May 06, 2022 (MLN): The profitability of the top 100 companies listed at the Pakistan Stock Exchange (PSX) continued to soar, as they witnessed an increase of 23% YoY in their net profit to Rs822 billion in the nine months ended March 31, 2022, fueled by heavy-weighted sectors including commercial banks.
When compared to 9MFY20, the earnings of the index also improved by a stunning 93% YoY.
According to a report compiled by Arif Habib Limited (AHL), the top five sectors that recorded significant growth in their profitability in a period under review were commercial banks which posted profits of Rs211.9bn (18% YoY), followed by oil and gas exploration, registering earnings of Rs209.1bn (52% YoY), cement with Rs40.8bn (30% YoY), technology (PAT of Rs1.7bn compared to a loss in 2Q) while automobile assembler generated net profits of Rs21bn (up by 44% YoY).
On the flip side, major laggards during 9MFY22 were fertilizer (earnings dip of 8% YoY), and technology which posted a loss of Rs9.3bn.
The profitability of the 100-Index saw a jump of 34% YoY during 3QFY22. Albeit, ex-oil, the growth trims down to just 9% YoY. The earnings growth was led by the heavy-weight commercial banks given the recent interest rate hike, the report highlighted.
This was followed by the fertilizer sector, in lieu of augmented urea prices coupled with a 17% YoY upturn in urea offtake. The oil and gas exploration sector also posted a noteworthy jump on the back of a significant rise in international oil prices amidst the Russia-Ukraine conflict. Whereas the cement sector posted a muted growth whereby the impact of higher retention prices was partially offset by the surge in coal prices, it added.
The oil and gas marketing sector also impressed with its bottom-line aided by hefty inventory gains booked during the quarter. Other notable results were displayed by the textile composite (given PKR depreciation) and refinery sector (inventory gains).
Pertinently, earnings upturn on a QoQ basis arrived at 28% whereas they were propelled by a massive 155% compared to 3QFY20.
In comparison, earnings of other heavy-weighted sectors such as technology and power generation contracted by 66% (PAT of PKR 1.7bn) and 36% (PAT of PKR 10.0bn), respectively. While Investment banks and the engineering sector also showed earnings decline of 6% (PAT of PKR 3.6bn), and 65% (PAT of Rs2.6bn), respectively.
On a sequential basis, KSE-100 index earnings posted a 28% growth QoQ, led by banks (+19%) attributable to higher effective interest rate, fertilizer (+25%) owed to escalated urea prices, oil & gas exploration (+28%) amid higher average oil prices, cement (+4%) aided by topline growth following a hike in cement prices, power generation (+18%) as HUBC recognized a share of loss from associate and a joint venture of Rs1,462mn in the last quarter.
While automobile assembler and engineering sector posted a decline in earnings of 9% and 32% QoQ, respectively in lieu of PKR depreciation and inability to pass on the impact of augmented input costs.
During 3QFY22, the KSE-100 posted a positive return of 334 points, up by 0.75%. The fertilizer sector remained the best performer adding 605 points from the index, followed by Auto Assemblers (+196 points), Power (+172 points), Banks (+171 points) and Textile composite (+107 points).
The brokerage house conducted its analysis on the KSE-100 index by accounting for the financial results of 86 companies from among the top 100 firms.
“Companies which have been included in our analysis represent almost 95% of the market capitalization of the benchmark bourse,” AHL said.
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