Topline Pakistan Research has released an optimistic report on the fertiliser sector, anticipating a 17% YoY profit increase in 2Q2025. This growth is attributed to improved Urea and DAP offtakes, despite ongoing challenges such as weak farm economics and water shortages.

Key highlights include:

– Urea offtake is projected to rise by 3% YoY and 14% QoQ to 1.25 million tons, while DAP offtakes are expected to increase by 16% YoY and 99% QoQ to 298k tons in 2Q2025.

– Average Urea prices fell by 7% YoY to Rs4,477 per bag, while DAP prices rose by 8% YoY to Rs12,525 per bag.

– Gross margins are expected at 34.63% in 2Q2025, down from 35.49% in 1Q2025.

– Finance costs are projected to decrease by 22% YoY to Rs2.9 billion, and the effective tax rate will be 39%.

– Engro Fertilisers (EFERT) is expected to report earnings of Rs4.25/share, up 4.3x YoY, with a significant increase in gross margins and a second interim cash dividend of Rs4/share.

– Fauji Fertiliser Company (FFC) is anticipated to report earnings of Rs15.04/share, down 2% YoY, but up 61% QoQ, with reduced finance costs.

Overall, the report maintains a Market-Weight stance on the Pakistan fertiliser sector.o announce a cash dividend of Rs 11.5/share, or Rs 11.525, taking the 1H2025 dividend to Rs 18.5/share.