PSX witnesses 16.5%WoW decline in average daily trading volume
Pakistan Stock Exchange (PSX) remained volatile during the week, with the benchmark index losing 233 points or 0.3WoW to close at 85,250 points on Friday, October 18, 2024.
Commercial Banks and Power sectors were the primary drags on the index, as concerns over additional ADR-based taxation to weigh on banks’ expected profitability for the last quarter, while continued government scrutiny on IPPs added pressure to the Power sector.
Fertilizer sector also remained laggard due to lower than expected payouts by EFERT.
On the political front, the successful conclusion of the SCO summit was a positive development. However, heightened political noise towards the weekend kept market sentiments subdued.
Textiles and food exports remained elevated.
Foreign exchange reserves held by the State Bank of Pakistan (SBP) crossed the US$11 billion mark for the first time in last two and half years, as of October 11, 2024.
In the T-Bills auction held on Wednesday, GoP raised PKR716 billion as against a target of PKR400 billion, with 3 and 6 month yields falling to 15.3% and 14.3%, respectively.
In its recent fortnightly review, GoP hiked diesel prices by PKR5/litre, while keeping petrol prices unchanged.
Market participation plunged by 16.5%WoW, with average daily traded volume dropping to 432 million shares from 518 million shares in the earlier week.
On the currency front, the PKR remained largely stable against the greenback, closing the week at PKR277.6 to a greenback.
Other major news flows during the week included: 1) GoP pays off PKR1.2 trillion domestic debt in first quarter of the current financial year, 2) Roshan Digital Accounts surpass US$8.749 billion in remittances, 3) LSM output rises by 4.68MoM in August, and 4) Urea off takes decline by 35YoY in September.
Tobacco, Close-end Mutual Funds, and Engineering were amongst the top performing sectors. Woollen, Property, and Transport were amongst the worst performers.
Major selling was led by Banks, with a total outflow of US$16.6 million, primarily due to NBP offloading its entire stake in AGL to FFC. Foreigner followed with net sell of US$11.1 million.
Companies absorbed most of the selling with a net buy of US$25.8 million.
Top performing scrips of the week were: ATRL, PAKT, HGFA, FCEPL, and JDWS, while laggards included: NPL, JVDC, BNWM, KAPCO, and PIOC.
Market is expected to remain positive going forward, supported by declining interest rates, anticipated to continue channeling investment flows into equities.
Additionally, with the ongoing earnings season, corporate results would stay in focus.
Despite the recent upward trend, the market remains attractively valued, currently trading at a P/E of 3.7x with a dividend yield of 11.9%.
AKD Securities proposes focusing on sectors that are likely to benefit from monetary easing and structural reforms, particularly high dividend yield stocks, likely to re-rate as yields converge with fixed income returns. Top picks include, OGDC, PPL, MCB, UBL, MEBL, FFC, PSO, LUCK, MLCF, FCCL and INDU.
Urea offtakes in September 2024 plummeted 35%YoY to 365,000 tons in Pakistan.
The drop in offtake can be attributed to: 1) strained agronomics caused by Rabi 2024 wheat crisis, 2) a 50%YoY drop in cotton crop yields, and 3) delay in crop cultivation owing to extended monsoon rains.
Urea offtake in 3QCY24 dropped 17%YoY to 1.5 million tons. The market share of FFC/FFBL improved by to 38% and 9% respectively during the quarter, while EFERT share plunged to 30%.
Urea Inventory in September has reached an alarming level of 622,000 tons. This is the highest level of urea inventory (10% of annual sales) since November 2020.
EFERT accounted for 34% of the industry’s closing inventory while FFC/FFBL contributed 10% and 4% respectively. Continued production and lower offtakes are key reasons for the inventory buildup.
Urea ex-factory prices declined 2%MoM to an average price at PKR4,644/bag (Sona) and PKR4,497/bag (other) during September. The decline is attributed to elevated levels of Urea inventory.
DAP offtake rose by 27%YoY to 133,800 tons in September 2024. Higher offtakes are attributed to stocking up of DAP amid the start of wheat cultivation by the end of October. Industry DAP inventory was reported at 383,000 tons.
Despite higher inventory, DAP prices remained stable at an average of PKR11,820/bag due to high demand in September.
Intermarket Securities expects 4QCY24 offtakes to remain strained due to 1) weak farmer economics, 2) expectation of lower cultivation for wheat crop in Rabi 2025, and 3) concerns around government considering to abolish Support Price Regime for major crops. However, October offtakes may improve with sowing for wheat crop to start later in the month.
Baluchistan Glass (BGL) held its analyst briefing to discuss FY24 results and future outlook of the company. Following, are the key highlights:
Company posted loss of PkR508 million (LPS: PKRR1.94) in FY24 that was in addition to a loss of PKR135 million (LPS: PKR0.52) a year ago.
Management attributed the loss mainly to an eleven-month closure, followed by just one month of production starting in June 2024. They highlighted that the costs associated with establishing and maintaining the initial furnace temperatures were significant, as the effects were concentrated on that final month’s output.
The cost of production remained high due to the unavailability of natural gas and desired gas pressure, which was below the sanctioned load. As a result, alternative and more expensive fuels such as LPG, furnace oil, and diesel had to be used.
Cost of gas remained high due to the 90% natural gas and 10% RLNG blend. The price of natural gas was PKR2,150/ MMBtu, while the inclusion of RLNG raises the overall cost to PkR2,300/ MMBtu.
The company currently operates three manufacturing facilities with a total capacity of 375 tons per day (TPD). However, only the facility located in Hub is currently operational, with a capacity of 110 TPD.
The sales mix currently consists of approximately 40% tableware and 60% container-ware glass.
As approved in the recent Extraordinary General Meeting (EOGM), the company plans to increase its paid-up capital by converting a loan of PKR 3.7 billion from holding company, after SECP’s approval.