Topline Pakistan Research has reported Fauji Fertilizer Company’s (FFC) 1Q2026 financial results, revealing an unconsolidated profit of Rs 17.5 billion (EPS: Rs 12.14), marking a 32% YoY and 10% QoQ increase. The results exceeded expectations, driven by higher other income, which stood at Rs 10.7 billion—up 43% YoY and 97% QoQ.

Gross margins improved to 30.6% compared to 25.2% in 4Q2025 and 35.6% in 1Q2025, aided by the removal of urea discounts and increased DAP prices. Net sales reached Rs 95.2 billion, a 50% YoY increase but down 36% QoQ. This was due to higher volumes of urea and DAP sales, despite a QoQ decline from advance buying in the previous quarter.

Distribution expenses rose 27% YoY to Rs 7.7 billion. Finance costs increased 28% YoY to Rs 2.7 billion, while tax expenses reduced to Rs 10.2 billion with a 37% effective tax rate. The company declared a cash dividend of Rs 8.50 per share, resulting in a 70% payout ratio for 1Q2026.

We maintain a “Buy” recommendation on FFC, trading at a 2026 P/E of 8.6x and a dividend yield of 8%.