Engro Holdings Earnings Outlook Raised, Buy Rating Reaffirmed

Engro Holdings’ recurring earnings forecast has been revised upward as analysts expect stronger contributions from thermal and telecom tower assets, with a target price of Rs323 per share.

Topline Securities has reaffirmed its “Buy” stance on Engro Holdings (ENGROH), citing attractive valuations and improved earnings prospects following the addition of thermal assets back to operations and the completion of the Deodar tower acquisition. The brokerage said the conglomerate is trading at a 39% discount to its sum-of-the-parts (SOTP) valuation of Rs373 per share, with a revised target price of Rs323 implying an upside of 41% from the current market price of Rs229.Restructuring of Engro and Dawood to take effect from Jan 1, 2025

The research update, released on September 8, 2025, highlights that ENGROH’s earnings will be driven by two key developments: the reinstatement of power assets into its consolidated results and the growing profitability of its telecom tower portfolio, which now includes Deodar and Enfrashare under Engro Connect.

Topline forecasts recurring earnings per share (EPS) of Rs23.1 in 2025, Rs35.1 in 2026, and Rs43.0 in 2027, excluding one-off impacts from asset restructuring. While dividend payouts are expected to remain modest in 2025 and 2026, with Rs2 per share projected each year due to equity financing commitments for Deodar, analysts anticipate a significant rebound in shareholder returns in 2027 with a projected payout of Rs14.5 per share.

Thermal power assets, particularly Engro Powergen Thar Limited (EPTL), Sindh Engro Coal Mining Company (SECMC), and Engro Power Qadirpur (EPQL), are expected to add Rs16.91 per share to consolidated earnings in 2026. EPTL will remain the largest contributor to consolidated profits, supported by tariff structures that include a high debt repayment component. On a cash basis, Engro Fertilizers (EFERT) is likely to remain the leading contributor to the group’s financial inflows.

The acquisition of Deodar — finalized on May 23, 2025, with an enterprise value of US$562.7 million for 10,617 towers — marks a significant diversification into telecom infrastructure. The deal, financed through US$375 million of debt and US$187.7 million of equity, has already begun to yield returns. Analysts estimate that Deodar will generate a profit of Rs1 billion in 2025, Rs2 billion in 2026, and Rs3.1 billion in 2027, reflecting both tenancy growth and revenue escalations linked to currency depreciation and inflation.

As part of the arrangement with Pakistan Mobile Communications Ltd (PMCL), Engro Corp provided a guarantee for Rs98 billion in liabilities related to Deodar. Of this, Rs52 billion was repaid in the first half of 2025, reducing the outstanding exposure to Rs47 billion by June. The company is also securing long-term debt financing with a tenor of up to 12 years, including a four-year grace period. Debt repayment, estimated at Rs10 billion annually, is expected to be comfortably covered by Deodar’s projected cash earnings of Rs11-12 billion in years three and four of operations.

Channel checks indicate Deodar’s tenancy ratio is currently around 1.25–1.3x, with about 3,000 of its towers connected to multiple mobile network operators. Monthly revenue per tenant per tower is estimated at Rs265,000, with 70% indexed to rupee depreciation and 30% to domestic inflation. A 12-year contract with PMCL ensures stable anchor tenancy across the network, further underpinning revenue visibility.

Engro Enfrashare, the group’s pre-existing tower business, also turned profitable in early 2025, aided by a lower finance cost structure due to its higher debt-to-equity ratio — a benefit amplified by declining interest rates. Combined with Deodar, Engro Connect’s tower portfolio is expected to contribute Rs5.2 billion and Rs6.8 billion to consolidated earnings in 2026 and 2027, translating into Rs4.3 and Rs5.7 per share, respectively.

The research report also notes that ENGROH has sufficient financial flexibility to meet its equity commitments for the Deodar acquisition, estimated at Rs52 billion. The group has already paid Rs16-18 billion through internal cash generation, with the remainder scheduled through December 2026. Dividend income of Rs41 billion from subsidiaries and additional cash earnings from Deodar are expected to comfortably fund the balance.

Valuation upside remains significant even after applying a 30% discount to the listed portfolio companies. Analysts see ENGROH’s diversified asset base — spanning energy, fertilizers, and telecom infrastructure — as offering resilient earnings streams despite macroeconomic uncertainty.

However, key risks flagged in the report include higher interest rates, revisions to power purchase agreements (PPAs), sharp rupee depreciation, declines in global urea prices, and regulatory changes that could impact asset cash flows.

Still, the overall outlook remains positive. “The real value drivers for ENGROH are its thermal power assets and the new tower portfolio, which are set to provide consistent earnings growth and cash generation,” Topline wrote. “We believe the stock remains undervalued relative to its intrinsic worth and offers strong upside for long-term investors.”

With recurring earnings on an upward trajectory and dividend payouts expected to normalize from 2027, Engro Holdings’ repositioning into both power and telecom infrastructure is seen as a key strategy to sustain growth and shareholder returns.