Index remains bullish amid geopolitical tension
Pakistan Stock Exchange (PSX) continued its bullish momentum during first half of the week. The announcement of Federal Budget was well-received by investors and perceived as broadly positive across most sectors. Optimism was further supported by expectations of a potential rate cut in the upcoming Monetary Policy Committee meeting scheduled for June 16, 2025. The market reached a new all-time high on Wednesday, closing at 124,353 points. However, this momentum waned towards the end of the week due to rising geopolitical tensions following Israel’s attack on Iran. Still the benchmark Index closed the week at 122,144 points, up 0.4%WoW.
The daily average traded volume increased by 37.3%WoW to 907 million shares, up from 660 million shares in the earlier week.
Workers’ remittances were reported at US$3.7 billion for the month of May 20225.
Auto sales for May 2025 rose to 16,941 units, up 19%YoY, driven by higher Passenger Cars and LCVs sales.
Foreign exchange reserves held by State Bank of Pakistan (SBP) increased by US$167 million, ending the week at US$11.7 billion as of Jun 06, 2025.
PKR depreciated by 0.28%WoW against the greenback.
Major news flow during the week included: 1) Federal Budget FY26 targets 4.2% real GDP growth, 2) current account deficit projects US$2.1 billion, 3) carbon levy imposed on POL products, 4) tax rate cuts for salaried class, and 5) Pakistan secures US$700 million loan for Reko Diq project.
Woollen, Textile Spinning, Textile Weaving, Glass & Ceramics and Modarabas were amongst the top performing sectors, while Refinery, Vanaspati & Allied Industries, Technologies & Communication, Transport, and Cable & Electrical Goods were the laggards.
Major selling was recorded by Foreigners with a net sell of US$7.4 million, Banks/ DFI absorbed most of the selling with a net buy of US$8.0 million.
Top performing scrips of the week were: PKGP, BNWM, GHGL, KTML, and MLCF, while top laggards included: POML, FCEPL, KEL, CNERGY, and HUMNL.
According to Pakistan’s largest brokerage house, AKD Securities, the market is expected to remain positive in the coming weeks, with federal budget being broadly positive or neutral across most sectors, along with room for rate cut during CY25.
The benchmark index 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.
Top picks of the brokerage house include: OGDC, PPL, PSO, FFC, ENGROH, MEBL, MCB, HBL, LUCK, FCCL, INDU, and SYS.
Pakistan State Oil (PSO) held its analyst briefing to discuss 9MFY25 financial results and future outlook. PSO reported net sales of PKR2,336 billion during 9MFY25, down 13%YoY, primarily due to lower average fuel prices and a 7%YoY decline in delivered volumes to 5.3 million tons. However, unconsolidated net profit rose 14%YoY to PR15.3 billion as against PKR13.4 billion for 9MFY24, supported by declining finance costs and higher other income.
On a consolidated basis, profitability declined 42%YoY to PKR10.7 billion, as falling oil prices and weak refinery margins weighed on overall earnings. Company expanded its footprint by commissioning 67 retail outlets during the period, bringing country-wide total to 3,641 outlets.
Company’s future initiatives include: 1) EV charging stations, 2) blue LPG, 3) rehabilitation of storage terminals, 4) investment in PRL for expansion and 5) maintain leadership in JP segment.
Management refrained from commenting on the government’s circular debt clearance plan but indicated that discussions are ongoing at the ministry level. Management stated that priority would be to pay-off all existing loans, following which new investment opportunities may be explored once liquidity becomes available. Furthermore, as per agreement between management and the Ministry of Petroleum, PSO has ceased accruing further receivables from SNGP, with RLNG payments flowing smoothly as of May 2025. Principal receivables from SNGPL is reported at PKR323 billion, while LPS receivables exceed PKR200 billion as per management.
OMC market during the outgoing year has remained highly competitive, with smaller operators offering discounts which PSO has opted not to match. Management emphasized on growing the current market share through organic means rather than pricing competition.
Management showed concerns regarding the ongoing sales tax issue, however, noted the previous price revision addressed the ongoing losses on sales tax recovery. However, the past-due sales tax receivables remain an issue.
No revision in OMC margins is expected in the upcoming pricing cycle given recent oil price increases. A detailed proposal for margin revision has been submitted by the company, which is presently awaiting approval by the authorities.
Management projects 3–5% growth in MS/HSD industry volumes for FY26. Quantum of petroleum smuggling is estimated at 2,000 to 4,000 tons per day.
On EV charging stations, procurement cost of a single charger is between US$20,000 to US$25,000, where in company anticipates gross margins of 15-20% from this segment. AKD Securities have a ‘BUY’ rating on the stock. Its liking for the stock is on the back of 1) improving liquidity situation amid ongoing gas-tariff reforms, 2) anticipated growth in OMC volumes on the back of economic recovery, 3) anticipated increases in OMC margins, and 4) up gradation of refinery subsidiary (PRL) to be fruitful for consolidated bottom-line.