PSX saw record corporate profitability in 2023 despite the economic slowdown

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Profits of key companies listed at PSX have remained fabulous despite the economic issues faced by Pakistan.

In calendar year 2023, 83 companies (88% of market capitalization) of KSE 100 index posted after tax profit of Rs1.66trn showing an amazing growth of 45% over 2022.

In USD terms 2023, the profits of these companies were US$5.94bn up 6.3%.

Banks contributed 34% in total profits in 2023. Excluding banks total earnings was up 31% (-3.8% in US$).

Similarly, oil and gas exploration (E&Ps) firms will make 29% of total profits in 2023. Excluding E&Ps, earnings increased by 40% in 2023 (+2.5% in US$).

Excluding these two big sectors, profit grew 15% (-15.5% in USD) in 2023.

Many people are curious how profits posted such a massive improvement when the economy is not showing big signs of improvement. 

Most people look at real GDP growth to analyze economic health. Pakistan real GDP declined 0.4% in 2023 based on figures of 3 quarters (Mar, June, Sep). However, nominal GDP grew approx. 25% in 2023.

Corporate earnings usually follow a nominal GDP growth trend as inflation is passed to consumers where possible.

Moreover, the two heavy-weight sectors (Banks and Exploration) profits are not directly linked to the overall economy

Banks make more money when interest rates are high and deposit growth is better, led by higher money Supply. Similarly, exploration firms earn more with rising global oil prices and falling PKR against US dollar..

Courtesy – Topline Research

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