EXECUTIVE SUMMARY
On the macro-economic level, the 3rd quarter of 2022 was marked by the persistence of inflationary tensions in Morocco with an average level of 8.0%, the downward revision of GDP growth forecasts to 0.8% for the year 2022 and the raising by Bank Al-Maghrib of its Key Rate by 50 PBS to 2.0%. A general context that remains less favorable to Equities.
Since the release of our two reports in June (Cf. The hidden risks of the sharp rise in activity in Q1-22) and in October (Cf. Deterioration of growth outlook for H2-2022), the Equity market lost 13.0% of its valuation. At this point, a legitimate question arises: ¡§Does the MASI index integrate most of the negative information related to the current context?¡¨.
The analysis of listed companies(1) achievements in Q3-22 reveals that the Equity market has not yet consumed most of its downside potential. In fact, the repercussions of the weakening Demand and the inflationary context would be more visible in the coming quarters. A scenario supported by the following points:
- The deceleration in the growth of the market's revenue, from an average of +15.3% over the first two quarters of the year to +11.4% at the end of Q3-22. At the same time, the number of companies showing a drop in their revenue rose sharply, from 12 in Q4-21 to 22 in Q3-22. In our opinion, this trend reflects the continued decline in companies' order books in a context where built up inventories remain at relatively high price levels ;
- The main contributors to the change in the market's revenue in Q3 22 are the Energy and the Agri-business sectors, which still benefit from a positive price effect (i.e. MAD +5.5 Bn).
Nevertheless, these developments in terms of revenue are far from reflecting the trend in margins, which should be under pressure during 2022;
- The banking sector presents a different growth profile from that of the market. Thanks to a significant provisioning effort made at the start of the pandemic in 2020, listed banks would still have a room to improve their profits in 2022. Thus, the continued normalization of the cost of risk remains the main driver of the sector's earnings growth.
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