Strong Earnings Push KSE-100 to Highest Level in 4 Years
Last week, KSE-listed Indus Motors announced 57% jump in profits on record sales of Toyota Corolla cars. It was followed by Lucky Cement Ltd. (LUCK), Pakistan’s largest producer of the building material, announcing 71 percent surge in profits to a record as an increase in domestic sales offset a decline in exports. Pakistan Petroleum Limited (PPL), the country’s second largest oil and gas explorer, said its profits soared 30% to Rs40.9 billion in fiscal 2012. Strong earnings have also been reported by Unilever Foods and Bata shoes in the last few days.
Best Performing Market:
So far in 2012 Pakistan is the best performing market in Asia surpassing the Philippines which was the top performer until June of this year. Karachi stocks have also significantly outperformed all emerging stock smarket indexes, including Mumbai and Shanghai, in 2012.
Meteoric rise of Engro Foods symbolizes strong consumer demand in growing package food sector. Its CEO Muhammad Afnan Ahsan has forecast 81% increase in net income in the current year ending December 31, 2012. With a compound annual growth rate (CAGR) of 65 percent and a planned infrastructure investment in 2012 of eight billion rupees, Engro Foods has become the country's fastest growing local company catering to a wide range of consumers in Pakistan and overseas.
Undeterred by the gloom and doom reports in the media, Pakistani consumers are continuing to spend and private consumption has now reached 75 percent of GDP. It rose 11.6% in real terms in 2011-12 compared with just 3.7% growth a year earlier , according to Economic Survey of Pakistan. In fact, many analysts believe that Pakistan's official GDP of $220 billion is understated by as much as 50%, buttressing a recent claim by the head of Karachi Stock Exchange that Pakistan's real GDP is closer to $300 billion.
I believe that even a modest effort to increase tax collection can significantly improve Pakistan's state finances to support higher public sector investments in energy, education, health care and infrastructure.
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