AKD Research has analyzed the financial results of Fatima Fertilizer Company Ltd. (FATIMA) and noted improvements in profitability due to higher sales volumes. The company reported consolidated earnings of PKR 8.6 billion (EPS: PKR 4.1), representing a 65% year-over-year increase. However, these earnings fell short of expectations, likely due to higher-than-anticipated discount offerings. Alongside these results, FATIMA declared a half-yearly dividend of PKR 3.5 per share (payout ratio: 43%).

Key highlights include:

– Revenue increased by 51% year-over-year to PKR 63.9 billion, compared to PKR 42.3 billion in the same period last year (SPLY). This growth was primarily driven by higher sales volumes, with urea, CAN, and NP sales rising by 2.1 times, 57%, and 27% year-over-year, respectively.

– Gross margins contracted to 32.8% from 38.2% in the SPLY, mainly due to increased discount offerings and a lower proportion of urea sales from the base plant, which typically benefits from lower gas pricing.

– Other income reached PKR 3.5 billion, a 65% year-over-year increase, largely attributed to a 4.4 times year-over-year rise in cash and short-term investments.

– Finance costs rose 2.5 times year-over-year to PKR 2.0 billion, up from PKR 0.8 billion in the SPLY, primarily due to a 2.9 times increase in total borrowings, although this was partially offset by declining financing rates.

– The effective tax rate for the quarter was 39%, compared to 49% in the SPLY and 39% in the previous financial period (1QCY25).

– This brings 1HCY25 profitability to PKR 16.9 billion (EPS: PKR 8.1), an increase of 25% year-over-year from PKR 13.6 billion (EPS: PKR 6.5) in the SPLY.

– We have revised our recommendation to ‘Neutral’ in light of the recent stock rally and maintain our target price for June 2026 at PKR 125 per share.

https://research.akdsl.com/638919095511865945.pdf

Courtesy – AKD Research