A review of PSX performance during April 2024

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Robust momentum weighting on the IMF program and prospects of investment from friendly countries

  • KSE-100 observed a healthy momentum during Apr’24, which took the index to the highest-ever level of 72,742pts, on a closing basis.
  • During the month, Pakistan and KSA agreed to expedite a USD 5bn investment package, prompting positive sentiment.
  • In addition to this, IMF Executive Board completed the second and final review under the SBA program for Pakistan, approving an immediate disbursement of USD 1.1bn.
  • Additionally, a delegation led by Iran’s president arrived during the month, which suggested development prospects in the country.
  • Moreover, the announcement of strong financial results further fuelled the overall positive momentum.
  • The SBP’s foreign reserves declined by USD 59mn MoM, clocking in at USD 8.0bn by the end of Apr’24.
  • The Pak Rupee depreciated against the greenback by PKR 0.37 | 0.13% MoM, clocking in at PKR 278.31.
  • Albeit, KSE-100 closed at 71,103 points, depicting a massive gain of 4,097 points | 6.1% MoM.

Major News

March sales of petroleum products jump 4pc YoY, Oil production edges up 1pc y/y in July-March while gas output falls 3pc, Cement dispatches up 3.85pc in March, WB projects 1.8pc growth, CPI clocks-in at 20.7% in Mar’24, Auto Sales declined by 3% MoM I 1% YoY, Power generation drops 8.2pc YoY, Attock Cement starts up new plant, Textile exports increased by 3.3% (YoY), RDA inflows rise to USD7.660bn, MARI discovers oil in Sindh, KE’s 7-year plan approved by Nepra, Pakistan’s IT exports surge 37pc to record USD 306 mn in March, and International Packaging Films Limited (IPAK) intends to raise Rs1.47bn through IPO.

Outlook and Recommendations

The investor will closely monitor developments related to the upcoming Federal Budget 2024-2025 and prospects for investments from friendly countries. Moreover, Pakistan and IMF are expected to engage in talks related to the Extended Fund Facility program, and any development in this regard could drive the positive momentum further.

The recent result season along with hefty dividends led to activity in the Commercial Banks, Fertilizer, Power, and Auto Assemblers sectors, which have posted robust financial results for the period 3QFY24 / 1QCY24. We expect these sectors to remain in the limelight. Also, the cyclical sectors including cements are expected to perform well in anticipation of the monetary easing cycle.

The inflation is projected to decline during May’24 mainly due to a significant base effect. However, some of the risk factors that could affect these forecasts, include fluctuations in food prices, potential depreciation of the PKR against the USD, any uptick in international oil prices, and fiscal/budgetary actions following entry into a new IMF program.

The KSE-100 is currently trading at a PER of 4.7x (2024) as compared to its 5-year average of 6.1x offering a dividend yield of ~9.8% as compared to its 5-year average of ~7.3%. Our preferred stocks are OGDC, MCB, UBL, MEBL, FABL, HBL LUCK, MLCF, FCCL, FFC, HUBC, PSO and SYS.

Courtesy – AHL Research

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