PSX posts lacklustre movement; awaits key triggers
Pakistan Stock Exchange (PSX) witnessed lacklustre sentiments during the week ended on March 14, 2025.Trading activity remained subdued due to Ramadan, with average daily traded volumes plunging to 337 million shares.
The week started on a negative note as the State Bank of Pakistan (SBP) decided to leave the interest rate unchanged, coupled with the IMF raising concern over government’s plan for resolving PKR1.25 trillion circular debt through commercial bank borrowing, kept investors cautious.
However, positive developments in ongoing policy-level discussions with IMF improved sentiment during the last two trading sessions, enabling the benchmark index to close on Friday at 115,536 points, with weekly gains of 1,137 points or up 1.0%WoW.
As per news flows, IMF has agreed to cut the FBR tax target by PKR620 billion, lowering total revenue target to PKR12.35 trillion, while assuring readjustments in expenditure by authorities to maintain a primary surplus of PKR2.4 trillion.
Notably, FBR tax collection during 8MFY25 missed the target by PKR600 billion.
The IMF revised Pakistan’s GDP growth forecast to range between 2.0 to 2.25% from 3.6% earlier, while also lowering its inflation projection to 7.0% from 12.5%.
Meanwhile, Moody’s upgraded Pakistan’s banking sector outlook to positive from stable, along with upward revision in GDP projection.
Worker remittance increased by 39%YoY to US$3.1 billion during February 2025.
Foreign exchange reserves held by SBP eroded by US$152 million to US$11.1 billion as of March 07, 2025.
Other major news flow during the week included: 1) China rolls over US$2 billion loan to Pakistan for one more year, 2) GoP mulls higher petrol levy amid revenue shortfalls 3) Passenger car sales increased by 44.6%YoY to 67,135 units during first eight months of the current financial year, 4) GoP hikes gas tariff for captive power plants on IMF prodding, and 5) ECC approves amendments to net-metering regulations, cuts buyback rate to PKR10/unit.
Miscellaneous, and Inv. Banks/ Cos. were amongst the top performing sectors, while Jute, Synthetic & Rayon, and Glass & ceramics remained laggards.
Major selling was recorded by Mutual Funds with a net sell of US$7.6 million. Banks absorbed most of the selling with a net buy of US$7.6 million.
Top performing scrips of the week were: PABC, PSO, MARI, JDWS, and DGKC, while laggards included: IBFL, ISL, TGL, INIL, and PGLC.
According to AKD Securities, the market is expected to remain positive with the potential announcement of a staff-level agreement on the first review over the weekend acting as a key trigger for momentum.
The market is anticipated to sustain its upward trajectory, primarily driven by strong earnings in Fertilizers, sustained ROEs in Banks, and improving cash flows of E&Ps and OMCs, benefiting from falling interest rates and economic stability.
The top pick of the brokerage house include: MEBL, MCB, HBL, FFC, ENGROH, OGDC, PPL, PSO, LUCK, FCCL, INDU, ILP, and SYS.
NFDC has reported February 2025 Urea offtake at 347,000 tons, down 36%YoY and 22%MoM. This takes the cumulative Urea offtake for the ongoing Rabi season to 2.8 million tons, down 2%YoY despite strong headwinds in the agriculture sector (removal of support price and lower water availability). DAP sales volume grew 4%YoY in the ongoing Rabi season to 798,000 tons.
FFC Urea offtakes for February dropped 35%YoY to 156,000 tons, taking the 2MCY25 offtake to 506,000 tons, down 31%. FFC’s Urea market share improved to 45% in February. DAP offtake for the company plummeted 32% MoM, albeit lower than industry sales dropping by 35%MoM. This took FFC’s DAP market share to 62%.
EFERT Urea sales were recorded at 94,000 tons, down 52%YoY, against industry’s Urea sales decline of 31%. This took 2MCY25 Urea sales to 201,000 tons, down 51%. Urea market share improved to 27%, still below its historical market share of around 35%. DAP offtake for the company plummeted 86% YoY to 3,000 tons as against 25,000 tons in February 2024. Meanwhile, EFERT’s DAP market share dropped to 9% from 20% in February 2024.
Urea closing inventory was reported at 536,000 tons, highest closing stock for February since 2017. FFC contributed 12% to this number while EFERT has a contribution of 52% to the industry’s closing inventory. Meanwhile DAP inventory was reported at 160,000 tons with FFC and EFERT contributing 37% and 35%, respectively.
Despite strong headwinds in the sector (removal of support price for wheat crop, weak farm incomes, and low water availability), cumulative fertilizer offtake for Rabi season was almost flat, Urea down 2% and DAP up 4%.
Intermarket Securities maintains an overweight stance on the cement sector. Its cement universe, currently at a cyclical low with just 56% utilization, is set for multi-year volume growth supported by monetary easing and economic recovery. While the improvement may initially be slow, due to the focus on sustainable growth, it is expected to gain momentum over time.
Industry profitability remains strong, with pricing discipline upheld, as seen in recent price hikes. Additionally, falling coal prices, and renewable investments are expected to further support the bottom line.
The brokerage house has revised its cement sector estimates, increasing FY25 earnings by 6% while FY26 earnings have remained flat. The FY25 revision incorporates 1HFY25 results, including one-off gains from elevated other income and a lower effective tax rate, along with lower projected coal costs. FY26 sees a downward adjustment in local dispatches growth vs. previous estimates, broadly offset by declining coal prices.
The brokerage house has downgraded LUCK to Neutral due to rising gas tariffs and relatively stretched valuation (US$81/ton) and upgraded DGKC to Buy, due to rising profitability as a result of lower coal prices and efforts to penetrate the US market. MLCF remains its top pick, given its attractive valuation and management’s focus on cost optimization.
Domestic cement demand remains under pressure as the IMF urges fiscal discipline, which the government is likely to achieve by scaling back its ambitious PSDP targets and tightening tax enforcement in the real estate, agriculture and retail sectors. These measures should offset the expected boost to construction activity from the country’s recent monetary easing (policy rate cut from 22% to 12% over 8 months).