KSE-100 companies post 22% higher profit in FY22, but index struggles

The 81 companies that represent 93% of market capitalisation at the Pakistan Stock Exchange's (PSX) benchmark KSE-100 Index have posted a year-on-year increase of 22% in their profit-after-tax, which clocked in at Rs1 trillion in FY22, a brokerage house said in a note on Saturday.

The growth is slower than the one registered in FY21 with Topline Securities attributing the lower earnings to the imposition of the super tax.

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"Earnings before tax of KSE-100 Index companies increased 42% YoY in FY22, clocking in at Rs1,764 billion in FY22 against 49% YoY in FY21," said Topline in the report.

The government had earlier this year announced a 10% super tax on 15 specified sectors with earnings in excess of Rs300 million for tax year 2022 (FY22) with retrospective implementation.

Furthermore, a 1-4% slab-wise super tax was also imposed on sectors excluding specified sectors with earnings of Rs150-300 million or above.

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The brokerage house conducted its analysis based on financial results of 81 companies from among the 100 firms on the KSE-100 Index.

"We believe that adding remaining companies would not materially impact profitability growth trend," said Topline.

In USD terms, profit after tax rose 10% YoY to $5.6 billion while profit before tax was up 28% YoY to US$9.9 billion in FY22.

Sector-wise profits

The top three sectors that recorded significant growth in their annual profitability during the year under review were oil marketing companies (192% YoY), oil and gas exploration (30% YoY) and refineries (639% YoY).

“Though the profits are rising, concern remains on the quality of these earnings as a significant percentage of the earnings are not cash due to circular debt and piling up of receivables for companies in the energy chain,” said the brokerage house.

Other sectors displaying major growth in FY22 included textile, banks, and chemicals, with profitability growths of 74% YoY, 3% YoY and 17% YoY, respectively.

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On the other hand, fertilisers, and power sectors reported a decline in profits during FY22, with earnings dropping by 9% YoY each.

Dividend payout

Meanwhile, dividend payout was down by 3% YoY to Rs392 billion in FY22. “This is probably due to circular debt that is affecting cash flow of companies,” said the brokerage house.

E&Ps' dividend remained flat despite 30% earnings growth while banks' dividend was down by 12% YoY.

The KSE-100 Index's performance

While KSE-100 companies' profitability has increased, market capitalisation – the value of all shares on the PSX – has plummeted, wiping off portfolios when adjusted for inflation.

On Friday, the KSE-100 finished with a fall of 307.74 points or 0.75% to close at 40,620.21, which was its eighth successive decline.

Since the start of FY23, the KSE-100 has lost 2.2%, a fall that comes after an almost 13% decrease in the previous fiscal year as well.

Apart from FY23, the KSE-100 has ended with a negative return in three of the past five fiscal years.

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