Karachi: Fatima Fertilizer Company Ltd. (FATIMA) has reported a significant increase in its third-quarter earnings for the calendar year 2025, surpassing analysts' expectations. The company announced consolidated earnings of PkR12.0 billion, reflecting a 30% year-over-year growth, driven largely by a substantial rise in other income.

FATIMA's revenue remained relatively stable at PkR62.9 billion compared to PkR62.6 billion in the same period last year. This stability was achieved despite varied sales performances, with urea and CAN sales increasing by 8% and 64% year-over-year, respectively. However, these gains were offset by declines of 9% and 77% in NP and DAP offtakes, respectively.

The company reported improved gross margins of 35.3%, up from 33.7% in the same period last year. This improvement was primarily attributed to reduced Phosrock input costs and increased sales from the base plant, benefiting from cheaper gas supplies.

A notable highlight of the financial results was the significant rise in other income, which reached PkR7.0 billion, marking a 3.4-fold increase year-over-year. This surge was driven by a 3.6-fold increase in cash and investments.

However, FATIMA's finance costs also saw a rise, increasing by 2.1 times year-over-year to PkR2.0 billion, largely due to a 3.9-fold increase in total borrowings. This was partially mitigated by declining financing rates.

The company's effective tax rate during the quarter stood at 35%, a decrease from 38% in the same period last year, and 39% in the previous quarter. This reduction was due to the higher contribution from other income.

Overall, FATIMA's profitability for the first nine months of the calendar year 2025 reached PkR28.9 billion, showing a 27% year-over-year increase from PkR22.8 billion in the same period last year.

Despite the strong financial performance, AKD Securities Limited maintains a 'Neutral' stance on FATIMA with a target price of PkR125 per share by June 2026. The firm cites that the benefits from lower input costs, including cheaper gas and easing Phosrock prices, are largely accounted for in the current valuation. However, potential developments at Natural Resources Ltd., continued low Phosrock prices, and gas allocation from the Pak-Arab field are identified as key upside risks to the valuation.