KSE-100 companies: Earnings jump 56% year-on-year, register record high

Riding the wave of domestic demand, 83 companies in the KSE-100 Index have registered combined earnings at a year-on-year increase of 56% in FY 2020-21, clocking in at an all-time high of Rs875 billion ($5.15 billion).

The previous highest, registered in FY18, was Rs619 billion, and included earnings of all 100 companies.

As per a report released on Tuesday by brokerage house Arif Habib Limited (AHL) titled 'KSE-100 Index Profitability', earnings improved by 43% and 41% over FY19 and FY18, respectively.

In FY21, the earnings jumped to a record high 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", according to the report.

However, the report added that a 4% quarter-on-quarter dip was witnessed during 4QFY21 "amid slowdown in cyclicals and sectors exposed to the PKR-USD parity".

The report featured analysis that included the result of 83 companies while the remaining 17 have not disclosed results yet.

"The companies which have been included in our analysis represent almost 88% of the market capitalisation of the benchmark bourse," stated the report.

Alongside higher profitability, payout in FY21 arrived at 46%.

Sector-wise performance

Sectors leading the growth in profitability during FY21 were Textile Spinning (+7,667% YoY), Cable & Electrical Goods (+846% YoY), Automobile Assembler (+434% YoY), Technology & Communication (+417% YoY) and Sugar (+415% YoY).

During 4QFY21/2QCY21, major contributors to the jump in profitability growth included: OMCs, cement, automobile assembler, fertilizer, E&P, chemicals, textile composite, and technology & communication. Earnings of Commercial Banks remained stagnant while bottom-line of Refinery contracted by 64% YoY.

KSE-100 cos post Rs243bn highest-ever quarterly profits

During FY21, 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).

However, the tobacco sector eroded 60 points from the index followed by miscellaneous (-52 points).

Equity market

In an interview with Bloomberg earlier, PSX Chairman Farrukh Khan had said Pakistan’s equity market remains attractive to investors.

“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,” he said.

The PSX CEO said that like the rest of the world, the Pakistani economy has also been hit by the pandemic, but is stabilising 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.

KSE-100 stages late recovery, but still ends 256 points lower

When asked about the surge in foreign selling, the official said that there is significant domestic liquidity, and other investors have come up “and snapped up those bargains, which the foreign investors have sold.”

The KSE-100 Index has been under pressure in recent weeks, dropping to the level last seen in May this year as the interest-rate hike, and widening current account deficit take their toll on the economy.

On Tuesday, however, the index finally broke a seven-day losing streak to inch close to the 45,300-point level.