Top 5 High ROE Picks According to Topline Securities

Looking for value in a rising market? As the KSE-100 scales new highs and investor optimism returns, finding cheap stocks gets harder, but not impossible. According to fresh estimates from Topline Securities, several companies still trade at remarkably low valuations based on their expected 2025 earnings.

In this post, we highlight the five stocks with the highest expected ROE in 2026, judged purely by their forward ROE expectations. They include well-known names offering strong earnings visibility and solid dividends.

Let’s dive into the most underpriced opportunities hiding in plain sight.

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5. Indus Motor Company Limited (INDU)

Expected ROE 2026: 35%

Indus Motor Company Limited (INDU), the assembler of Toyota vehicles in Pakistan, recently conducted its corporate briefing for investors and analysts. The discussion focused on the company’s financial performance for the first half of FY25, its operational efficiency, localization strategy, and forward outlook. Based on recent estimates, the company also presents a strong value case in terms of profitability, dividends, and valuation multiples.

Financial Performance in 1HFY25

INDU reported a profit after tax (PAT) of PKR 9.96 billion for the first half of FY25, up from PKR 4.96 billion in the same period last year. The increase was primarily driven by a 74% rise in vehicle sales, reaching 12,749 units compared to 7,324 units in the prior year.

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Management attributed the improved gross margins to multiple factors:

• A stable exchange rate
• A higher degree of localization
• Reduced fixed costs
• Improved energy efficiency, with around 25% of total energy needs now met by solar sources

Localization and Product Plans

The company continues to invest in increasing localization to manage costs and improve margins. Localization levels currently stand at:

• 60%–65% for Corolla, Yaris, and Corolla Cross
• 40%–50% for IMV models such as the Hilux

Management also confirmed that a hybrid sedan is under consideration, though no decision has been finalized at this point.

Industry Challenges and Policy Suggestions

On the policy front, INDU has recommended lifting the PKR 3 million limit on auto financing and rationalizing the tax and duty structure on imported and CKD units. These changes, the company believes, would promote fairer competition within the domestic auto sector.

Despite increased competition from new market entrants, INDU stated it has no plans to reduce prices to protect its market share. Instead, the focus remains on maintaining brand strength and product quality.

When asked about the possibility of a stock split or buyback, the company responded that no such actions are currently under consideration.

Forward-Looking Estimates

Analyst forecasts for FY25 and FY26 reflect continued strength in earnings and shareholder returns:

• EPS Forecast: PKR 307.3 in FY25 and PKR 362.8 in FY26
• DPS Forecast: PKR 185 in FY25 and PKR 222 in FY26
• Earnings Growth: 60% in FY25 and 18% in FY26
• Dividend Yield: Estimated at 9% in FY25 and 11% in FY26
• Forward P/E Ratios: 6.5x for FY25 and 5.5x for FY26
• Return on Equity (ROE): 34% in FY25 and 35% in FY26
• Price-to-Book (PBV): 2.0x in FY25 and 1.8x in FY26

These metrics suggest that INDU remains one of the more attractively priced companies in the PSX auto sector, especially when accounting for its high payout ratio and consistent profitability.

INDU’s strong operational performance in 1HFY25, combined with encouraging earnings forecasts and a focus on cost efficiency, positions the company well for the remainder of the fiscal year. Its valuation multiples remain modest relative to sector norms, and the projected dividend yields make it an appealing option for income-focused investors.

With localization, efficiency gains, and policy engagement shaping its near-term trajectory, Indus Motor continues to be a stock worth watching in Pakistan’s automotive space.

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →