The best performing listed companies on the Pakistan Stock Exchange (PSX) recorded a cumulative growth of 22% in their net profit which reached 1 trillion rupees despite the economic downturn and the imposition of a super tax during the past year. the fiscal year ended June 30, 2022.
Net income, however, marked a significant slowdown as it increased by 55% in the prior year. “The slowdown in growth is mainly due to the impact of the super tax,” Topline Research analyst Sunny Kumar reported on Saturday.
In US dollars, after-tax profit increased 10% year-over-year to $5.6 billion, while pre-tax profit increased 28% to $9.9 billion in FY22 .
In the FY23 budget, the government imposed a super tax of 10% on 15 specified sectors with revenues exceeding Rs 300 million for the tax year 2022 (FY22) with retroactive effect.
In addition, a super tax in increments of 1-4% has been imposed on sectors excluding specified areas with revenues of Rs 150-300 million or more.
The increase in profits in FY22 was led by Petroleum Marketing Companies (OMC), whose profits grew 192% year-on-year, Oil & Gas Exploration (E&P) companies, in up 30%, and refineries up 639%.
“While earnings are growing, concerns remain about the quality of those earnings as a significant percentage is non-cash earnings due to circular debt and the build-up of receivables for companies in the energy chain” , said Kumar of Topline.
Other sectors such as textiles, banking and chemicals also provided major support in FY22, with earnings growth of 74%, 3% and 17% year-on-year respectively.
On the other hand, the Fertilizer and Energy sectors reported declining profits in FY22, with profits down 9% YoY each.
Despite strong earnings, dividend payout declined by 3% year-on-year to Rs 392 billion in FY22. “This is likely due to circular debt which affects corporate cash flow,” Kumar said.
“E&P company dividend remains stable despite 30% earnings growth. Similarly, bank dividends fell by 12% year-on-year.
For its analysis, the brokerage selected 81 companies out of a total of 100 companies (which announced their results), which represent 93% of the market capitalization of the KSE-100 index.
“We believe that the addition of remaining businesses will not have a significant impact on the trend of profitability growth,” he explained.
CMOs emerged as the best sector. Its profit rose to Rs 115 billion in FY22 from Rs 39 billion in FY21, mainly due to inventory gains.
Pakistan State Oil (PSO) is the market leader in the OMC sector, with a profit of 86 billion rupees against 29 billion rupees last year. It was followed by Attock Petroleum which announced a profit of Rs18.5 billion against Rs4.9 billion last year.
“The significant rise in earnings is primarily due to inventory gains followed by higher volumetric sales,” Kumar said.
E&P emerged as the second best sector where profits rose to 246 billion rupees, up 30%. Oil and Gas Development Company (OGDC) contributed a large share (54%) to the sector’s profit growth, followed by Pakistan Petroleum (22%), Mari Petroleum (13%) and Pakistan Oilfields (11%).
“Segment profit increased on net sales increase of 38% year-on-year amid rising international oil prices and devaluation of the rupiah against the US dollar .”
Published in The Express Tribune, September 25e2022.
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