Taking a look at Engro Fertilizers (EFERT) earnings

Key takeaways

• Engro Fertilizers (EFERT) reported 4QCY24 earnings of PKR 10.3bn (EPS: PKR 7.7), an 8% YoY decline due to higher distribution costs and lower other income.
• Full-year CY24 earnings rose 8% YoY to PKR 28.3bn (EPS: PKR 21.2), supported by higher urea prices and demand.
• Gross margins fell to 34.9% from 38.7% YoY, as a 56% increase in gas prices outpaced the rise in selling prices.
• Selling & distribution expenses surged 100% YoY to PKR 9.8bn, while finance costs jumped 5.4x YoY to PKR 1.5bn due to higher outstanding debt.
• The final dividend was declared at PKR 8.0 per share, bringing the total CY24 payout to PKR 21.5 per share.
• AKD Securities maintains a ‘BUY’ stance with a target price of PKR 242 per share, citing stable fertilizer demand and expected market share growth.

EFERT’s 4QCY24 performance: profitability pressured by rising costs

Engro Fertilizers (EFERT) posted 4QCY24 consolidated earnings of PKR 10.3bn (EPS: PKR 7.7), reflecting an 8% YoY decline. While revenue grew 13% YoY to PKR 84.8bn, the drop in earnings was primarily due to higher distribution expenses and lower other income.

On an annual basis, EFERT recorded a profit of PKR 28.3bn (EPS: PKR 21.2), up 8% YoY, supported by a 17% rise in urea offtakes and a 24% increase in urea prices. However, declining sales in DAP (-5% YoY) and NP (-74% YoY) offset some of the gains.

Rising costs impact margins

Gross margins contracted from 38.7% in 4QCY23 to 34.9% in 4QCY24, as a 56% increase in input gas prices outpaced selling price adjustments. This pressure on margins, combined with a sharp rise in operating costs, weighed on overall profitability.

Selling and distribution expenses doubled YoY to PKR 9.8bn, reflecting increased urea sales. However, the sharp rise exceeded expectations, likely due to the reclassification of expenses, though further clarification from management is awaited.

Additionally, other income dropped 72% YoY to PKR 511mn, mainly due to an 82% decline in short-term investments. Finance costs also surged 5.4x YoY to PKR 1.5bn, driven by a 5.2x increase in outstanding debt.

The dividend payout remains strong

Despite cost pressures, EFERT continues to deliver high dividend payouts, declaring a final cash dividend of PKR 8.0 per share, bringing the full-year CY24 dividend to PKR 21.5 per share. This reflects the company’s strong cash generation ability and commitment to shareholder returns.

Investment outlook: why EFERT remains a strong bet

AKD Securities maintains a ‘BUY’ rating on EFERT with a December 2025 target price of PKR 242 per share, backed by:

• Stable fertilizer demand and rising adoption of high-margin specialty fertilizers.
• Expected recovery in market share as the company strengthens its distribution strategy.
• Continued high dividend payouts, with an estimated CY25 dividend yield of 11.8%.

Engro Fertilizers (EFERT) faces short-term profitability pressures due to rising gas prices and higher distribution costs. However, strong urea demand, higher pricing, and a solid dividend policy continue to support long-term growth prospects. With positive fundamentals and an attractive valuation, EFERT remains a compelling investment opportunity in Pakistan’s fertilizer sector.

What are the analysts saying?

According to our database, EFERT has an average analyst price target for Dec 2025 of Rs. 230 based on estimates of 10 different analysts. This includes the highest price target of Rs. 249 by Pearl Global Securities and the lowest price target of Rs. 198 by AHL.

The average analyst price target of Rs. 230 implies an upside of 5.9% from here on. The expected dividend of the company is Rs. 25 in the next year which corresponds to a dividend yield of 11.5%. As a consistent dividend payer company EFERT can be considered a valuable investment opportunity.

Here is how different research firms have set their target prices for Dec 2025: