KSE-100 Companies’ Profitability Jumped by 60% YoY in FY2020-2021

KSE-100 index companies reported record-high profitability in the fiscal year 2020-2021, according to a report released by a brokerage company, Topline Securities.Advertisementhttps://1f13008c15f1fdfd45d3efa6f18cdd1f.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

The companies’ profitability grew by 60 percent year-over-year (YoY) to Rs. 884 billion. This was mainly led by “macro recovery post-COVID-19 lockdowns” in FY 2021, Topline Securities said.ALSO READPSX Holds Gong Ceremony to Mark World Investor Week

The company said that this profitability was significantly higher than the last 5-year and 10-year Compound Annual Growth Rates (CAGRs) of 8 percent and 11 percent, respectively.

It was also higher than what was reported in FY 2019-2020, which was before the COVID-19 pandemic hit when the profitability of KSE-100 companies stood at Rs. 624 billion.

This means that profitability in FY 2020-2021 is up 41 percent in the past two years.

“This boost in profitability was augmented by pent up demand and expansionary policy adopted by SBP and the government,” Topline Securities said.Advertisementhttps://1f13008c15f1fdfd45d3efa6f18cdd1f.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

The State Bank of Pakistan (SBP) had reduced the Policy Rate by 625 basis points to 7 percent in the first half of FY 2020-2021. The central bank had also introduced relief schemes for companies such as the
Temporary Economic Refinance Facility (TERF), loan restructuring schemes, and the SBP Rozgar scheme.

These measures allowed companies to avail of concessional financing and to apply for loan repayment extensions and concessional financing for the payment of employee salaries.

Similarly, the finance cost of KSE-100 index companies fell 37 percent YoY to Rs. 87 billion in FY 2020-2021. In addition, net sales increased by 7 percent YoY to Rs. 7 trillion, while gross profits improved by 23 percent YoY to Rs. 1.9 trillion. This led to gross margins rising to 27 percent in FY 2020-2021 from 23 percent in the previous fiscal year.ALSO READPakistan’s IT Sector Should Match Europe/US: President Alvi

In the last quarter of FY 2020-2021, the profitability of KSE-100 index companies jumped by 85 percent YoY and 6 percent quarter-over-quarter (QoQ) to Rs. 246 billion. Net sales rose by 28 percent YoY and 11 percent QoQ.

Topline Securities used 93 companies out of the total 100 companies in its analysis. This represents 98 percent of KSE-100’s market capitalization.