PSX index slips on budget uncertainty, earnings outlook eyed
Pakistan Stock Exchange (PSX) remained range bound during the week, as uncertainty over the upcoming budget moderated investor confidence built on Pak-India ceasefire and the IMF agreement. The benchmark index declined by 546 points or 0.5%WoW to close at 119,103 points on Friday.
Market participation also weakened, with average daily traded volumes falling by 25%WoW to 492 million shares, down from 660 million shares a week ago.
As regards FY26 Federal budget, revenue target is expected to rise to PKR14.3 trillion from FY25 target of PKR12.3tn. A key highlight includes tariff rationalization; capping the highest tariff at 15%, removing Additional Customs Duty (ACD), and reducing Regulatory Duty by 80% till FY30.
The National Accounts Committee approved the provisional GDP growth at 2.68%YoY for FY25. Consequently, Pakistan’s economy has expanded to US$411 billion, making it the 40th largest in the world and pushing per capita income to a record US$1,824.
In its post–first review report, IMF acknowledged that Pakistan has met all quantitative performance criteria, most indicative targets, and several structural benchmarks.
IMF also revised down GDP growth and current account deficit forecasts and updated the timelines of structural benchmarks along with introducing new ones for the coming year. Furthermore, IMF endorsed the GoP plan to eliminate the power sector’s circular debt by FY31.
On the currency front, PKR depreciated by 0.11%WoW to close at PKR281.97/US$. Foreign exchange reserves held by State Bank of Pakistan (SBP) increased by US$1.0 billion to a 17-week high of US$11.4 billion.
Other major news flow during the week included: 1) IMF projects external debt to rise to US$126.7 billion by next financial year, 2) Profit repatriation jumps 115%YoY in last month, 3) During Q3FY25 Pakistan economy posts 2.4%YoY growth, and 4) Power generation surges 22%YoY in April 2025.
Woolen, Transport, and Inv Banks/ Cos & Securities Cos were amongst the top performers, while Sugar & Allied Industries, Cement, and Cable & Electrical Goods reported remained laggards.
Major selling was recorded by Mutual Funds, other organizations, and Companies with a net sell of US$10.1 million, US$4.1 million, and US$2.9 million respectively. Individuals and Insurance absorbed most of the selling with a net buy of US$13.1 million and US$7.5 million, respectively.
Top performing scrips of the week were: POML, RMPL, GADT, BNWM, and PKGP, while laggards included: HUMNL, NATF, LUCK, AVN, and MARI.
According to AKD Securities, the market is expected to remain positive in the coming weeks, with developments around the upcoming federal budget likely to guide short-term sentiment. The KSE100 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 picks of the brokerage house include: OGDC, PPL, PSO, FFC, ENGROH, MEBL, MCB, HBL, LUCK, FCCL, INDU, and SYS.
Mari Energies (MARI) announced 3QFY25 profit after tax of PKR15.9 billion (EPS: PKR13.25), up 42%QoQ and 13%YoY. This was higher than market expectations, a deviation largely stemming from higher than expected revenue and lower effective tax rate. The result takes 9MFY25 net profit to PKR46.3 billion (EPS: PKR38.54), down 10%YoY.
Net revenue increased by 10%QoQ to PKR45.6 billion but was down 5%YoY. Sequential improvement in net sales was largely led by higher oil prices, international oil prices up 4%QoQ on average.
Operating expenses declined significantly by 45%QoQ to PKR8.3 billion, primarily due to the absence of a one-off amortization charge booked in the previous quarter. However, the reported figure still came in higher than expectation, likely attributable to increased workover activity during the quarter.
MARI’s royalty expense rose sharply by 45%QoQ to PKR11.6 billion, reflecting the full impact of the incremental royalty imposed on MARI D&P. Consequently, royalty as a percentage of net sales increased to 25%, from 19% in the earlier quarter.
The company’s financial income declined by 24%QoQ to PKR1.8 billion, primarily due to a drop in interest rates, with the 6-month KIBOR falling by 156bps over the quarter.
MARI posted decent earnings during the quarter, driven by the absence of one-off amortization charges and a lower effective tax rate. However, IMS Securities expects earnings to slightly decline going forward due to weaker oil prices and the anticipated normalization of the tax rate. On the operational front, the long-awaited Shewa field in the Waziristan block commenced production during the quarter, with initial flows of 55mmcfd of gas and 585bpd of oil, which should partially support profitability.
Pioneer Cement (PIOC) has posted profit after tax of PKR974 million (EPS: PKR4.29) for 3QFY25, down 44%QoQ and 19%YoY. This takes 9MFY25 net profit to PKR3.7 billion (EPS: PKR16.50), flat YoY. The result came in much lower than expected, the deviation is mainly due to lower than expected gross margins.
Net sales were reported at PKR7.90 billion, down 11%QoQ. The sequential decline was driven by a 7% reduction in cement prices and a 4% drop in volumes.
Gross margins declined sharply to 26%, significantly below the estimate. Analysts believe the deviation is likely due to the recognition of royalty costs this quarter, which were unusually low in the previous quarter.
Financial costs continued their downward trend, falling 18%QoQ to PKR286 million, driven by decline in interest rates and a sharp 40% reduction in short-term borrowings.
The company recorded an effective tax rate of 38%.
PIOC reported weak results this quarter, primarily due to a sharp decline in gross profitability, posting the lowest margins in the IMS cement universe for 3QFY25—even below DGKC, which has historically underperformed its peers. That said, the company’s high sensitivity to coal prices, given coal accounts for 60% of its power mix, could turn into a near-term advantage, as coal prices have declined 11%. Furthermore, the recent rise in cement prices is expected to aid margin recovery going forward.