Pakistan Stock Market Review

KSEIn line with its on-going momentum, benchmark of Karachi Stock Exchange, KSE-100 Index gained 481 points or 1.35%WoW reaching its historic high during the week ended on 7th August and closed at 36,223 points. Despite the broader index remaining in green territory, average daily turnover for the week went down sizably by 26.7%WoW to 295.4 million shares with average value of US$132.6 million – up 5.53% WoW).

Key news flow during the week were: 1) expectations of elevated Iranian oil output by 500,000 barrels per day upon lifting of sanctions to pose downside risk to oil prices, 2) imposition of a Rs10.7 million fine by OGRA on 12 OMCs for overcharging consumers during the petrol crisis of January this year, 3) collection of Rs143.2 billion up by 6.9%YoY during first month of current financial year, 4) amendment of KSE regulations relating to audit requirement of SECP, 5) borrowing of Rs356 billion in the latest MTB auction, where cut-off yields remain unchanged for all tenors.

Leaders at the bourse during the week were PSMC, DAWH, FFBL, HCAR and AGTL, while laggards included SSGC, SNGP, HBL, POL and PTC. Foreign investors remained buyers with net inflows of US$4.90 million. Successful completion of IMF review and continuation of result season is expected to bag in positivity (key upcoming result announcements include MCB, EFERT and POL. However, risks emanate from planned increase in the gas tariff and any unexpected shifts in global oil prices. Analysts recommend cement scrips (on continued weakness in coal prices), Autos and Banks (on anticipated strong earnings.

Indus Motor Company Limited (INDU) is scheduled to announce its annual results on Friday, 28th August. The Company is expected to announce its all time high earnings in 4QFY15 earning per share (EPS) of Rs41.8, up 112%YoY taking FY15 cumulative earnings to Rs123.5/share. The growth in earnings is expected on the back of: 1) improved gross margins on back of favorable PkR/USD and JPY/USD parity and 2) higher capacity utilization during FY15 posting sales of 56,943 units, up 67%YoY units with sale of new Corolla variant at 51,398 units. Along with the result a final dividend of R30/share is also expected. INDU has outperformed the KSE‐100 index by 32.4% CYTD. Possible upside may come from realizing of operational efficiencies geared towards enhancing production volumes.

G. Khan Cement (DGKC) is expected to announce its 4QFY15 results during the first week of September, where analysts project NPAT to settle at Rs2.17 billion (EPS: Rs4.94), up 7%YoY. The growth in earnings is expected on the back of: 1) improving local dispatches ‑ up7%YoY, 2) stable local prices to cover revenue losses from weaker exporting price, and 3) 40bps YoY improvement in gross margin. Analysts project effective tax rate to rise to 24.9% for 4QFY15 as compared to 22.5% for 4QFY14 due to imposition of 3% super tax. Subsequently, FY15 earnings would rise to Rs7.54 billion (EPS: Rs17.21), up 26%YoY. Additionally DGKC’s move into the South is expected to help the Company in unlocking future growth opportunities, where it would be well placed to cater the additional demand once the plant rolls out its first production batch after installation within 36 months. Currently, analysts have an Accumulate stance on the scrip as it offers an upside potential.

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