Karachi: Engro Holdings (ENGROH) released its second quarter 2026 financial results today, revealing a substantial decrease in earnings. The company reported a profit attributable to equity owners of Rs9.0 billion, translating to an earnings per share (EPS) of Rs7.45. This marks a significant 70% decline from the Rs29.8 billion profit (EPS of Rs24.71) recorded in the same quarter of the previous year, and a 7% decrease from the previous quarter. The earnings fell short of expectations due to higher administrative costs and an increased effective tax rate.

According to JS Global, Engro Holdings' administrative expenses decreased by 53% year-over-year, attributed to merger and transaction-related charges, but increased by 18% on a quarterly basis. The effective tax rate rose to 32% in the second quarter of 2026, up from 30% in the first quarter and 13% in the same quarter last year. Other income for the company increased by 14% year-over-year to Rs2.6 billion, although it saw a 12% decline from the previous quarter. The finance cost surged by 41% year-over-year to Rs12.6 billion, mainly due to higher debt levels of subsidiaries.

Engro Fertilizers Limited, a subsidiary of Engro Holdings, reported a 32% year-over-year decline in earnings to Rs3.8 billion, although there was a 14% quarterly increase. The gross margin reached a 10-quarter high of 35.8% in the second quarter of 2026. Meanwhile, the connectivity and telecom segment recorded a profit of Rs3.8 billion in the first half of 2026, compared to a loss of Rs2.7 billion in the same period last year, primarily due to consolidation.

The company did not announce any cash dividend, which was in line with expectations. Despite the earnings decline, a buy stance is maintained on Engro Holdings, with the stock currently trading at a 2026E and 2027F price-to-earnings ratio of 6.4x and 5.3x, respectively.