Sustainable economic growth needed to maintain Corporate Earnings growth: Analyst

Mohammed Sohail, Chief Executive Officer of Topline Securities has said that low interest rate, stable currency, and sustainable economic growth needed to maintain the corporate earnings growth trend.

The statement comes after the KSE-100 companies posted the highest-ever quarterly profits of Rs 243 billion, during the quarter ended March 31, 2021, up 82 percent on a year-on-year and 11 percent on a quarter-on-quarter basis.

Within this, government companies’ profits have increased by 15 percent on YoY and 33 percent on QoQ, while privately managed companies’ earnings have improved by 119 percent YoY and 5 percent QoQ, Topline Securities research report said.

Private companies outperformed government companies on YoY basis during the outgoing quarter as last year in March-2020, OMCs, refineries, and cement companies posted losses, it added. Government companies outperformed private companies on QoQ basis due to exceptional profits posted by BOP, OGDC, PSO, and NBP.

Talking to a private channel, Sohail said that we should not compare the corporate earnings results with that of the last year due to COVID-19 restrictions and lockdowns in place as three sectors including oil marketing, refinery and cement were in losses which are now earning profit. He said that it will be better to analyze on a quarterly basis.

Sohail said that the most impressive sectors have been banks, which despite the reduction in interest rates have posted impressive profits both absolute and percentage-wise. “Cement sector profits have also grown significantly, the oil and marketing sector has rebounded thanks to stability in oil prices. Whereas, the textile sector has shown impressive results as well,” he said.

The financial expert was of the view that the biggest reason behind the increase in corporate earnings in March 2021, has been Pakistan is showing an economic recovery after three years of slow growth.

“After COVID the remittances have increased, due to decrease in Pakistanis travelling we are moving towards consumption-driven growth. Furthermore, the reduction in the interest rate and strengthening of Pakistani rupee has played a role in KSE-1000 companies showing record profit,” he said.