KARACHI: The listed corporate sector companies performed exceptionally well, as the KSE-100 index companies recorded highest ever quarterly earnings (profit after tax or PAT) of Rs 417 billion up 52 percent on year-on-year basis in Pak Rupee term and 16 percent YoY in US$ in the first quarter of FY24, which is higher than 10-years average growth of 13 percent, experts said.

The pre-tax earnings of KSE-100 index companies also up 58 percent YoY to Rs 729 billion (up 22 percent YoY in US$ term) in this quarter.

Economic recovery, easing of LC issues, slowdown in inflation, and stable currency were the prime reasons of significant jump in corporate profitability, Sunny Kumar, an analyst at Topline Securities said.

Banks, and OMC sector were the primarily contributor to the earnings, Sunny Kumar said adding that ex-Banks and OMCs, earnings clocked in at Rs 238 billion up 23 percent YoY.

Banks (which are part of KSE-100 index) earnings were up 85 percent YoY to Rs 149 billion (36 percent of total KSE index profitability) in the first quarter of FY24, primarily driven by higher Net Interest Income (NII) amid highest ever interest rates.

Similarly OMCs earnings clocked in at Rs 30 billion in the first quarter of FY24 against Rs 0.8 billion in the same quarter in FY23. This substantial increase is primarily attributed to inventory gains.

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

Other sectors like Fertilizers, Refinery, and Automobile also gave major support during the first quarter of FY24, with YoY increase in profitability of Rs 21 billion, Rs 16 billion and Rs 11 billion respectively.

On quarter-on-quarter (QoQ) basis, after-tax earnings were up by 33 percent in the first quarter of FY24. However pre-tax earnings up by 10 percent QoQ due to higher tax expense recorded last quarter amid 10 percent super tax.

For our analysis, 94 companies have been taken (unconsolidated accounts) out of the total 100 companies (that have announced their results), which represents 97 percent of KSE-100 index market capitalization and 80 percent of total market capitalization.

“We estimate that adding remaining companies of Index would not materially impact profitability growth trend”.

Copyright Business Recorder, 2023