Budget impact on key industries
The FY27 Federal Budget is net positive for equities. Super Tax phase-out, even if gradual and IMF-conditioned, provides a structural earnings tailwind across the listed universe. The likes of Cement, Autos, and Textiles benefit from both corporate relief and sector-specific measures. Real estate and construction stimulus, Section 7E abolition, simplified advance tax, PM Apna Ghar allocation, are credible demand catalysts for Cement. FBR execution risk is the primary overhang, the PKR15.3 trillion target requires a step-change in compliance. Index direction beyond the budget remains anchored to the SBP rate cycle and US-Iran tensions.
Construction Materials
PSDP allocation has been increased to PKR3.7 trillion as compared to revised target of FY26. Property transaction taxes cut on sale to 2.75% (from 4.5–5.5%), and purchase to 1.25% (from 1.5–2.5%). Section 7E deemed-income tax on property (5% of Fair Market Value) abolished. Increase in subsidy for PM Apna Ghar Scheme. Export development surcharge of 0.25% has been abolished. Reduction of Customs Duty on vehicles for construction companies to 10% from 20%. Super tax reduced for large corporates to 8% above PKR500 million (from up to 10%), zero tax on the PKR150 million to PKR500 million band. Steel shifted to electricity-based sales-tax collection on melters/ re-rollers/ composite units, with refunds gated to digital integration.
Higher PSDP allocation would increase public sector demand, supporting demand for cement and steel. The property package (reduction in transfer cost and section 7E removal) should revive investments in real estate and drive cement and long-steel demand. Subsidized housing finance would support the construction demand. Abolishment of export development surcharge enhance exports contribution margins. Positive for LUCK, DGKC, ACPL, POWER, and MUGHAL. Electricity-based steel collection pushes documentation in favor of listed re-rollers. Super-tax relief is directly EPS-accretive for large-cap cement and steel players
Automobiles
GST on Hybrid and PHEV rationalized to 18% from 8.5% to 12.75%. New Special Excise Duty of 40–41% on large-engine imported vehicles, adding onto the existing vehicle FED. Value-based FED on imported CBU EVs: 0% up to PKR20mn, 30% PKR20 million to PKR 30 million, 40% above PKR30 million. EV local-assembly incentives extended till FY27 (1% GST for small cars/SUVs ≤50kWh and LCVs ≤150kWh; 50% concessional duty on EV-related parts). Moreover, 1% GST concession extended to electric trucks as well. Potential reduction in duties on CKD imports under NTP26-30.
Domestic auto assemblers are expected to benefit from income-related relief measures (salary and super tax reductions), which should support consumer demand. The proposed increase in GST on hybrids and PHEVs is likely to raise vehicle prices, potentially impacting sales volumes. Alternatively, if OEMs absorb the higher GST, it would pressure their margins. Negative for SAZEW and NPL. Increased taxation on imported vehicles to partially offset the impact of reduction in duties under NTP26-30. Concessions for locally assembled EVs have been extended until FY27, encouraging shift toward EV segment. Positive for BYD and LUCK
Banks
Super tax maintained at 10% for Banks. Reduction on salaried taxes and super tax for corporates. Income of asset-backed-securitization SPVs exempted, supporting structured-finance activity. WHT on cross-border transaction reduced to 0.5% from 5%. Allocation under PM Apna Ghar Scheme to provide subsidized housing. Minimum turnover tax on telecom infrastructure increased to 7%. Reduction of tax on terminal and port services to 12% from 15%. Allocation of containment of circular debt set at PKR252 billion for FY27.
Higher disposable incomes from salary and super tax reductions to enhance deposit growth and elevate formal channel activity. Subsidized Housing program would enhance advances growth. It is believed that deposit growth to reduce OMO requirement. The SPV securitization exemption is positive for banks active in structured finance. Increase in MTR on telecom infrastructure would negatively impact country’s largest telecom operator ‘Deodar’, though the expected impact to be diluted with increasing profitability – negative for ENGROH. Decline in minimum taxation on terminal would enhance profitability of Engro Elengy terminal – positive for ENGROH. Reduction in circular debt would positively impact cash flows of power companies. Positive for HUBC, LUCK, ENGROH, and FFC
Fertilizers
Super tax remains unchanged at 10%, exemption of CD, ACD and RD on import of Agricultural Machinery and subsidy allocation to Fertilizer plants for Production and supply of urea, along with allocation for import of urea.
Allocation of subsidy for supply of urea can be utilized for farmers support program, leading to improvement in demand. Analysts do not foresee utilization of the urea import subsidy, given elevated local inventory position. Exemption of duties on agricultural machinery would positively impact farm economics and support corporate farming initiatives.
Textiles
Final Minimum turnover tax reduced to 1.25% from 2% (including 1% advance tax). Export development surcharge of 0.25% has been abolished. Extension of the Export Finance Scheme (EFS) utilization period from 9 months to 18 months. Enhanced allocation for mark-up subsidy to support SBP EFS.
Reduction in MTR would positively impact companies’ profitability. In addition, abolishment of advance tax would ease exporters cash flows. Higher allocation for EFS would enhance working capital availability at cheaper rates. Positive for ILP, NML, NCL, and GATM.
OMCs and Refineries
Sales-tax exemption on machinery for upgradation of existing refineries, supporting the refinery upgradation/ BMR drive to be presented in upcoming refinery upgradation policy. New FED of PKR80/ liter on petroleum solvents (naphtha, white spirit/ MTT, solvent oil). Petroleum Development Levy (PDL) collection target has been set at PKR1.7 trillion for FY27, up from the revised PKR1.5 trillion in FY26.
Refineries remain the winners as the imported capex exemption lowers the capital cost of long-pending brownfield upgradations. The PKR80/liter solvent FED to deter adulteration in motor-vehicle fuels, and eventually uplift formal OMC sales. The petroleum levy target seems attainable, assuming growth of 4% in volumes for FY27 under the current PDL setting and the eventual resolution of geopolitical conflicts.