The strong rise in domestic demand has led to 83 companies in the KSE-100 Index registering a year-on-year increase of 56% in combined earnings for FY 2020-21. This marks an all-time high of Rs875 billion or $5.15 billion.
The highest figure in the past has been Rs619 billion registered in FY18, which comprised the earnings of all 100 companies under KSE-100.
Arif Habib Limited (AHL) a brokerage house, issued a report on Tuesday titled ‘KSE-100 Index Profitability’. The report says that earnings increased by 43% and 41% over FY19 and FY18, respectively.
According to the report, earnings have peaked at a record high in FY21 as “a sharp U-turn in domestic demand had helped cyclical sectors post an impressive rebound in profitability, with some sectors swinging into healthy profits compared to losses last year”.
It must be noted that a 4% quarter-on-quarter drop was also seen during 4QFY21 “amid a slowdown in cyclicals and sectors exposed to the PKR-USD parity”.
The report comprised of an analysis of the results of 83 companies. The other 17 companies are yet to disclose their results. It said, “The companies which have been included in our analysis represent almost 88% of the market capitalization of the benchmark bourse,”.
Apart from higher profitability, payout in FY21 reached 46%.
Sector-wise performance
Leading the growth in profitability during the current year are the following sectors; Textile Spinning (+7,667% YoY), Cable & Electrical Goods (+846% YoY), Automobile Assembler (+434% YoY), Technology & Communication (+417% YoY) and Sugar (+415% YoY).
Sectors that had significant contributions to the growing profitability during 4QFY21/2QCY21 are the OMCs, cement, automobile assembler, fertilizer, E&P, chemicals, textile composite, and technology & communication. Commercial banks saw stagnant earnings while refineries saw a contraction in the bottom-line by 64% YoY.
FY21 witnessed the KSE-100 index generated a return of 37.6% (+12,934 points). Technology sector led the charts with the highest contribution during FY21 (+2,489 points) followed by Cement (+2,064 points), Banks (+2,059 points), Fertilizer (+842 points), Textile Composite (+768 points), power (+670 points), Auto Assemblers (+667 points), Food (+598 points), OGMCs (+377 points), E&P (+361 points) and Chemical (+360 points).
The tobacco sector, however, eroded 60 points from the index followed by miscellaneous (-52 points).
Equity market
PSX Chairman Farrukh Khan said in an interview with Bloomberg, that the equity market of the country is still attractive to investors. He added, “If you look at the valuations right now in the Pakistan market, the price-earnings ratio for the market’s KSE-100 Index is around six times, the dividend yield is over 5%. The profitability growth of the companies this year that have reported to the KSE-100 Index has been around 60-70%, compared to 2020 and 2019,”.
The PSX CEO said that similar to markets all around the world, the Pakistani economy was also negatively impacted by the pandemic, but it is on its way to stabilization post-Covid shocks. “If you look at our comparative performance in the region, it has come out relatively better and, particularly, our large-scale manufacturing and other industries have come out extremely strongly with record export numbers,” he said.
Answering a question related to the rise in foreign selling, Khan said that there is substantial domestic liquidity, and other investors have turned up “and snapped up those bargains, which the foreign investors have sold.”
