KARACHI: The fertilizer industry in Pakistan has become one of the best investments on the stock exchange as analysts have revised their view positively on the industry following higher fertilizer prices, better farming economics, and prospects of more activity in the agriculture sector in the coming years.
Analysts believe that the fertilizer industry has become bullish once again after several years of tough times as the sector is now expected to see growth in its earnings by about 13 percent per year for the next three years.
Pakistan Fertilizer Sector Outlook Turns Bullish
It is expected that the top players in the fertilizer industry will witness favorable conditions due to increased sales volumes, higher profit margins, and positive global market dynamics in the upcoming period.
The optimism is because of the anticipated higher fertilizer use as farmers react positively to higher prices that bring them greater profits in agriculture.
Also Read: Fauji Fertilizer Profit Soars to Rs17.5bn in Q1 2026
There is an expected rise in the sales of urea across the country to an estimated 6.87 million tons by the year 2026, higher than earlier expectations because of higher demand from farmers. There is also expected higher demand from the farmers for diammonium phosphate (DAP) fertilizer because of higher cultivation and yields.
Changes in the pricing trends of the industry can be observed. Leading firms have revoked their discounts provided to distributors, while prices of urea have witnessed a rise after nearly two years. Analysts feel that further rises in prices may become possible, should there be any improvement in the trend of rising demand.
“An unusual combination of improved demand and pricing has worked well for the industry,” an analyst told Focus Pakistan. “That has significantly improved earnings visibility for fertilizer companies, he further added.
The government’s continued emphasis on food security has also improved confidence within the industry. Analysts believe that the government will ensure un-interrupted supply of gas to fertilizer factories, enabling fertilizers to be produced at higher levels of capacity even in spite of supply disruptions faced in the past few months.
Recent global events have also provided additional support.
Prices of international DAP have seen sharp increases due to disruptions in energy markets as well as geopolitical conflicts in the Middle East. Increasing international prices of DAP have improved profit margins for fertilizer manufacturers.
Among the companies quoted on the market, the stock analysts still rate Fauji Fertilizer Company (FFC) as the best choice for investment. The company stands to benefit from stronger urea demand and improved economics in the DAP segment. Earnings growth at FFC is expected to be strong in the upcoming years, and the target price set for its shares is Rs664.
Investor interest in Engro Fertilizers Limited (EFERT) has seen a revival recently.
Urea Price Increases Strengthen Industry Profitability
The stock was recently rated “buy” by analysts as earnings forecasts were revised upwards due to increased demand prospects, improved urea prices and increased visibility regarding the long-term gas supply situation. The firm recently signed a gas allocation agreement for its basic plant, an action seen as a positive for the firm’s production stability going forward.
This positive trend has led to an improvement in the recommendation by analysts for Pakistan’s fertilizer industry, raising their average recommendation from “Market Weight” to “Overweight.”
Under the current circumstances, with crop economics improving and prices for fertilizer rising while at the same time maintaining favorable supply trends, the industry seems set to generate good earnings, thus justifying its reputation as one of the most watched sectors in Pakistan’s equity markets.
