June 22, 2026 (MLN): National Foods Limited (PSX:NATF) is projected to reach a target price of Rs515 per share from its current market price of Rs368, implying an upside of approximately 40%.

JS Global, in its research report reiterated a Buy rating on the stock, noting that the company's recent underperformance on the bourse is unwarranted given its strong operating fundamentals and long-term earnings trajectory.

The brokerage flagged that NATF is currently trading at a forward price-to-earnings multiple of 13.4x for FY27, well below its one-year and five-year historical averages of 22x, and the food sector's four-quarter trailing P/E of 20x.

JS Global projects the company's earnings to grow at a compound annual rate of 30% over the next five years, underpinned by rising demand for convenience foods and kitchen ingredients, resilient margins, operational efficiency gains from a new Faisalabad plant, tax savings, and substantial investment income from the sale of its majority stake in A1 Bags & Supplies for Rs20.8 billion (US$75 million).

Estimates revised upward

The brokerage revised its consolidated EPS estimates for NATF significantly upward, reflecting strong operating earnings, robust margins, and higher-than-expected subsidiary sale proceeds.

The report noted that its base-case estimates do not yet incorporate the government's recently proposed 2 percentage point reduction in super tax.

If enacted, this would add a further 0.7% to FY27 and FY28 EPS and lift the target price by 1.3% to Rs522.

The impact is relatively modest compared to other corporates, as NATF generates the bulk of its operating income from tax-free zones.

Margins holding firm

NATF recorded 13% year-on-year revenue growth and a 4 percentage point expansion in gross margins during the nine months of FY26.

Gross margins are expected to remain above 38% going forward, supported by the shift of major production to the Faisalabad facility.

While energy price pressures stemming from the Iran conflict have added some input cost strain, the company has largely passed these on through product price adjustments.

On the tax front, the FY27 Federal Budget proposes bringing sauces, ketchup, seasonings, fruit jams, and condiments under the third schedule of sales tax, subjecting them to 18% GST on maximum retail price.

JS Global noted most of NATF's products in this category were already subject to 18% GST, and any incremental impact would be fully passed through to consumers, leaving margins unaffected.

Key financial projections

Source: JS Research