Top 5 High ROE Picks According to Topline Securities

1. Millat Tractors Limited (MTL)

Expected ROE 2026: 89%

Millat Tractors Limited (MTL), one of Pakistan’s leading agricultural equipment manufacturers, is navigating a volatile earnings cycle. While the near-term outlook suggests a dip in earnings, forward projections point to a meaningful rebound by FY26. Investors may find value in the long-term recovery trajectory and improved shareholder returns.

Earnings Outlook

MTL is expected to report an earnings per share (EPS) of PKR 30.8 in FY25, followed by a recovery to PKR 51.0 in FY26. This reflects a challenging FY25, with earnings projected to decline 38% year-on-year, but a sharp rebound of 66% anticipated in FY26.

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The FY25 dip likely reflects sector-wide headwinds such as high interest rates, suppressed rural demand, and elevated input costs — while the FY26 recovery assumes a normalization in demand and cost structures.

Dividend Forecast

Dividend per share (DPS) is expected to follow a similar pattern:

• PKR 26.2 in FY25
• PKR 43.3 in FY26

These translate into forward dividend yields of 5% and 8% respectively, based on the current share price of PKR 558. MTL has a strong dividend-paying history, and this trend is expected to continue, even during earnings volatility.

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Valuation

Valuation multiples reflect the expected earnings cycle:

• P/E of 18.1x for FY25 (during the earnings trough)
• P/E of 9.9x for FY26 (as earnings recover)

This suggests that current pricing is factoring in near-term softness, with potential upside if the recovery materializes.

Price-to-book (PBV) ratios are projected to ease from 10.4x in FY25 to 9.2x in FY26. While these levels are on the higher end, they align with MTL’s historically high return metrics.

Return on Equity

MTL’s return on equity (ROE) is forecast at:

• 60% in FY25
• 89% in FY26

Despite the earnings drop in FY25, ROE remains elevated, reflecting the company’s asset-light structure and efficient capital deployment.

Conclusion

MTL presents a cyclical recovery story. While FY25 is expected to be a soft year for earnings, the outlook for FY26 is considerably more positive. The stock may appeal to long-term investors willing to look beyond near-term challenges in the agricultural machinery market. With a strong balance sheet, high ROE, and reliable dividends, MTL remains a well-established name in Pakistan’s manufacturing sector.

⚠️ 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 →