{"id":9099,"date":"2025-05-16T09:16:51","date_gmt":"2025-05-16T04:16:51","guid":{"rendered":"https:\/\/ksestocks.com\/blog\/?p=9099"},"modified":"2025-05-16T09:16:54","modified_gmt":"2025-05-16T04:16:54","slug":"why-fatima-fertilizer-remains-a-buy-despite-sluggish-topline","status":"publish","type":"post","link":"https:\/\/ksestocks.com\/blog\/why-fatima-fertilizer-remains-a-buy-despite-sluggish-topline\/","title":{"rendered":"Why Fatima Fertilizer remains a buy despite sluggish topline?"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\"><strong>Key takeaways:<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Earnings remained flat at <strong>Rs. 8.4 billion (EPS: Rs. 3.99)<\/strong> despite a 21% drop in revenue<\/li>\n\n\n\n<li>Gross margins slightly narrowed to <strong>40.4%<\/strong>, still robust due to gas pricing at the base plant<\/li>\n\n\n\n<li><strong>BUY stance maintained<\/strong> with Dec-25 target price of <strong>Rs. 103\/share<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Fatima Fertilizer Company Ltd. (<strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/fatima\/\" target=\"_blank\" rel=\"noopener\" title=\"FATIMA\">FATIMA<\/a><\/strong>) posted consolidated earnings of <strong>Rs. 8.4 billion<\/strong> for the first quarter of CY25, almost unchanged compared to the same period last year. While revenue was down sharply, the company managed to sustain its profitability thanks to lower expenses and a favorable tax impact. Revenue Drop Driven by Lower Sales<\/p>\n\n\n\n<p>Revenue for 1QCY25 fell by <strong>21% YoY<\/strong> to <strong>Rs. 52.0 billion<\/strong>, down from <strong>Rs. 66.0 billion<\/strong> in 1QCY24. This decline was largely due to lower product offtakes across all key fertilizer categories:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Urea sales<\/strong> down 10% YoY<\/li>\n\n\n\n<li><strong>CAN sales<\/strong> down 21% YoY<\/li>\n\n\n\n<li><strong>NP sales<\/strong> down 23% YoY<\/li>\n<\/ul>\n\n\n\n<p>Despite the revenue decline, gross profit remained healthy at <strong>Rs. 20.97 billion<\/strong>, with margins at <strong>40.4%<\/strong>, only slightly lower than last year\u2019s <strong>41.5%<\/strong>. The minor dip in margins was due to a reduced contribution from the base plant, which benefits from preferential gas pricing.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Costs and expenses in focus<\/h2>\n\n\n\n<p>Operating expenses grew by <strong>9% YoY<\/strong> to <strong>Rs. 6.6 billion<\/strong>, but this was offset by a sharp <strong>82% YoY drop in other expenses<\/strong>. This drop was primarily due to the absence of a one-off brand impairment charge recorded in 1QCY24.<\/p>\n\n\n\n<p>Other income came in at <strong>Rs. 2.2 billion<\/strong>, slightly lower than last year. While cash and short-term investments more than doubled YoY, lower yields weighed on income.<\/p>\n\n\n\n<p>One area of concern was the <strong>finance cost<\/strong>, which surged to <strong>Rs. 1.9 billion<\/strong>, more than doubling from last year. This increase was a result of a <strong>7.3x rise in total borrowings<\/strong>, although the impact was cushioned somewhat by falling interest rates.<\/p>\n\n\n\n<p>The effective tax rate dropped to <strong>39%<\/strong>, down from 49% in 1QCY24, which helped maintain bottom-line stability.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Sequential performance shows seasonal weakness<\/h2>\n\n\n\n<p>Compared to 4QCY24, FATIMA\u2019s performance weakened sequentially:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Sales dropped 40% QoQ<\/li>\n\n\n\n<li>Net profit declined by 39%<\/li>\n\n\n\n<li>No interim dividend was announced this quarter, compared to <strong>Rs. 4.25<\/strong> in 4QCY24<\/li>\n<\/ul>\n\n\n\n<p>This was expected given seasonal slowdowns and inventory adjustments.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Investment outlook: still fertile<\/h2>\n\n\n\n<p><span class=\"fontstyle0\">AKD Securities Limited<\/span> continues to maintain our <strong>\u2018BUY\u2019 rating<\/strong> on FATIMA with a <strong>Dec-25 target price of Rs. 103\/share<\/strong>, underpinned by three key drivers:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Recovery in offtakes<\/strong> is expected in the coming quarters due to high carryover inventory<\/li>\n\n\n\n<li><strong>Gas price advantage<\/strong> at the base plant continues to support high gross margins<\/li>\n\n\n\n<li><strong>Improved liquidity<\/strong> may support healthy dividends going forward<\/li>\n<\/ol>\n\n\n\n<p>Despite a challenging quarter marked by lower sales and higher finance costs, Fatima Fertilizer managed to protect its earnings. With strong fundamentals, favorable input pricing, and room for demand recovery, the stock remains attractive for long-term investors.<\/p>\n\n\n\n<p><strong>Source: <span class=\"fontstyle0\">AKD Securities Limited<\/span> <\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Fatima Fertilizer Company Ltd. (FATIMA) posted consolidated earnings of Rs. 8.4 billion for the first quarter of CY25, almost unchanged compared to the same period last year. While revenue was down sharply, the company managed to sustain its profitability thanks to lower expenses and a favorable tax impact. Revenue Drop Driven by Lower Sales<\/p>\n","protected":false},"author":9252,"featured_media":6543,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[154,138],"tags":[171],"class_list":["post-9099","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis","category-financials","tag-fatima"],"featured_image_src":{"landsacpe":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/08\/FATIMA-STOCK-PSX-1140x445.png",1140,445,true],"list":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/08\/FATIMA-STOCK-PSX-463x348.png",463,348,true],"medium":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/08\/FATIMA-STOCK-PSX-300x188.png",300,188,true],"full":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/08\/FATIMA-STOCK-PSX.png",1920,1200,false]},"_links":{"self":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/9099","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/users\/9252"}],"replies":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/comments?post=9099"}],"version-history":[{"count":0,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/9099\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media\/6543"}],"wp:attachment":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media?parent=9099"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/categories?post=9099"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/tags?post=9099"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}