BFAGRO set to rise 34% to Rs60/Share

October 06, 2025 (MLN): Barkat Frisian Agro Limited (PSX: BFAGRO), Pakistan’s pioneering producer of pasteurized egg products, is to reach Rs60 per share implying a 34% upside from its current market price of Rs44.77. The stock trades at an attractive valuation of 11x FY26E and 7x FY27E P/E, with P/BV of 1.0x (FY26E) and 0.75x (FY27E).

The brokerage, AL Habib Capital Markets has initiated coverage with a BUY rating, highlighting the company’s strategic capacity expansion, backward integration, and accelerating export momentum as key growth catalysts.

BFAGRO stands at a turning point as it undertakes a 71% capacity increase through its Faisalabad expansion project, boosting total processing capacity to 29,000 tons, according to the brokerage report.

The newly approved Rs690 million backward integration into poultry farming is also set to transform the company’s operational model by reducing supply chain risks and supporting long-term margin enhancement.

BFAGRO is strategically positioned to capitalize on Pakistan’s underpenetrated processed egg market, currently estimated at 50,000 tons annually in the organized segment, compared to a much larger unorganized market of roughly 150,000 tons.

The company currently serves about 38% of the organized sector, leaving significant room for expansion by converting traditional shell-egg users in the bakery and confectionery industries through customer education and product demonstration initiatives.

The company maintains a strong export footprint across the Middle East, including the UAE, Saudi Arabia, Qatar, Kuwait, Bahrain, Egypt, Oman, and Sri Lanka.

The establishment of its UAE subsidiary provides a dedicated platform for regional growth, leveraging rising demand for safe, certified food products across Gulf markets.

BFAGRO’s dual-pronged strategy capacity expansion and backward integration positions it for resilient, sustainable growth. The Faisalabad facility directly addresses a major logistical inefficiency, as around 70% of the company’s raw materials originate from Punjab while its current processing plant is in Karachi.

The new location will cut logistics costs by an estimated 60–70% and improve delivery timelines to northern clients, boosting operational efficiency.

The backward integration project, comprising two poultry farms with a capacity of 225,000 birds, will initially secure 20% of daily egg requirements, with potential scalability to cover 50% in the long term.

This initiative mitigates raw material volatility, strengthens supply chain reliability, and offers meaningful cost savings, with commercial production expected within 15 months.

AL Habib Capital Markets notes that BFAGRO also benefits from significant tax incentives through its Special Economic Zone (SEZ) status, granting a 10-year income tax exemption from the start of operations.

The Karachi facility enjoys tax exemption until FY29, while the new Faisalabad plant will remain exempt until FY36 factors that meaningfully enhance cash flows and overall return on capital.

The brokerage expects sustained margin expansion, driven by logistics optimization, economies of scale, and cost efficiencies from backward integration. As value-added products gain share in the revenue mix, profitability is expected to strengthen further.

However, AL Habib Capital Markets cautions that concentration risk remains high, as a large portion of revenue is derived from a few key clients, exposing the company to potential pricing and volume pressures.

Additionally, the approximately 60-day cash conversion cycle continues to strain liquidity due to upfront cash payments to farmers and credit-based sales to corporate clients.

The backward integration initiative, while strategically important, also introduces operational risks related to poultry health and disease management that could impact production and costs.

Copyright Mettis Link News