Corporate earnings to recover in this Jan-June: EBL Securities analyst

Having suffered the bites of soaring prices of raw materials, energy, and dollar over the first half of the 2022-23 fiscal year, corporate earnings in Bangladesh are expected to recover in the January-June period of this year as the macroeconomic situation has improved, feels equity analyst Mohammad Rehan Kabir.

"If the energy crisis does not make a comeback, or any new crisis does not resurface in the global arena, listed companies will tremendously recover their earnings in Jan-June," expects the analyst heading the research wing of a top-tier brokerage firm EBL Securities Ltd.

The quarterly and half-yearly recovery would help firms avert an annual slide in earnings, expected Kabir in an interview with TBS.

In the 2021-22 fiscal year, businesses suffered sales and production declines in the 42 days of lockdown in July-August of 2021. Also, the April-June quarter of 2022 was a bad one due to the rapidly soaring dollar then.

Profits of most firms declined and many big names even counted losses till December. But they are in a better position now as most have transferred soaring costs on to the customers while the dollar is already fairly stable after a 25% appreciation in less than a year.

Energy crisis that peaked in September-October is fairly under control now while the global market of energy and commodities have corrected a lot, said Kabir.

For instance, the cement and steel mills are getting higher prices from the government against their supplies in government projects, and consumer product manufacturers are selling at higher prices.

Also, the IT firms that are in business expansion have potentials for business and earnings growth, according to the analyst.

Banking sector that awaits a boost from July this year where they can charge a higher interest rate after the lending rate cap withdrawal should enjoy a better profitability, he said, adding that well-governed banks offering a dividend yield higher than FDR interests are lucrative bets in the stock market.

Dividend yield is how much cash an investor gets as dividends against the cost of buying a stock from the market. 

However, after any interest rate hike, leveraged companies would have to face higher financing costs while the lenders and cash-rich businesses would earn more from interests.

Many lucrative stocks, offering a good dividend income, have been trading at floor prices nowadays and are good entries for long term investments, Rehan Kabir believes.

However, due to the pre-election caution of wealthy investors, the broader stock market index is anticipated to be in a narrow range this year, he added.