LAHORE - State Bank of Pakistan’s (SBP) decision to keep the policy rate unchanged failed to weaken the investor sentiments at the local bourse. Investors also ignored domestic political uncertainty, as strong corporate announcements, US State department’s allocation of $2.4 billion for Pakistan and attractive valuations lured investors. Consequently, the KSE-100 Index gained 264 points (up 2.2 percent WoW) to close at 12,496 level. Also, the average daily volumes remained healthy at 175 million shares, up 3.2 percent WoW. During the outgoing week, foreign investors were net sellers worth $0.8 million.

SBP adopted a cautious approach and maintained the discount rate at 12 percent. The decision was due to the twin deficit concerns and absence of foreign fund flows. Moreover, SBP believes that inflationary pressures have not eased significantly and highlighted a risk of higher inflation in 2HFY12. Furthermore, trade numbers were released this week with exports reaching US$13.2 billion in 7MFY12 while overall import bill stood at US$26.3 billion. Hence, trade deficit reached US$13.2 billion in the period under review, an increase of 39.8 percent YoY.

ABL, ENGRO and DGKC announced their financial results this week. ABL reported EPS of Rs11.79 in 2011, up 23 percent YoY. Also, the bank announced a final cash dividend of Rs2.5/share and a 10 percent bonus issue. ENGRO’s result came in above expectations as the company posted an EPS of Rs20.5 in 2011, rising by 19 percent YoY. Along with the result, the company also announced a final cash dividend of Rs2 per share and a bonus issue of 30 percent. DGKC’s earnings too were above street estimates, reporting an EPS of Rs2.92, growing by a massive 566 percentYoY in 1HFY12.

DG Khan Cement Company Limited (DGKC) has announced its 1HFY12 financial results. The company has reported a superb 6.67 times higher earnings to Rs1.28 billion translating into an EPS of Rs2.92 as against the PAT of Rs192m (EPS of PKR0.44) in the corresponding period last year.  The gigantic growth in earnings of the company was primarily on the back of magnificent growth of 31 percent YoY in top line to PKR10.70 billion as against PKR8.18 billion in the same period last year because of strongly elevated retention prices which were seen 25 percent YoY higher in the country to PKR425/bag as against the per bag prices of PKR339 during the same period last year. The company owing to a dashing growth in top line and improved cost of sales mainly because of lower production would register a massive 106 percent YoY growth in its gross profit to PKR3.48 billion (gross margin of 32 percent) in comparison of PKR1.69 billion (gross margins of 21 percent) in 1HFY11.

DGKC has reported an enormous augment of 92 percent YoY in EBIT to Rs2.53 billion as against EBIT of Rs1.32 billion in the 1HFY11 despite a huge jump of 57 percent YoY to Rs1.36 billion in operating costs in comparison of Rs868m in the corresponding period last year mainly because of sharp rise in distribution cost which is anticipated to record a rise of 61 percent YoY to Rs1.24 billion. Nevertheless, the other income which has increased by a sharp 19 percent YoY to PKR650m has contributed about 51 percent share in total after tax profit as the EPS on core income would have been only Rs1.44. Higher other income was primarily on the back of heavy dividend income which company has received from its associates. Moreover, financial charges have also declined by a sharp 13 percent YoY to PKR886m in 1HFY12 as against the Rs102 billion is also expected to add the weight in earnings. 

It is expected that the DGKC to have even better earnings in 2HFY12 primarily because of expected solid dividends from its associates. As far as the core income is concerned, we believe, higher prices, decline in coal prices, lower interest rates and expected reconstruction activities within country would be the key factors to ensure a better overall performance in FY12.

Experts said that Pakistan stocks stayed bullish amid higher volumes in scrips across the board as investors cheer record earning announcements and payouts in oil, banking and fertilizer stocks.

Governement's Commitment for Iran-Pak gas pipeline projects, higher global commodities, easing political outlook, expectations for official announcements on resolution of CGT issues at KSE played a catalyst role in prevailing bullish sentiments.

Led by both large and small cap stocks Karachi bourse witnessed a rising turnover of more than 233 million shares equivalent to Rs7 billion, the rally is led by Engro Corp excellent payout which has triggered buying in all the leading shares.