Top 5 Undervalued Shares in PSX

Introduction

Identifying undervalued shares requires investors to look beyond short-term market movements and focus on the underlying strength of a business. A company may remain overlooked by the market despite having strong earnings potential, competitive advantages, healthy cash flows, and future growth opportunities. For this analysis, companies have been selected based on a combination of factors including earnings growth potential, business quality, financial strength, future expansion plans, and valuation opportunity. The objective is to identify businesses where the current market perception may not fully reflect their long-term potential. The methodology focuses on companies that demonstrate sustainable profitability, strong industry positioning, strategic growth initiatives, and clear catalysts that can improve shareholder value over time.

5. Maple Leaf Cement Factory Limited (MLCF)

Expected Average 2027 EPS Growth 7%

Maple Leaf Cement Factory Limited (MLCF) is one of Pakistan’s established cement manufacturers with a strong presence in the domestic market. The company has continued strengthening its operations while benefiting from improving efficiency, capacity utilization, and strategic expansion. The company operates as a major player in the cement sector and has also expanded its business exposure through investments and acquisitions that can support future growth.

Latest Financial Performance Shows Strong Long-Term Improvement

MLCF delivered a significant improvement in profitability during recent periods. For 2025, the company reported sales of approximately PKR 68.9 billion and profit after tax of PKR 17 billion, compared with PKR 5.3 billion profit in 2024. Earnings per share improved to PKR 16.26 from PKR 4.98 during the same period. The company’s profitability improvement reflects better operational performance and stronger margins compared with previous years. During the first half of FY26, MLCF continued to generate positive earnings despite pressure on cement prices and industry challenges. The second quarter of FY26 reported revenue of approximately PKR 18.9 billion, while earnings remained supported by operational efficiency.

Challenges Create Potential Opportunity

The cement sector remains cyclical and depends heavily on construction activity, infrastructure development, pricing environment, and input costs. During the third quarter of FY26, MLCF reported earnings pressure, with profit after tax declining compared with the previous year. The decline was mainly affected by higher administrative expenses, lower other income, and increased finance costs following expansion activities. However, these short term challenges may create an opportunity for long term investors if the cement cycle improves and the company successfully captures benefits from its expanded operations.

Why Maple Leaf Cement Appears Undervalued

MLCF appears attractive because of the gap between its improved business fundamentals and the challenges currently facing the cement sector. The company has demonstrated its ability to grow profitability significantly, with earnings improving strongly compared with previous years. Its large scale operations provide advantages in terms of production efficiency and cost absorption. The company’s expansion strategy, including increased exposure through acquisitions, provides additional growth potential if cement demand improves. Another important factor is the cyclical nature of the cement industry. Historically, cement companies perform strongly when economic activity, construction spending, and infrastructure development recover.

Investor View

Maple Leaf Cement represents a recovery-focused investment opportunity. Unlike defensive sectors such as fertilizer or banking, cement companies usually experience stronger earnings cycles when economic conditions improve. The company’s improved profitability, operational strength, and potential benefits from a future construction recovery make it an interesting undervalued opportunity for investors with a longer investment horizon. The key factors to monitor remain cement demand recovery, pricing discipline, cost control, and successful execution of expansion plans. For investors willing to accept sector cyclicality, MLCF offers exposure to Pakistan’s potential construction and infrastructure growth story.

 

4. National Bank Of Pakistan (NBP)

Expected Average 2027 EPS Growth 5.1%

National Bank of Pakistan is one of Pakistan’s largest government-owned banks and has been designated as a Domestic Systemically Important Bank by the State Bank of Pakistan. The bank continues to focus on improving operational efficiency, controlling costs, and strengthening its digital banking capabilities. Management is pursuing controlled expansion of its branch network while focusing on reducing administrative expenses to improve margins. The bank is also investing in digital services to modernize its retail franchise and improve customer experience.

Strong Financial Position And Earnings Potential

For 2024, National Bank of Pakistan reported consolidated profit after tax of PKR 26.9 billion, resulting in earnings per share of PKR 12.63. The bank invested PKR 10.2 billion in technology during the year to enhance infrastructure and service delivery. Its investment portfolio remains significant, with Pakistan Investment Bond holdings including a 30% fixed rate portion and an average maturity period of 2.7 years. As a Domestic Systemically Important Bank, NBP operates under higher capital requirements, including an additional CET 1 capital requirement of 2.5% above the base regulatory level.

Why National Bank Appears Undervalued

National Bank’s valuation opportunity comes from the gap between its underlying earning capacity and reported historical performance. The bank’s 2024 earnings were affected by a significant one time pension fund expense of PKR 57.5 billion. Without this extraordinary charge, the bank’s normalized profitability would appear stronger. Government owned banks often trade at lower valuations compared with private sector and Islamic banking peers. However, improvements in efficiency, digital transformation, and stronger capital positioning could support future value creation. Once pending dividend approvals are completed, shareholder returns could become another important factor for investors.

3. Engro Fertilizers Limited (EFERT)

Expected Average 2027 EPS Growth 7.3%

Engro Fertilizers Limited is one of Pakistan’s leading urea manufacturers, holding approximately 31% market share in the urea sector as of 2024. The company operates large-scale production facilities supported by gas supplies through the SNGPL and SSGC networks. The company has consistently focused on operational efficiency and industry reforms while maintaining its position as a key player in Pakistan’s agriculture sector.

Latest Corporate Developments And Industry Outlook

Management has continued to support the removal of fertilizer subsidies and the implementation of a single gas pricing mechanism across the industry. According to the company, a uniform gas pricing structure can improve industry efficiency, reduce distortions, and help create a more competitive fertilizer sector. Following gas price adjustments in early 2024, which set rates at PKR 1,597 per mmbtu for manufacturers connected with SNGPL and SSGC networks, the company highlighted that the move could support long-term competitiveness. Engro Fertilizers also emphasised the importance of maintaining a stable gas supply to older plant units to ensure uninterrupted fertilizer production and support national food security. The company highlighted that current urea inventory levels remain above domestic consumption requirements, creating an opportunity for potential exports that could contribute to foreign exchange earnings.

Financial Performance And Resilience

During 2024, Engro Fertilizers delivered a resilient financial performance despite a challenging operating environment. The company recorded an 8% increase in total profit during the year. During the first nine months of 2024, the company managed volatility from higher gas costs while maintaining its market position. Its ability to adjust pricing according to changing input costs helped protect profitability. The company also benefited from the momentum created by record production levels achieved in 2023, demonstrating strong operational capability.

Why Engro Fertilizers Appears Undervalued

Engro Fertilizers remains attractive because of its strong market position, recurring demand, and ability to operate efficiently despite cost pressures. Urea remains a critical agricultural input in Pakistan, creating structural demand for the company’s products. The shift towards a more uniform gas pricing environment may also create a more level playing field and reward efficient producers. With an expected average 2027 EPS growth rate of 15%, potential export opportunities, and a strong position in the fertilizer sector, Engro Fertilizers offers a combination of stability and growth.

2. Hub Power Company (HUBC)

Expected Average 2027 EPS Growth 5.5%

Hub Power Company is undergoing a significant transformation from a conventional power producer into a diversified energy and technology company. Management is focusing on expanding into electric vehicles, EV infrastructure, and mineral exploration to reduce dependence on traditional power generation. A major development is the BYD automotive venture. HUBC achieved financial close in January 2026 for a 25,000 unit annual capacity CKD assembly plant through a 50/50 joint venture with Mega Motors. Commercial operations are expected to begin in the second half of 2026. The company is also developing an EV charging network through Hubco Green. A Karachi to Multan charging corridor has already been established with 16 DC fast chargers operational, with plans for expansion towards Peshawar.

Latest Quarterly Performance Shows Strong Earnings

During the second quarter of FY26, HUBC reported earnings per share of PKR 8.2 and net earnings of PKR 10.6 billion. Consolidated profits were supported by dividend income of PKR 4 billion from TELNOVA and PKR 1 billion from TEL. The company’s Thar facilities benefited from local coal utilization, generating foreign exchange savings of approximately USD 116 million during the first half of the fiscal year. Core generation assets maintained load factors between 60% and 68% during the first half of FY26.

Future Growth And Investment Case

For FY26, HUBC expects net sales of approximately PKR 71.36 billion and profit after tax of PKR 51.82 billion. Dividend per share is forecast at PKR 17.0 for the FY26 and FY27 period. The company is also expanding its mineral exploration exposure through the Zin offshore block, where seismic surveys have been completed and drilling activities are planned for late 2026 or early 2027. HUBC appears undervalued because the market may still view it primarily as a power company, while its future growth potential increasingly comes from EVs, technology, and exploration businesses. The company provides investors with a combination of stable cash flows from existing assets and growth opportunities from new ventures.

1. Mari Energies Limited (MARI)

Expected Average 2027 EPS Growth 10.8%

Mari Energies Limited has started a major transformation from a traditional exploration and production company into a diversified energy and technology platform. The company’s rebranding from Mari Petroleum to Mari Energies Limited reflects its broader strategy of entering new growth areas. Through its subsidiary Sky47 Limited, the company is developing two Tier III certified 5MW data centres in Islamabad and Karachi. Once scaled, this segment is expected to contribute around 8% to 10% of the company’s bottom line, providing exposure to a high-margin and non-cyclical business. The company is also expanding into mining through Mari Minerals, focusing on copper and gold exploration in Chagai district, Balochistan. In addition, Mari Energies secured stakes in all 23 awarded offshore blocks during the recent bid round and will operate 18 of these blocks, strengthening its future exploration potential.

Strong Production Profile Supports Growth

Mari Energies continues to maintain a stable production profile through new projects and operational improvements. Commercial production from the Waziristan block, Spinwam field, has started, contributing approximately 70 million standard cubic feet per day of gas and 700 barrels per day of condensate. The company’s Ghazij and Shawal reservoirs are another important growth opportunity. Current production stands at around 48 million standard cubic feet per day, with plans to increase output to 220 million standard cubic feet per day by the second half of 2028.

Financial Strength And Investment Case

For the 2026 fiscal year, Mari Energies is expected to generate approximately PKR 202 billion in net sales and PKR 59.3 billion in profit after tax. Earnings per share is projected at approximately PKR 49.4, with dividend per share expected between PKR 22.0 and PKR 22.2. The company’s estimated reserve life of nearly 20 years provides strong visibility for future cash generation.Mari Energies appears undervalued because the market may mainly focus on its traditional energy business while assigning limited value to its technology, mining, and exploration expansion. The company offers a combination of stable cash flows and multiple future growth opportunities.

Conclusion:

The search for undervalued shares in PSX should focus on companies where strong businesses, future growth opportunities, and improving fundamentals are not fully recognized. Mari Energies stands out due to its transformation into a diversified energy and technology platform, supported by strong production and exploration opportunities. Hub Power Company offers a combination of stable power generation cash flows and future growth through electric vehicles, charging infrastructure, and exploration. Engro Fertilizers remains a strong player in Pakistan’s agriculture sector with market leadership, operational resilience, and potential growth opportunities through exports. National Bank of Pakistan represents a value unlocking opportunity through operational improvements, digital transformation, and normalized profitability. These companies represent different sectors and investment themes, but they share a common characteristic: strong businesses with potential catalysts that could improve long-term shareholder value. For investors looking beyond short-term market movements, these companies deserve attention because their future potential may be greater than current market perception.

⚠️ 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 →