Erratic week ends on highest-ever level
During the trading sessions of the week ending on April 19, 2024, the Pakistan Stock Exchange experienced fluctuations. However, it concluded the week on a strong note, with the benchmark index reaching its highest-ever closing at 70,909 points, marking a 0.85% WoW increase from the previous week.
The overall trading volume saw a significant rise, with an average of 492.37 million shares traded, reflecting a 43.51% increase WoW compared to the previous week. In total, 2.46 billion shares were traded throughout the week, up from 1.72 billion shares traded in the preceding week.
The volatility may be attributed to the general uncertainty surrounding over international crude prices, primarily due to the ongoing rifts in the Middle East, with the tensions largely emanating due to the scuffle between Iran and Israel. The key highlight of the week was the successful visit of the Saudi delegation to Pakistan, promising major investments in various sectors. Additionally, KSA’s acquisition of a 25% minority stake in the Reqo Diq Mining project for US$1.0 billion appears to be progressing well, with the deal anticipated to finalize soon.
With regards to FIPI flows, net foreign investments remained consistent throughout the outgoing week, culminating to US$33.86 million by Friday close.
Finally, authorities repaid the maturing US$1.0 billion Eurobond on April 12th, resulting in the SBP’s FX reserves to end the week at US$8.0 billion.
With regards to fuel price, Motor Gasoline and Diesel prices were raised, attributed to rising crude oil prices.
Other major news flows during the week included; 1) PIB sale falls short, yields dip on shorter maturities, 2) Pakistan claimed to complete gas pipeline project with Iran, 3) Wheat production target of 32.2 million tonnes set for the current season is at high risk due to rainfall, 4) Government does not anticipate any significant currency devaluation.
Sugar & Allied industries, Refinery, Synthetic & Rayon, Vanaspati & Allied Industries, Textile Weaving were amongst the top performing sectors, while laggards included Miscellaneous, Woolen, and Paper & Board.
Major net selling was recorded by Individuals (US$14.43 million) & Banks (US$10.97 million). Brokers absorbed most of the local selling with a net buy of US$1.23 million.
Top performing scrips of the week were: PSX, FABL, FATIMA, AKBL, NRL, while top laggards included: PTC, ISL, KTML, SEARL, and MUGHAL.
Going forward, market is expected to return its focus to negotiations with the IMF regarding The EFF programme, upcoming monetary policy announcement, and the corporate results which are expected to be announced throughout the coming two weeks.
Despite the market reaching its new highest, the forward P/E continues to remain below 5.0x, which instills positivity regarding the market’s fundamentals.
D.G. Khan Cement (DGKC) announced 3QFY24 unconsolidated results posting profit after tax of PKR1.2 billion (EPS: PKR2.69), which is flat but up by 200%QoQ. The results were higher than industry expectations. This took 9MFY24 earnings to PKR2.2 billion (EPS: PKR5.10), up 6%YoY.
The main reason for the higher-than-expected earnings in 3QFY24 was higher-than-expected gross margins. Gross margins in 3QFY24 were recorded at 25.5% as compared to 19.0% in 3QFY23 and 12.8% in 2QFY24.
Higher gross margins can be attributed to lower cost coal inventory in 3QFY24 amid decline in prices of imported, Afghan and local coal. Furthermore, the lower coal costs also resulted in reduced per-unit costs from its captive power plants.
Another factor contributing to the higher margins was that DGKC recorded lower exports in 3QFY24 as compared to both 3QFY23 and 2QFY24, which typically have lower margins.
Sales were recorded at PKR14.3 billion for 3QFY24 which was down by 22%YoY and QoQ. Lower revenue was due to 21%YoY and 10%QoQ decline in domestic cement offtakes and 44%YoY and 56%QoQ decline in export offtakes.
Distribution expenses declined by 23%YoY and by 40%QoQ due to lower volumetric sales.
Effective tax rate of DGKC was reported at 38.5% for 3QFY24 as against 33.0% for 3QFY23 and 40.3% for 2QFY24.
Pakistan State Oil (PSO) is expected to announce its 3QFY24 financial result during late April, AKD Securities expect the company to post profit after tax of PKR1.96 billion (EPS: PKR4.17). Like most players in the sectors, PSO is also expected to incur gains on inventory amidst increasing ex-refinery prices, mainly due to higher international gasoline/ gasoil prices resulting from tensions in the Middle East. MS/ HSD prices have inched up by 6.6% and 4.3% from their 2QFY24 quarter closings. The brokerage house expects the OMC to record inventory gains of PKR0.95 billion (PKR2.0/share) for 3QFY24, subsequently resulting in gross margins for the period to end at 2.9% as against negative 0.4% for the previous quarter before.
The Company’s revenue is expected to clock in at PKR853 billion, changing by negative 6%QoQ and positive 5% YoY, as total POL offtakes for the quarter stood abysmally low at 1.82 million tons, down 6% QoQ.
On the RLNG front, PSO’s average DES price for the quarter stood at US$9.62/mmbtu as against US$10.35/mmbtu a quarter before, the quantity delivered stood at 966mmcfd, up 17%QoQ), taking topline from the RLNG segment to clock in at PKR254 billion (higher by 9%QoQ and 1%YoY.
Attock Petroleum (APL) is expected to announce its 3QFY24 financial results on Thursday. AKD securities expects the company to post profit after tax of PKR2.91 billion (EPS: PKR23.4), up 15%QoQ but down 32%YoY. The quarterly increase is mainly attributable to higher ex-refinery prices alongside slightly higher regulated margins during the outgoing period. The brokerage house expects the company to record inventory gains of PKR325 million (PKR2.6/share) for the period, subsequently resulting in gross margins for the quarter to end at 3.3%.
The company’s revenue is expected to clock in at PKR121 billion, lower by 10%QoQ, as volumetric offtakes for the quarter fell by 1.1%. During the period (HSD offtakes were down 16%QoQ). On the taxation front, brokerage house expects effective tax to clock in at 39% for the period.