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Kohinoor Power Q3 FY26: Rental Income Rebounds, but Concentration Defines the Recovery

Kohinoor Power’s rental-led earnings improved sharply in Q3 FY26 as revenue rose against a largely fixed cost base, but related-party concentration, unusual quarterly overheads and PSX compliance risk remain central to the story.

Sep 23, 2026

Verdict

Kohinoor Power Company Limited delivered a strong rental-led earnings recovery in the quarter ended March 31, 2026. Quarterly rental income rose 80.3% year on year to Rs2.54 million, while direct cost fell 5.7% to Rs0.93 million. That combination expanded gross margin to 63.2% from 29.6% and lifted profit after tax 164.8% to Rs1.38 million. The improvement is economically meaningful because the higher rental run rate was visible throughout FY26 rather than appearing only in Q3.

The result still needs qualification. The company is classified on PSX under power generation and distribution, but its current reported revenue is rental income from operating leases rather than electricity sales. The nine-month related-party note reports rental income from associated companies equal to the entire rental-income line, making customer concentration a core risk. In addition, Q3 administrative expense fell to an unusually low Rs9,952 and the nine-month result included a Rs136,313 income-tax credit. Those items make the headline operating and after-tax margins stronger than a simple annualization would imply.

Company and reporting basis

Company Name: Kohinoor Power Company Limited

Ticker: KOHP

Reporting period: quarter and nine months ended March 31, 2026.

Reporting basis: company-level condensed interim financial statements. The report is labelled unaudited. Its basis note states that the interim financial statements were subjected to a limited-scope review and that the comparative statement of financial position at June 30, 2025 is based on audited annual financial statements. The March report also makes clear that the company’s objects include leasing machinery and buildings under operating lease arrangements.

One disclosure inconsistency is worth flagging. The directors’ narrative gives a prior-period net-profit comparison that does not agree with the statement of profit or loss and appears to reverse the EPS comparison. This analysis therefore uses the primary financial statements: 9MFY26 PAT of Rs3.858 million and EPS of Rs0.31 versus 9MFY25 PAT of Rs0.789 million and EPS of Rs0.06.

AlphaGen model outputs

Alpha QoQ Score: 54.9

TTM Performance Score: 99.62

3Y Business Perf Score: 84.75

Sector Leadership Score: 93.775

These four scores are AlphaGen model outputs, not company-reported figures.

Results at a glance

  • Q3 rental income: Rs2.537 million, up 80.3% year on year.
  • Q3 gross profit: Rs1.603 million, up 284.8%; gross margin expanded to 63.2% from 29.6%.
  • Q3 operating profit: Rs1.660 million, up 209.4%; PAT: Rs1.377 million, up 164.8%.
  • 9MFY26 rental income: Rs7.502 million, up 81.6%; gross profit: Rs4.699 million, up 305.5%.
  • 9MFY26 operating profit: Rs4.567 million versus Rs0.838 million; PAT: Rs3.858 million versus Rs0.789 million.
  • Net cash generated from operations: Rs5.697 million versus Rs2.200 million in the comparable period.
  • Cash and bank balances: Rs18.895 million at March 31, up from Rs13.198 million at June 30, 2025.
  • The Board recommended no cash dividend, bonus shares or rights issue with the Q3 result.

What improved

The strongest improvement is the rental revenue base. Q3 rental income rose to Rs2.537 million from Rs1.408 million a year earlier. More importantly, the PSX quarterly history shows Q1FY26 revenue of roughly Rs2.494 million and Q2FY26 revenue of Rs2.471 million. In other words, the higher Q3 level was not a single-quarter spike: revenue stayed in a narrow Rs2.47-2.54 million band across the first three quarters of FY26. That pattern supports the view that Kohinoor Power entered FY26 with a materially higher rental run rate.

The company’s November 2025 corporate briefing provides useful business-model context. Management said the former power-generation assets and building are now leased under operating lease agreements, and described renting as the company’s current business. That makes rental income, lease terms and collection quality much more relevant to this quarter than fuel prices, plant dispatch or electricity tariffs. A conventional power-sector peer comparison would therefore be misleading and has not been forced into this analysis.

The gross-profit improvement was even stronger than revenue growth because direct cost moved in the opposite direction. For Q3, direct cost declined 5.7% to Rs0.934 million despite the 80.3% increase in rental income. For nine months, direct cost also fell 5.7% to Rs2.803 million while rental income rose 81.6%. Economically, this is powerful operating leverage: additional rental revenue flowed through a cost base that was broadly fixed in aggregate. The interim report does not provide a detailed direct-cost bridge, so attributing the improvement to any specific maintenance, depreciation or utility component would be speculative.

Cash generation also improved. Cash generated from operations before levy and tax payments rose to Rs7.193 million from Rs2.783 million, while net operating cash flow increased to Rs5.697 million from Rs2.200 million. Cash at bank and in hand consequently rose by about Rs5.697 million from June 2025 to March 2026. The company reported no investing or financing cash flows in the nine-month cash-flow statement, so the period’s increase in cash came from operations.

What weakened / needs attention

The first issue is related-party concentration. The notes identify Pak Elektron Limited, Santow Spinning Mills Limited and Red Communication Arts (Private) Limited as associated companies. They report Rs7.502 million of rental income from associated companies for 9MFY26—the same amount as total rental income in the statement of profit or loss. That indicates the period’s reported rental revenue was entirely related-party sourced, although the filing does not disclose how the rent is split among individual counterparties.

Concentration does not make the revenue non-economic, and the company states that related-party transactions are carried out on commercial terms equivalent to arm’s-length transactions. But it does change the risk profile. Earnings depend heavily on lease arrangements with associated companies rather than a diversified external customer base. Lease rentals receivable were Rs15.024 million at March 31, only modestly below Rs15.137 million at June 2025 and large relative to the current revenue run rate. The balance did not worsen during the nine months, but collection discipline and renewal terms remain important.

The second issue is the unusually low Q3 administrative expense. The quarter recorded only Rs9,952 versus Rs73,783 a year earlier, while 9MFY26 administrative expense was Rs1.356 million. That means almost all nine-month administrative expense was recognized in the first half. The report does not explain why Q3 was so low. Because the figure materially boosts the quarter’s operating margin, it should not be treated as a normal quarterly overhead run rate without further disclosure.

Third, levies rose sharply. The provision for levies under the Income Tax Ordinance increased to Rs282,067 in Q3 from Rs16,095 and to Rs841,048 for nine months from Rs47,737. The rise absorbed part of the operating improvement. The report does not provide a rate bridge or detailed explanation, so the safer conclusion is simply that the tax-and-levy burden became materially heavier as rental earnings increased.

Recurring versus non-recurring earnings

The rental-income recovery looks recurring within FY26. Revenue was already near Rs2.5 million in both Q1 and Q2 before reaching Rs2.537 million in Q3, and 9MFY26 rental income of Rs7.502 million had already exceeded the Rs6.742 million full-year sales figure shown by PSX for FY2025. That makes the higher rent base the clearest recurring driver in the current result.

The unusually light Q3 administrative expense is less safe to treat as recurring. The same applies to the Rs136,313 income-tax credit recorded over nine months, which caused PAT of Rs3.858 million to exceed profit before income tax of Rs3.722 million. Even without that credit, however, the underlying earnings recovery remains substantial. The result therefore does not depend on the tax credit, but reported PAT includes a benefit whose recurrence is uncertain.

Other income was broadly flat over nine months at Rs1.224 million versus Rs1.207 million, but it fell in Q3 to Rs67,673 from Rs193,893. Core rental economics—not growth in other income—were therefore the main reason operating profit improved. Finance cost was immaterial at Rs3,816 for nine months, consistent with the balance sheet showing no non-current liabilities and no borrowings.

Balance sheet and cash conversion

Liquidity remained strong. Current assets increased 16.4% from June 2025 to Rs49.711 million, while current liabilities increased 12.9% to Rs2.524 million. Cash alone was more than seven times current liabilities. Total equity rose to Rs125.967 million from Rs122.109 million as the period’s profit reduced accumulated losses.

The asset base continued to run down through depreciation rather than expansion. Property and equipment fell to Rs67.769 million from Rs70.458 million, while investment property declined to Rs2.199 million from Rs2.378 million. The notes show Rs2.688 million of depreciation on property and equipment and Rs0.178 million on investment property during the period. There were no known commitments at the reporting date and no significant post-reporting events requiring adjustment or disclosure.

Historical perspective

Kohinoor Power’s recent history is unusual because the business has transitioned away from its original generation model. The company’s own website still describes the legacy 15 MW furnace-oil power station and WAPDA relationship, while the current financial statements and FY2025 corporate briefing describe a rental-led operating model in which machinery and buildings are leased. For analytical purposes, the current filed financial statements should take precedence when assessing what drives earnings today.

PSX’s annual financial table shows sales declined from Rs17.552 million in FY2023 to Rs11.118 million in FY2024 and Rs6.742 million in FY2025. Against that backdrop, the Rs7.502 million generated in only the first nine months of FY26 marks a clear reversal in the revenue trajectory. What is not yet disclosed is whether the new run rate reflects revised lease rates, additional leased assets, contractual step-ups or another commercial mechanism. Management has disclosed the increase in rental income, but not the detailed bridge.

Corporate actions and current risk flags

The Board recommended no cash dividend, bonus shares, rights issue or other price-sensitive entitlement with the March 2026 result. That leaves retained liquidity on the balance sheet rather than distributing the quarter’s earnings.

Separately, PSX currently displays a Risk Warning Alert on KOHP stating that the company is in continuous violation under clauses 5.11.1 or 5.11.2 and carries a risk of trading suspension or delisting. The warning text on the PSX company page does not specify the underlying breach, so the cause should not be inferred. The existence of the warning itself is material and sits outside the otherwise strong liquidity profile shown by the financial statements.

What to monitor next

First, the sustainability of the roughly Rs2.5 million quarterly rental run rate. The first three FY26 quarters were remarkably consistent, so the next result should show whether that level persists into year-end and whether management provides a clearer lease-rate or asset-level explanation.

Second, related-party receivables and collections. Because associated-company rental income equals total rental income for the nine months, counterparty concentration is the most important operating risk. The receivable balance should ideally decline or remain controlled as cash collections continue.

Third, normalized overheads. Q3 administrative expense was exceptionally low relative to both the prior-year quarter and the first-half run rate. A return to more normal administrative spending could lower operating margin even if rental income stays stable.

Fourth, the levy and tax mix. Levies rose sharply and the nine-month result also contained an income-tax credit. The full-year tax note will be important for separating recurring cash taxes from timing or accounting effects.

Fifth, PSX compliance status. The operating recovery does not remove listing-compliance risk. A resolution or clarification of the current Risk Warning Alert would materially reduce a separate non-operating uncertainty.

The quarter therefore shows a genuine improvement in the economics of Kohinoor Power’s current rental business: more rent, lower direct cost and much stronger cash generation. The central question for the next cycle is not whether Q3 improved—it clearly did—but how durable the higher lease income is once overheads, tax effects and concentrated related-party exposure are normalized.

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