About three-fourth of the listed companies, in terms of market capitalisation of Karachi Stock Exchange (KSE), recorded healthy profits which helped boost the share prices. One of the contributing factors to the stock market boom in Pakistan was the rising earnings of the listed companies. After a decline seen in 2000, the corporate profitability of listed firms is on an upward march. In the past four years, from 2001 to 2004, the earnings of listed companies have increased, on an average, by 34 percent annually.
The analysis presented in this report is based on 42 sample-listed companies. InvestCap covers the highest number of listed companies.
Since 2000, average annual profits of listed firms have jumped by around 34 percent each year. In 2001, profits were up by 39 percent followed by a mammoth 49 percent rise in 2002. Then, in 2003, earnings increase cooled down and rose by a mere 16 percent. And, finally in 2004, it is estimated to soar by 31 percent.
Out of the 42 companies, 22 companies have already announced their full year 2004 financial results, while the remaining 20 have made public their 9-month profits. Thus, based on these numbers, an average firm which was earning Rs 100 in 2000 is now making Rs 315 in profits.
Similarly, an average listed organisation which made Rs 100 in profits in 2001 will post profits of around Rs 226, that is an increase of 126 percent. Compared to this, the KSE Index in the last 3 years of bull-run has risen 331 percent.
Again, without going into details and reasons, it may be estimated that these sample companies' profits in the coming three years (2005-2007) might increase by an average rate of 9 percent annually.
The Data compiled by analysts at Investcapital Securities, Khalid Iqbal Siddiqui, Abdul Rasheed, Faisal Jiwani, and Abdul Azeem, are based on their detailed financial models which suggest that in 2005 profitability will increase by 13 percent. The pace of growth will slow down in 2006 and it is likely to post a jump of 9 percent in 2006 and 6 percent in 2007.
Thus, based on this, an average company making Rs 100 currently may make Rs 130 in 2007. Thus a growth of 30 percent in profits in the next 3 years is expected.
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