Karachi: National Foods Limited (NATF) presented its fiscal year 2026 financial performance during a corporate briefing, highlighting significant growth in its recipe mixes and ketchup sales, alongside improved working capital efficiency.

According to JS Global, the briefing revealed that while recipe mixes remain a leading category, ketchup sales surpassed Rs12 billion with a 15% increase in volume. Mayonnaise sales reached Rs1 billion, reflecting a 45% growth in volume. The Food Service division is expanding at a compound annual growth rate of approximately 30-35%, positioning itself as a key growth pillar for the company.

The company reported an improved working capital cycle, reducing to 65 days in FY26, marking its lowest level in five years. This improvement was attributed to enhanced inventory management, which released approximately Rs3-4 billion in operating cash flow. Domestic revenue growth was driven by Rs3 billion from pricing and Rs5 billion from volumes, with an overall volumetric growth of around 8%.

Despite maintaining gross margins at around 40% through pricing strategy and inventory management, margins declined in the first quarter of FY27 due to increased costs in packaging and raw materials. Management noted that price adjustments are implemented during non-seasonal periods to minimize consumer impact, and sales were moderated to avoid excess inventory in channels.

In FY26, National Foods launched 25 products and is evaluating further line extensions and entry into new categories, focusing on products with higher contribution margins. The company holds a 50-55% market share in the Rs22-23 billion ketchup market in value terms. Management remains cautious about the GCC region due to geopolitical uncertainties but expects DMCC to break even by 2030.

Efficiencies at the Faisalabad facility have reduced variable costs by Rs21 per kilogram, with a 50% decline in wastage over the past three years. Proceeds from the divestment of a 50.5% stake in A1 Cash & Carry have been parked in short-term investments, targeting annual returns of 8% or higher, while the company explores potential greenfield and brownfield investment opportunities.

JS Global maintains a "BUY" stance on NATF, with the company trading at an FY27 estimated price-to-earnings ratio of 8.7x and a dividend yield of 4%.