We initiate coverage on Fatima Fertiliser Company Limited (FATIMA) with a BUY rating. Our target price of PKR 230.36 per share for December 2026 suggests a 42% upside from the last closing price, along with a 6% dividend yield, for a total return of 48%. This positive outlook is based on a projected five-year earnings CAGR of 11%, driven by a recovery in fertiliser demand and a more stable gas supply. FATIMA’s current PE ratios of 6.6x for 2026 and 6.0x for 2027 are attractive compared to industry peers, which average 10.2x and 9.3x, respectively, according to a BMA Research report.

Dominant Market Position

FATIMA leads in specialised fertilisers as the sole producer of Calcium Ammonium Nitrate (CAN) and the primary manufacturer of Nitro Phosphate (NP), benefiting from low competition and strong pricing power. With a 17% market share in urea, the company enjoys stability and diversified earnings.

Stable Gas Supply

Recent government approval for gas allocation to FATIMA’s Sheikhupura plant ensures a reliable supply, reducing reliance on costly RLNG. The Sadiqabad plant’s long-term agreement with the Mari network allows access to competitively priced gas, improving cost efficiency.

Strategic Diversification

FATIMA’s management is diversifying into sectors such as oil and gas exploration, mining, and energy. The company also successfully bid for the privatisation of Pakistan International Airlines (PIA), positioning itself for a broader earnings base.

Valuation

Using a blended valuation approach, we arrive at a target price of PKR 230.36 per share, indicating a 48% return potential. Key assumptions include a five-year adjusted beta of 0.88, a risk-free rate of 11.0%, and an equity risk premium of 6.0%, yielding a cost of equity of 16.3%.