Total corporate earnings reported by listed companies during the quarter ended June 2021 has significantly increased year-on-year; however, compared to March 2021 quarter it has declined according to ‘Earning Highlights’ for Quarter Ended - June 2021 complied by SC Securities (Pvt) Ltd.
Earnings in Quarter Ended (Q/E) June 2021 surged by 122% YoY; mainly due to the low base effect in Q/E June 2020 as a result of the 7 weeks lockdown. However, Compared to Q/E March 2021 earnings in June have plummeted 30% QoQ. This could be partly due to the 3 week travel restriction that prevailed during the month of June 2021.
Banking as well as diversified finance sectors earning rose by 25% and 14% YoY; backed by higher Net Interest Income (NII) compared to the corresponding quarter of the previous year. However, compared to the Q/E March 2021, earnings have declined 24% and 51% QoQ respectively, mainly due to higher impairment charges and lower fee & commission income.
Revised policy rates could improve Net Interest Margins (NIMs) of banks; however, this benefit could get offset by the surge in Non Performing Loans (NPLs) due to the current economic turmoil. Industrial sector was the second largest contributor (19%) to the corporate earnings of the CSE; while, EXPO and RCL were the main contributors in terms of earnings.
During Q/E June 2021, Capital Goods sector earnings improved YoY on the back of depreciation of LKR against USD and import protectionism; however, earnings have declined compared to the previous quarter. Considering the ongoing lockdown, and the rapid increase in COVID19 infections owing to the spread of the Delta variant, the industrial segment would operate below capacity; consequently, this could have a negative impact on future earnings. The Food, Beverage, and Tobacco sector saw strong earnings growth of 94% YoY driven by rising commodity prices.
“We expect plantation sector companies to perform well in future periods underpinned by higher commodity prices coupled with depreciation of LKR against USD.” The Telecommunication sector contributes 11% to the total earnings, and sector earnings surged by 68% YoY due to the increase in data consumption.
“Well developed infrastructure and the product portfolio coupled with new normal conditions would improve the profitability of the telecommunication service sector in the upcoming period.” All counters in the Healthcare Service sector reported profits during Q/E June 2021, compared to the losses made in the corresponding period of the previous year.
“We are bullish on the Healthcare Service sector owing to the rapid increase in PCR testing volumes and increase in occupancy rates amid Covid-19 pandemic.Considering the prevalent situation with travel restrictions and lockdown measures, we expect the hotel segment to post losses in the coming few quarters.”
The Energy sector posted negative earnings during Q/E June 2021 mainly due to losses incurred by Laugfs Gas.
0 comments: