SHDT FY2026 results: margin repair offsets softer sales

Shadab Textile Mills Limited’s audited standalone results for the year ended June 30, 2026 show a stronger operating business despite slightly lower revenue. Net sales declined 2.7% to PKR 7.79 billion, yet gross profit rose 27.5% to PKR 719.9 million and profit after tax increased 30.5% to PKR 241.4 million.

The result is encouraging because the improvement was largely produced inside the manufacturing account rather than by a large exceptional gain. Lower fuel and power expense, tighter production-cost control, higher output and reduced finance costs all helped. The resulting gross-margin recovery carried through to operating profit.

The caution is cash and balance-sheet quality. Operating cash flow remained positive and broadly covered reported earnings, but fell sharply as inventories and trade receivables absorbed cash. Closing borrowings also increased, while customer concentration rose. SHDT therefore ended FY2026 more profitable, but not yet demonstrably less working-capital intensive.

Results at a glance

Reporting basis: audited standalone financial statements for the year ended June 30, 2026; amounts below are in Pakistani rupees unless stated otherwise.
Net sales: PKR 7.787 billion, down 2.7% from PKR 8.003 billion.
Gross profit: PKR 719.9 million, up 27.5%; gross margin improved to 9.24% from 7.06%.
Operating profit: PKR 505.5 million, up 32.4%; operating margin improved to 6.49% from 4.77%.
Profit before tax: PKR 410.0 million, up 67.9%; profit after tax: PKR 241.4 million, up 30.5%.
Basic and diluted EPS: PKR 13.40 versus restated PKR 11.09. The prior-year figure was restated for the bonus element in the FY2026 rights issue.
Proposed final cash dividend: PKR 1.25 per share, unchanged from the prior year on a per-share basis.
Net cash from operations: PKR 247.8 million versus PKR 601.8 million, with a PKR 232.8 million working-capital outflow.

AlphaGen model signals

The following are AlphaGen model outputs, not figures reported by SHDT and not investment recommendations:

Alpha QoQ Score: 2.36
TTM Performance Score: 62.37
3Y Business Perf Score: 78.15
Sector Leadership Score: 20.55

The contrast is useful: the strong three-year business score aligns with the recovery from FY2023’s loss, while the low latest-quarter score warns against reading the full-year improvement as uniformly strong through the year. The article relies on the audited accounts—not the scores—for every financial conclusion.

What improved

Margin expansion did the heavy lifting

Sales fell by PKR 215.6 million, but cost of sales declined by a larger PKR 370.9 million. That widened gross profit by PKR 155.2 million and lifted gross margin by about 2.19 percentage points. In a textile spinner, where raw material and energy dominate the cost base, this is the central FY2026 achievement.

The manufacturing-cost detail explains much of the arithmetic. Raw materials consumed declined only 0.7% to PKR 5.24 billion, but fuel and power expense fell 13.4% to PKR 926.9 million. That PKR 143.5 million energy saving was material relative to the PKR 155.2 million increase in gross profit. Salaries and wages rose 10.8% and depreciation increased, so the margin gain was not simply the result of across-the-board cost deflation.

Management attributes performance to efficient capacity use, production-cost control, greater reliance on solar energy and prudent management of working capital and bank borrowings. Those explanations are consistent with the disclosed cost lines, although the filing does not quantify how much of the saving came from solar generation versus tariffs, operating efficiency or the production mix.

Production increased while revenue declined

Actual production converted to 20s count rose 4.2% to 22.51 million kilograms from 21.59 million kilograms. Normal capacity was 22.68 million kilograms, implying utilization of roughly 99%. Production loss from maintenance and gas or electricity shutdowns declined to 0.17 million kilograms from 0.22 million kilograms.

Higher output alongside lower net sales points to weaker average realization or a less favorable sales mix. This is an inference, not a disclosed pricing conclusion: reported revenue also includes raw-material and waste sales, and the annual report does not provide a clean split between yarn volume, price and mix. All external revenue was domestic in both years.

Operating profit and finance costs moved in the right direction

Administrative expense rose 17.8% to PKR 214.4 million, but the gross-profit improvement more than absorbed it. Operating profit increased 32.4% to PKR 505.5 million, and the operating margin rose to 6.49% from 4.77%.

Finance cost declined 18.9% to PKR 76.4 million. Mark-up on short-term bank borrowing fell to PKR 53.3 million from PKR 75.1 million, and long-term-loan mark-up also declined. The lower expense helped profit before levies and tax rise 43.4% to PKR 413.0 million.

The closing short-term-borrowing balance nevertheless increased to PKR 621.7 million from PKR 505.5 million. Finance-cost improvement therefore should not be interpreted as simple year-end deleveraging; average utilization, borrowing prices and timing matter. The company’s low-cost TERF and renewable-energy facilities also reduce the cost of part of the funding base.

The levy comparison amplified reported profit growth

Levies dropped to PKR 3.0 million from PKR 43.8 million. Consequently, profit before taxation increased 67.9% to PKR 410.0 million—faster than the 43.4% growth before levies. Tax expense then rose to PKR 168.6 million from PKR 59.1 million, absorbing a significant part of that improvement. The final 30.5% increase in profit after tax is therefore solid but materially slower than pretax growth.

What weakened or needs attention

Revenue and implied realization weakened

A 2.7% decline in sales despite 4.2% higher normalized production is the clearest operating concern. The annual report cites a difficult spinning environment and rising raw-material prices late in the year. Without a disclosed volume-price-mix bridge, it is not possible to determine whether lower yarn prices, product mix, raw-material trading or timing was the dominant cause.

Customer concentration increased materially. Three customers generated PKR 3.16 billion, or about 40.5% of annual revenue, compared with PKR 2.26 billion and 28.2% a year earlier. Concentration can support mill utilization, but it also gives a small number of buyers greater influence over pricing, payment terms and order continuity.

Cash conversion was positive, but much weaker

Net operating cash flow fell 58.8% to PKR 247.8 million from PKR 601.8 million. It still equaled roughly 1.03 times profit after tax, so the earnings were not unsupported by cash. The deterioration came from working capital: FY2026 absorbed PKR 232.8 million, whereas FY2025 released PKR 270.5 million.

Trade receivables used PKR 147.0 million of cash, inventory used PKR 73.6 million, and stores and spares used PKR 44.3 million. Higher trade payables returned PKR 47.8 million, only partly offsetting those demands. This pattern matters because the reported margin gain will create durable value only if receivables collect and inventory turns without write-downs.

Inventory ended at PKR 877.8 million—24.2% of total assets—and its existence and valuation was the auditor’s key audit matter. The opinion itself was unmodified, and the auditor did not report a going-concern material uncertainty. Still, the size and judgment involved make inventory realization a decision-relevant monitoring item.

Borrowings and liquidity remain significant

Total interest-bearing debt, including lease liabilities and current maturities, was approximately PKR 830.6 million, up 9.7% year on year. Cash was only PKR 25.5 million. Current assets exceeded current liabilities, producing a current ratio of about 1.28 times, but a large share of current assets consisted of inventory and receivables rather than cash.

Short-term borrowings represented PKR 621.7 million of the debt burden and were secured against stocks, book debts and fixed assets, among other security. Closing net debt was therefore about PKR 805 million. This is manageable relative to FY2026 operating profit, but refinancing cost and working-capital discipline remain material earnings sensitivities.

Right issue funded investment and working capital

SHDT raised PKR 250.0 million through 6.25 million rights shares at PKR 40 each, comprising PKR 10 par value and PKR 30 premium. By June 30, PKR 197.6 million, or 79%, had been used: PKR 79.1 million for plant and machinery, PKR 47.5 million for solar installation and PKR 71.0 million for working capital. PKR 52.4 million remained for machinery.

The cash-flow statement shows PKR 259.3 million of property, plant and equipment purchases during the year, while the rights proceeds helped fund investment and enabled PKR 258.6 million of sponsor contributions to be repaid. Capital expenditure commitments of PKR 130.9 million at year-end indicate that the modernization program was not complete.

The rights issue strengthened reported equity to PKR 1.97 billion from PKR 1.76 billion, but it also expanded the share count. EPS rose despite that dilution, aided by higher profit; the FY2025 EPS comparison was restated to incorporate the rights issue’s bonus element. The proposed PKR 1.25 dividend preserves the nominal per-share payout while retaining most earnings for the business.

Historical perspective

The FY2026 result extends a multi-year recovery. SHDT moved from a PKR 107.7 million loss in FY2023 to profits of PKR 98.5 million in FY2024, PKR 185.0 million in FY2025 and PKR 241.4 million in FY2026. Gross margin recovered from 3.1% in FY2023 to 5.5%, 7.1% and then 9.2% over the same sequence.

That trend is more persuasive than a one-year comparison because it shows repeated operating-margin rebuilding. However, FY2026 revenue remained below FY2025 and the latest year’s cash conversion weakened. The next test is whether SHDT can defend the margin while converting its enlarged inventory and receivables into cash.

What to monitor next

Gross margin versus cotton and energy costs: management warned that raw-material prices rose significantly in the final quarter and that energy remains expensive. The 9.24% FY2026 margin is the key benchmark.
Revenue realization and customer mix: watch whether sales recover without sacrificing margin, and whether dependence on the three largest customers falls from 40.5%.
Receivables and inventory: the combined year-end balance exceeded PKR 1.35 billion. Cash conversion should improve if these balances normalize.
Short-term borrowing: the PKR 621.7 million closing balance needs to be assessed against future working-capital needs and finance costs.
BMR and solar benefits: PKR 52.4 million of rights proceeds remained unspent on machinery, while further capital commitments were outstanding. Investors need evidence that the program raises efficiency rather than merely expanding the asset base.
Dividend and post-rights capital structure: the PKR 1.25 final dividend is subject to shareholder approval. Future per-share growth should be judged on the enlarged 22.85 million-share capital.

Evidence limitations

The audited filing supports the core earnings, balance-sheet, cash-flow, production and capacity analysis. It does not provide a quantified yarn price-volume-mix bridge, a measured breakdown of solar savings or separate profitability for yarn versus raw-material trading. Those causal claims have therefore been omitted or explicitly identified as inference. AlphaGen returned eight annual and 30 quarterly statement periods, annual and quarterly ratio history, no KPI series and no separate quarterly cash-flow series; no unsupported quarterly cash-conversion claim is made.

Primary sources

PSX company page — official announcement history and company record.

SHDT Annual Report 2026 — audited standalone financial statements, directors’ report and operating notes.

FY2026 financial-results filing — official result announcement for the year ended June 30, 2026.