KSE-100 index companies post record profitability

KSE-100 index companies post record profitability

KARACHI: KSE-100 index companies recorded record profitability in FY21, growing by 60 per cent YoY to Rs884 billion mainly led by macro recovery post COVID-19 lockdowns in FY20.

This profitability was significantly higher than last 5-Year and 10-Year CAGRs of 8 per cent and 11 per cent, respectively, analysts at Toplines Securities.

The profitability of KSE-100 index was also better than that recorded in pre COVID-19 era of FY19, when profitability of KSE-100 stood at Rs624 billion, which means that profitability in FY21 is up 41 per cent in two-years. This boost in profitability was augmented by pent up demand and expansionary policy adopted by the State Bank of Pakistan (SBP) and the government.

To recall, SBP had reduced the Policy Rate by 625 basis points to 7 per cent in the first half of the fiscal year 2019/2020 and had maintained the Policy Rate of 7 per cent through FY21.

SBP also introduced relief schemes for corporates like Temporary Economic Refinance Facility (TERF), loan restructuring schemes and SBP Rozgar scheme. These schemes helped corporates get concessional financing, get loan repayment extensions and concessional financing for payment of employee salaries. This coupled with government pro-growth budget also aided profitability growth.

This is also evident from the fact that Finance Cost of KSE-100 index companies was down 37 per cent YoY to Rs87 billion in FY21. Net Sales of KSE-100 companies were up by 7 per cent YoY to Rs7 trillion whereas Gross Profits improved by 23 per cent YoY to Rs1.9 trillion. Consequently, Gross Margins improved to 27 per cent vs. 23 per cent in FY20.

In fourth quarter of FY21, profitability of KSE-100 index was up 85 per cent YoY and 6 per cent QoQ to Rs246 billion. Net sales of KSE-100 companies improved by 38 per cent YoY and 11 per cent QoQ.

For our analysis, we have taken 93 companies out of the total 100 companies (that have announced their results) which represent 98 per cent of KSE-100 market capitalization. We believe that adding remaining companies would not materially impact profitability growth trend.

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