PSE posts nominal gains as global concerns ease, remittances surge
Pakistan Stock Exchange witnessed mixed momentum throughout the week ended on August 09, 2024 to close at 78,570 level with a nominal 0.4%WoW gain.
According to a report by AKD Securities, the week began on a turbulent note, primarily due to concerns about global markets following Japan’s interest rate hike. However, a rebound in the E&P sector, spurred by a surprising payout from MARI, revitalising market sentiment in the last two sessions.
Investors’ confidence was further strengthened by debt rollover commitments during the week, aligning with IMF prerequisites ahead of the Executive Board meeting expected later this month.
Additionally, T-Bill yields dropped in the latest auction on Wednesday, signaling investor anticipation of rapid rate cuts in upcoming Monetary Policy Committee (MPC) meetings. This decline in T-Bill yields consequently led to KIBOR rates hitting 18-month low.
On the macroeconomic front, remittances for July 2024 were reported at US$3.0 billion, up 45%YoY, cementing a positive outlook for the current account balance for the ongoing year.
The energy sector remained a focal point of public discourse amid rising power prices, prompting the government to establish a task force on energy and announce plans to retire/ gradually phase out 15 IPPs.
The ECC directed the relevant ministry to formulate a fertilizer policy to address concerns over production, pricing, and the provision of gas, which might result in unify gas prices across the industry.
Despite initial volatility in market, participation surged by 38%WoW, with the average daily traded volume rising to 493 million shares, from 358 million shares a week ago.
On the currency front, PKR largely remained stable against the greenback, closing the week at PKR278.55 to a US$.
Other major news flows during the week included: 1) Cement sales declined by 7% due to slow down of economic activity, 2) SBP forex reserves rose by US$51 million to US$9.15 billion, 3) SIFC was hopeful of foreign investments once IMF deal was done, and 4) GoP hiked GST on tractors to 14%.
Woollen, Textile weaving, and Textile spinning were amongst the top performing sectors, while, Vanaspati & allied industries, Property, and Fertilizer were amongst the worst performers.
Major net selling was recorded by Mutual Funds with a net sell of US$6.0 million. Individuals absorbed most of the selling with a net buy of US$5.5 million.
Top performing scrips of the week were: YOUW, BNWM, MARI, SNGP and APL, while top laggards included: PIBTL, AKBL, BAHL, FFC and ATRL
Looking ahead, market is expected to continue positive momentum as global market concerns settle and macroeconomic indicators remain favorable. The anticipated IMF Executive Board approval during the month is likely to support the momentum.
Sectors benefiting from monetary easing and structural reforms would remain in the limelight. However, modest economic recovery would keep the upside in check for the cyclicals.
AKD Securities expects Maple Leaf Cement (MLCF) to post profit after tax of PKR1.7 billion (EPS: PKR1.5) for 4QFY24 as against a loss of PKR0.2 billion (LPS: PKR0.2) for the same period last year. The recovery can be attributed to higher taxation in 4QFY23 due to the retrospective implementation of super tax and a deferred taxation adjustment.
Fauji Cement Company (FCCL) is expected to post net profit of PKR1.7 billion (EPS: PKR0.71) as against PKR0.5 billion (EPS: PKR0.19) for the same period last year, primarily due to absence of retrospective taxation charged in 4QFY23. The company’s topline is projected at PKR2.9 billion, up by 29%YoY.
The Board of Directors of D. G. Khan Cement (DGKC) is scheduled to announce 4QFY24 results. The Company is expected to post net profit of PKR0.4 billion (EPS: PKR0.88) as against a loss of PKR5.7 billion (LPS: PKR13.12) for 4QFY23. The turnaround is mainly due to deferred tax adjustments and super tax in last year.
Cherat Cement Company (CHCC) 4QFY24 net profit is expected to raise to PKR1.3 billion (EPS: PKR6.7) from PKR0.1 billion (EPS: PKR0.5) for the same period last year primarily due to higher taxation in 4QFY23 owing to retrospective super tax.
Pioneer Cement (PIOC) is anticipated to post net profit of PKR1.2 billion (EPS: PKR5.3) for 4QFY24 as against a loss of PKR0.1 billion (LPS: PKR0.4) for the same period last year. Notably, 4QFY23 profit was impacted by retrospective super tax (implemented in FY24 Budget).
Kohat Cement (KOHC) earnings for 4QFY24 are projected at PKR2.0 billion (EPS: PKR10.4), from PKR0.5 billion (EPS: PKR2.3) for the same period last year. Similar to other players, 4QFY23 earnings were impacted by retrospective implementation of super tax.
According to Topline Securities, Car sales in Pakistan totaled 8,589 units in July 2024, reflecting a 60%YoY increase and a 36%MoM decline as reported by PAMA.
In volumetric terms, the MoM decline in car sales can be primarily attributed to the increase in withholding tax rates on vehicles introduced in the FY25 budget. This led to pre-buying in June 2024 and as a result June 2024 number was reported at 18 months high.
Hyundai Nishat Motor experienced the most significant MoM drop, with sales of 529 units, down 50%MoM and 7%YoY.
Indus Motor Company (INDU) recorded sales of 1,664 units in July 2024, reflecting a 44%MoM decline.
Honda Atlas Cars (HCAR) reported sales of 931 units, down 15%MoM.
Sazgar Engineering (SAZEW) saw a smaller decrease, with 825 units sold, marking a 5%MoM decline.
The YoY increase in car sales during July 2024 is attributed to low base effect of industry due to closure of plants due to shortage of inventory.
In the motorcycle segment, Pakistan’s 2 wheelers and 3 wheelers sales decreased by 5%MoM, but increased by 15% YoY, totaling 84,993 units in July 2024.
Atlas Honda (ATLH) recorded sales of 70,300 units, reflecting a 12%MoM decline but a 13%YoY increase.
In the tractor segment, Millat Tractors (MTL) recorded sales of 605 units, down 63%YoY and 78%MoM. Al Ghazi Tractors (AGTL) recorded sales of 855 units, down 16%YoY and 40%MoM. This brings total tractor industry sales to 1,460 units, a decrease of 45%YoY and 65%MoM.
The sharp fall in sales of tractors is also attributed to pre-buying in Jun 2024 as Government imposed GST of 10% on tractor sales.
Truck and bus sales were up 3%MoM and 57%YoY, reaching 307 units in July 2024.