AsiaNet-Pakistan Premier Editorial Content and Press Release Distribution Service
Karachi: National Foods Ltd (NATF), a prominent player in Pakistan’s food products industry, has been given a Buy rating by analysts at JS Global, highlighting its promising growth trajectory and strategic business decisions. With a newly set target price of Rs485, the company is projected to see a 28% increase in its stock value.
NATF derives more than 90% of its earnings from its operations within Pakistan, where it has established a strong brand presence. The company is expected to achieve a compound annual growth rate (CAGR) of 28% in standalone earnings over the next five years, contributing significantly to the target price.
This growth is fueled by a rising demand for convenience food ingredients in Pakistan, influenced by changing demographics and an expanding distribution network. The company’s brand positioning and pricing strategy are expected to support a sales CAGR of 15% over the same period.
Despite facing increased input costs during the fiscal years 2023-24, NATF has maintained gross margins above 30%. Recent developments, including a new cost-efficient plant in Faisalabad and direct farm-to-table sourcing, are anticipated to help sustain gross margins above 35%, reaching 38% in the first quarter.
Additionally, NATF plans to shift approximately 70% of its operations to a tax-exempt Special Economic Zone (SEZ), which is expected to reduce the effective tax rate to approximately 12% for fiscal years 2026 to 2034.
To enhance its investment portfolio, NATF has divested a 50.5% stake in A1 Bags and Supplies to CCMP Growth. This move is expected to add Rs56 per share of post-tax capital gain to the fiscal year 2026 earnings per share (EPS), along with Rs72 per share to the target price.
Further analysis suggests a potential 15% increase in fiscal year 2027 EPS, contingent on reinvestment yields achieving a 10% return on investment (ROI), compared to the current 4.5% ROI assumption. These estimates will be reassessed following divestment disclosures expected in December 2025.
While the company’s outlook remains positive, analysts caution that domestic demand fluctuations and delays in new investment projects may impact short-term expectations.