August 17, 2021 (MLN): Amid rising industrial activities and improved performance of Oil, the Large Scale Manufacturing Index (LSMI) has enhanced by 15%YoY during FY21.
In the month of June’21, LSMI has increased by 4% MoM and 18% YoY.
During Jun’21 the sectors that performed mainly were Automobile, Petroleum, Iron, Mineral, Chemicals, Textile, Pharma and Fertilizer sectors that recorded a surge of 89%YoY, 39%YoY, 33%YoY, 33%YoY, 24%YoY, 12%YoY, 11%YoY and 10%YoY respectively compared to Jun’20 indices levels.
Cumulatively, during FY21, most of the major categories of LSM witnessed strong growth mainly attributable to low base effect and high growth fiscal incentives given to the manufacturing sector. Automobile,
Mineral, Chemicals, Petroleum, Iron, Pharma, Textile and Food sectors were the major sectors with increased output levels of 51%YoY, 27%YoY, 19%YoY, 18%YoY, 16%YoY, 15%YoY,12% YoY, and 11%YoY respectively compared to FY20 LSMI levels.
The textile sector which has the most weight in the index contributed significantly during FY21 largely on the back of robust international demand complemented with favorable government policies to boost exports.
Automobile production witnessed the highest growth of 51%YoY in FY21compared to the negative growth of 44.6% YoY in FY20, mainly due to increased production of Jeeps & Cars, Trucks, Tractors, and LCVs amid favorable macroeconomic indicators and low-interest-rate environment which amplified auto financing during FY21.
The improvement in Fertilizer production during the period under review was accredited to an increase in urea production courtesy commencement of LNG plants operations, a report by Taurus Securities mentioned.
According to the NFDC estimates, total urea availability during Kharif-2021 would be 3,033 Kt.
The remarkable rise in LSM numbers was expected as the government took various initiatives to increase Aggregate Demand in the country in order to revive the GDP growth in the year FY21. This has enhanced the Capacity Utilization of different sectors, particularly Automobile, Fertilizer, Textile, and Petroleum Sectors in the midst of high credit offtake. To note, Credit Offtake soared to Rs25.31trn in FY21, marking a rise of 10%YoY compared to FY20 Credit Offtake numbers.
Meanwhile, the sectors which witnessed deterioration during the year were the ones with significantly lower weight in the LSM index, such as Wood, Leather, Engineering, and Rubber products with a decline in output of 39%, 26%,15.4%, and 15% YoY, respectively.
On the market front, the performance of the industrial sectors has increased KSEALL share performance in the year FY21.
According to the report by Shajar Capital, KSEALL share index average daily trading volume (ADTV) has robustly surged by 168% YoY to 528mn shares in the year FY21 compared to FY20 ADTV of 197mn.
With regards to KSE100 index, index performance has remarkably improved by 38%YoY in FY21 compared to the FY20 index level of 34,422 index level, the report added.
Looking ahead, the LSMI numbers are expected to increase in the coming months mainly on the back of incentives given in the budget FY21 particularly to Autos, Textile and the Construction sector, triggering manufacturing activity.
However, Covid-19 related restrictions (if imposed) would be a major downside risk to the manufacturing industry.
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