Earnings of the KSE-100 Index increased significantly during CY21

Earnings of the KSE-100 Index increased significantly, displaying a jump in quarterly profit of 19.9% YoY and 0.6% QoQ. Earnings growth was led by the highest weighted Commercial Banks sector amid interest rate hike and reversal in general provisioning made last year in lieu of COVID. Whereas cyclicals (Cements & Autos) also witnessed a massive growth in profitability given improved prices. Finally, the energy sector (O&GMC & E&Ps) also posted a bottom-line jump led by higher oil prices.

On the other hand, Power generation sector displayed a dip in profitability in lieu of lower share of profit from associate of HUBC and lower capacity payment of KAPCO. While the Engineering sector also depicted decline in earnings led by slow down in demand. Pertinently, compared to 4QCY19, profitability of the index surged by 71%.

Moreover, earnings during CY21 augmented by 47% YoY to PKR 940bn (an all-time high). Earnings of the index also improved by 59% YoY when compared to the pre-COVID period of CY19.

The jump in the profitability has been broad based. During 2QFY22 / 4QCY21, major contributors to the jump in the profitability growth includes: Oil & Gas Marketing Companies, Textile Composite, Textile Spinning, Glass & ceramics, Oil & gas exploration, Pharmaceuticals and Commercial Banks, generating a bottom-line of PKR 24.4bn (+385% YoY), PKR 12.9bn (+128% YoY), PKR 1.3bn (+98% YoY), PKR 1.9bn (+56% YoY), PKR 63.1bn (+54% YoY), PKR 4.7bn (+44% YoY), and PKR 62.6bn (+44% YoY), respectively. In comparison, earnings of other heavy weighted sectors such as Power generation, Fertilizer and Engineering contracted by 56% (PAT of PKR 8.5bn), 27% (PAT of PKR 17.1bn), and 54% (PAT of PKR 3.8bn), respectively.

On a sequential basis, KSE-100 index earnings posted a 0.6% growth QoQ, led by Banks (+7%) attributable to rate hikes, Oil & Gas Marketing Companies (+70%) led by inventory gains, Chemicals (+12%) amid improved chemical margins, Pharmaceutical (+65%), and Refinery sector (+1537%) amid inventory gains. While Fertilizer and Engineering posted a decline in earnings of 11% and 43% QoQ, respectively.

Earnings jump of 47% YoY during CY21 was fueled by all heavy weighted sectors including Commercial Banks which posted profits of PKR 233.1bn (+16% YoY), Fertilizer generating earnings of PKR 77.3bn (+17% YoY), Oil & gas exploration sector registering profits of PKR 225.4bn (+20% YoY), Technology (+47% YoY), and Cement displaying a cumulative bottom-line of PKR 52.4bn (+251% YoY). On the flipside, only three sectors showed earnings decline namely Power generation (-23% YoY) and Transport (-62% YoY) in CY21.

Sectors leading the growth in profitability during CY21 were Textile Spinning (+8311% YoY), Textile Composite (+285% YoY), Cement (+251% YoY), Engineering (+154% YoY), Automobile Assembler (+114% YoY), Chemicals (+106%) and Glass & ceramics (+71%).

On a sequential basis, during 4QCY21, the KSE-100 posted negative return of 304 points, down by 0.7%. Technology sector remained the worst performer eroding 469 points from the index due to decline in TRG, followed by Oil & Gas Marketing Companies (-132 points), Refinery (-116 points), Food & personal care (-108 points) and Textile composite (-104 points).

During CY21, the KSE-100 index generated a return of +1.9% (+841 points). Technology sector posted the highest contribution during CY21 (+1,003 points) followed by Commercial Banks (+921 points), Fertilizer (+467 points), Miscellaneous (+273 points), Power (+131 points) Automobile Assemblers (+67 points), and Chemical (+57 points). However, Cement sector eroded 373 points from the index followed by OMCs (347 points) and Refinery (337 points).

We have based our analysis on KSE-100 index companies. We have included the result of 83 companies while the remaining 17 companies have not disclosed their results yet. The companies which have been included in our analysis represent almost 89.3% of the market capitalization of the benchmark bourse.

Courtesy – AHL Research

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