KARACHI: In spite of the dismal economic circumstances, external account pressures, highest-ever inflation reading in FY23, and lower demand across major sectors, the profitability of the KSE-100 index showcased an upward trend, posting a healthy growth 20.6% YoY in FY23 and 70.3% YoY in 4QFY23.
According to Arif Habib Limited, the growth in profitability (PAT) in FY23 was attributable to a massive jump of 69% YoY in index-heavy Commercial Banks sector, arriving at PKR 428bn owing to higher interest rates. This was followed by another heavy weight, the Oil and Gas Exploration sector (+68.5% YoY to PKR 415bn) given higher oil prices, and exchange gains booked given the sharp Pak Rupee devaluation. The cement sector also posted a notable jump of 28.4% YoY in the bottom line to PKR 71bn in lieu of higher retention prices and use of relatively cheaper coal from Afghan and local market during the year, which offset the impact of volumetric decline (-15.6% YoY), hike in energy tariff as well as PKR depreciation. Meanwhile, earnings of the Chemical sector increased by 14.5% YoY to PKR 44bn, which was primarily on account of one-off gain booked by Lucky Core Industries Limited (LCI and formerly ICI Pakistan Limited) owing to sale of NutriCo Morinaga. Food & Personal Care Products sector’s profitability ascended by 34.8%, clocking in at PKR 42bn amid better margins. Lastly, Refinery sector’s net profit augmented by 30.3% YoY to PKR 25bn, led by ATRL (amid higher gross refining margins).
o On a quarter basis, KSE-100 profitability climbed up by 70.3% YoY to PKR 337bn attributable to growth in earnings of index-heavy sectors. Commercial Banks posted a robust growth of 3.0x YoY in 4QFY23 given a substantial surge in net interest income. This was followed by Oil and Gas Exploration sector (+2.8x YoY) led by OGDC (owing hefty exchange gains) and PPL (due to the absence of expensive dry wells), and Fertilizer sector (+3.0x YoY) due to higher urea prices along with higher super tax charged last year.
Dividends of KSE-100 companies increased by 21.8% YoY to PKR 511bn in FY23, whereby the index-heavy sectors Commercial Banks and Oil and Gas Exploration Companies announced 57.1% YoY and 17.6% YoY higher dividends, respectively. In addition, the dividend of Fertilizer and Power and Distribution reported growth of 27.9% and 199.8% YoY, respectively. Meanwhile, dividends of Chemical, Automobile Assemblers, and Oil & Gas Marketing contracted by 22.1%, 35.8% and 26.3% YoY, respectively.
During FY23, the KSE-100 index remained flattish at 41,453 points (-88 points | -0.21% YoY). The Pharmaceuticals sector remained the worst-performing sector, eroding 561 points followed by Miscellaneous (-435 points), Automobile Assembler (-310 points), Refinery (-159 points), Food (-145 points), and OGMCs (-123 points). Whereas key gainers were Fertilizer (+802pts), Power (+535pts), Technology (+357pts), Cement (+356pts) and Chemical (+198 points).
On a sequential basis, during 4QFY23 the KSE-100 index increased by 3.6% (+1,451 points). Cement sector remained the best-performing sector, adding 557 to the points followed by Fertilizer (+486 points), Chemical (+466 points), and Banks (+280 points). However, the Technology sector eroded 444 points from the index followed by E&P (-167 points), Pharma (-110 points), and Glass (-59 points).
We have based our analysis on KSE-100 index companies. We have included the result of 87 companies while the remaining 13 companies have not disclosed their results yet. The companies that have been included in our analysis represent almost 93.6% of the market capitalization of the benchmark bourse.