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KARACHI: The profit after tax (PAT) of KSE-100 index companies increased by 16 percent on year-on-year basis to Rs 1.2 trillion in FY23 as compared to last year FY22 growth of 23 percent.

The FY23 profit growth was in line with last 10-year average growth of 13 percent for KSE-100 index companies, analysts said.

“This growth in earnings is majorly contributed to by Banking sector (up 68 percent YoY) and the E&P Sector (up 69 percent YoY) in FY23,” Sunny Kumar, an analyst at Topline Securities said adding that excluding Banks and E&Ps, KSE-100 index companies profitability was down 32 percent YoY.

In USD terms, PAT down 17 percent YoY to $ 4.9 billion versus growth of 11 percent in FY22. EX-Banks and E&Ps’ PAT down 51 percent YoY in FY23.

Banks earnings were up 68 percent YoY to Rs 421 billion (35 percent of total KSE index profitability) in FY23, primarily driven by higher Net Interest Income (NII) amid highest ever interest rates. Similarly, E&Ps’ profits were up 69 percent YoY to Rs 415 billion (34 percent of total KSE-100 index profitability) due to significant rupee devaluation as their revenues are dollar-linked, Sunny Kumar said.

Though, the profits of E&Ps are rising but concern remains on the quality of these earnings as a significant percentage of the earnings are not cash earnings due to circular debt and piling up of receivables for companies in energy chain.

Other sectors like OMCs, Power, and Automobile, recorded decline in earnings during FY23, with profitability decline of 88 percent YoY, 90 percent YoY and 94 percent YoY, respectively.

Pre-tax earnings (PBT) of KSE index companies increased by 19 percent YoY to Rs 2.1 trillion in FY23 versus 46 percent YoY in FY22. Higher tax of Rs 887 billion in FY23 also affected after tax earnings.

Net sales of KSE-100 index companies were up by 34 percent YoY in FY23. However, gross margins declined to 21 percent in FY23 as compared to 23 percent in FY22.

“For our analysis, we have taken 87 companies out of the total 100 companies (that have announced their results), which represents 96 percent of KSE-100 Index market capitalization and 82 percent of total market capitalization. We estimate that adding remaining companies of Index would not materially impact profitability growth trend,” Sunny Kumar said.

Copyright Business Recorder, 2023

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