the decisive reason the net result deteriorated. FY2026 included current tax of PKR 1.84 million and deferred tax of PKR 0.16 million, for a total charge of PKR 1.99 million. FY2025 instead benefited from a PKR 2.22 million deferred-tax credit, which more than offset current tax and produced a net tax credit of PKR 1.28 million. The year-on-year tax swing was therefore roughly PKR 3.27 million. It overwhelmed the PKR 1.25 million improvement at the pre-tax level and widened the net loss by PKR 2.03 million.
Rental income weakened by almost PKR 1.00 million. This matters because rent is not incidental in the current business model: it offsets a large share of the administrative and depreciation burden while the textile unit remains idle. Management plans to rehabilitate additional vacant buildings for warehousing, but the FY2026 result shows that existing rental income can fluctuate. The report does not provide occupancy, leased area, tenant concentration or rent-escalation data, so the durability of this stream cannot be assessed in detail.
The textile operation remains the largest strategic overhang. Management says banks continue to restrict access to credit while litigation remains unresolved, and that restarting textile production would require substantial spending on balancing, modernization and replacement or refurbishment of machinery as well as fresh working capital. The company intends to rehabilitate the textile unit after the litigation reaches finality and credit access is restored. That is an aspiration rather than a funded timetable; the report provides neither a restart date nor a capital budget.
The audit opinion is unmodified, which is important. The auditors nonetheless draw attention to the going-concern note because textile operations have been suspended since 2007. They state that the company changed its line of operations, has generated net cash flows and is solvent, and they do not modify the opinion on this matter. Contingent litigation remains a key audit matter. The company disputes historical bank claims and says no provision is required; readers should treat the legal outcome and any eventual financing implications as unresolved.
Balance sheet and cash flow
Liquidity improved. Current assets rose to PKR 21.62 million from PKR 19.68 million, while current liabilities fell to PKR 5.05 million from PKR 6.03 million. Working capital increased 21.3% to PKR 16.56 million, and the current ratio improved to about 4.28 times from 3.26 times. Cash alone exceeded current liabilities by nearly four times at year-end.
The funding structure is unusual but not interest-intensive. KHYT reported an interest-free, unsecured PKR 16.50 million loan from a shareholder/director, with repayment deferred for at least twelve months, and a PKR 4.50 million short-term director loan repayable on demand. The short-term balance declined by PKR 1.06 million during the year. Combined director funding was PKR 21.00 million, only modestly above year-end cash of PKR 19.46 million.
Total assets were PKR 1.292 billion and equity PKR 1.243 billion, but those headline figures are dominated by property, plant and equipment and a PKR 1.236 billion revaluation surplus. Property, plant and equipment declined to PKR 1.270 billion as depreciation exceeded additions. Accumulated losses improved to PKR 5.33 million from PKR 6.56 million despite the net loss because PKR 9.08 million was transferred from the revaluation surplus to unappropriated profit, net of tax. That accounting transfer is not operating earnings or cash.
Capital spending was limited but targeted: PKR 1.26 million went to a solar power system and PKR 27,000 to bearer plants. After PKR 1.29 million of investing outflow and PKR 1.06 million of director-loan repayment, cash still rose by PKR 2.41 million. This supports management’s statement that the revised business is generating positive cash flow, though the scale remains small relative to the asset base.
Longer-run perspective
The six-year summary shows a volatile, subscale operating business. Sales progressed from PKR 9.62 million in FY2021 to PKR 14.59 million in FY2022, peaked at PKR 27.10 million in FY2023, then fell to PKR 18.36 million in FY2024 before recovering to PKR 20.68 million in FY2025 and PKR 22.79 million in FY2026. Gross profit remained positive throughout, but the company has reported an after-tax loss in every year since FY2022. FY2026 therefore marks better operating execution, not a return to profitability.
The historical pattern also demonstrates why conventional textile peer comparisons would mislead. KHYT has no current spinning or weaving output, no disclosed capacity utilization and no textile sales mix. Its earnings are driven by livestock economics, rental yield on vacant buildings, depreciation on idle and revalued assets, taxation and the legal path to restored credit access. Sector-relative conclusions should wait until the textile unit either restarts on a disclosed economic basis or the alternative business becomes large enough to support clearer segment economics.
What to monitor next
- Livestock economics: whether sales continue to grow faster than animal purchases, feed and medicine costs, and whether management begins disclosing volumes or herd metrics.
- Gross margin: whether the 31.4% margin is repeatable rather than a favorable mix or timing outcome.
- Rental income: occupancy, tenant concentration and whether refurbished warehouse space reverses FY2026’s decline.
- Cash generation: operating cash flow after tax, additional solar or agricultural investment, and the pace of director-loan repayments.
- Banking litigation: any final court decision, settlement or restoration of credit facilities, plus a quantified textile-rehabilitation plan.
- Taxation: whether current tax remains elevated and whether deferred-tax movements continue to dominate the gap between pre-tax and after-tax performance.
Bottom line
FY2026 contains a credible operating improvement but not yet a clean turnaround. The agricultural operation delivered higher sales and a better gross margin, administrative costs eased, pre-tax losses narrowed and cash generation remained positive. Those gains were obscured at the net level by the tax swing, while lower rental income and the long-idle textile unit remain meaningful constraints.
A defensible reading is therefore balanced: KHYT’s revised agricultural-and-rental model is sustaining liquidity and funding modest investment, but it has not eliminated recurring accounting losses or resolved the strategic question of the textile assets. The next result needs to show that the gross-margin improvement can persist, that rental income can stabilize, and that litigation progress converts into a concrete, funded operating plan before the earnings quality can be considered structurally stronger.
Primary sources
Khyber Textile Mills Limited — Annual Report FY2026 (audited, year ended June 30, 2026)
Khyber Textile Mills Limited — Financial statements archive
Pakistan Stock Exchange — KHYT company page and official announcements
Pakistan Stock Exchange — FY2026 annual report filing
Pakistan Stock Exchange — FY2026 financial results filing
Evidence note: the filing does not disclose livestock volumes, average selling prices, rental occupancy or a funded timetable for restarting textile production. Those gaps do not prevent analysis of the audited earnings, cash flow and balance sheet, but they limit causal precision and forward-looking conclusions.