The State Bank of Pakistan’s (SBP) much-awaited policy rate cut today is expected to positively impact the earnings of at least 13 listed companies on the main bourse.
According to Arif Habib Limited, today’s rate cut of 150 basis points is expected to positively influence five key sectors.
“Policy rate cut positive for cement, power, textile, chemical and auto sectors,” the brokerage house said in a brief statement.
Winners
The cement sector emerges as a primary beneficiary of the rate cut. According to AHL, D.G. Khan Cement Company (PSX: DGKC) will see a 5.8 percent increase in its earnings per share (EPS), while earnings of Attock Cement Pakistan Limited (PSX: ACPL) will see a 3.0 percent uptick.
This outlook stems from lower financing costs as a result of the rate cut, which will bolster profitability and enhance sectoral expansion.
HUB Power Company (PSX: HUBC) stands to gain from the new interest rate, with its EPS set to grow by 1.6 percent.
Textiles will gain big as well. Nishat (Chunian) Limited (PSX: NCL) and Nishat Mills Limited ({SX: NML) will each witness an EPS growth of 12.0 percent and 3.7 percent, per AHL data.
The chemical sector is another beneficiary. EPS of Lotte Chemical Pakistan Limited ({PSX: LOTCHEM) is expected to rise by 1.8 percent while Engro Polymer & Chemicals Limited (PSX: EPCL) will see a 1.6 percent improvement. Reduced financial expenses are likely to improve profit margins and support strategic growth plans.
The auto sector is looking at a few lucky gains as well. According to AHL, Honda Atlas Cars (Pakistan) Limited (HCAR) and Ghandhara Nissan Limited (GNL), are expected to see an EPS growth of 3.7 percent and 3.2 percent, respectively. Lower financing costs for consumers and manufacturers alike are likely to improve topline and profitability for listed auto companies.
Losers
Banks and Exploration & Production (E&P) sectors will have it rough.
Banks like MCB Bank Limited (PSX: MCB), United Bank Limited (PSX: UBL), and Bank Alfalah Limited (PSX: BAFL) are projected to face declines in EPS by 4.1 percent, 6.2 percent, and 8.1 percent, respectively. In the E&P sector, Pakistan Oilfields Limited (PSX: POL) and Oil & Gas Development Company Limited (PSX: OGDC) are tipped to see their EPS decrease by 2.3 percent and 0.6 percent, respectively.
The reduced interest rate is expected to compress net interest income for bank stocks, presenting headwinds for the sector as a whole. Meanwhile, reduced returns on investments and currency volatility in the coming months may hurt E&P stocks. Fertilizer stocks are expected to take hits as well.
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