JS Securities Limited – JS Research (02 June 2023)

Karachi, June 02, 2023 (PPI-OT): May CPI marks near-term peak; trend to head south June onwards

With May CPI touching 38%, we believe the trend has touched a near term peak on a YoY basis. While the sequential uptick will continue, the long-awaited base effect will finally kick in from Jun-2023 readings.

We build in a 100bp MoM increase in Jun-2023, but the YoY CPI reading for the month falls to 31% - signifying the base effect; followed by a decelerating trend from there onwards.

Entering FY24, a MoM average trend of 90bp is expected to average FY24F CPI at 20%, lower than FY23E average of 29%. On the core front, we expect NFNE pace to decline from 20.4% YoY in FY23E, to 14.8% YoY in FY24F.

While we have built in the direct impact of Petrol/HSD product prices being reduced by Rs20/Rs40 per ltr in last 2 months, the second-round impact is yet to reflect and could bring respite to future CPI readings if oil prices continue to remain benign.