Equity Analysis /
Pakistan

Attock Petroleum: 4QFY19 preview – Inventory gains to contribute to earnings rebound

    Ahmed Raza
    Ahmed Raza

    Investment Analyst

    Intermarket Securities
    29 July 2019

    Attock Petroleum (APL) is expected to post 4QFY19 NPAT of PKR1,428mn (EPS: PKR14.35), which will be flattish on a yoy basis but up 4x qoq. This will take FY19 NPAT to PKR3,816mn (EPS: PKR38.34), down 33%yoy due to large inventory losses during 2Q/3Q. We forecast a final dividend of PKR10/sh, in addition to PKR10/sh paid already.

    Recovery in 4Q earnings will be led by handsome inventory gains as MS/HSD prices (excluding sales tax) went up by 26%/18% during the quarter; we are factoring in a gross profit of PKR2,606mn (including gains of PKR726mn) in 4Q. This will more than overweigh our expected exchange loss of PKR200mn as PKR depreciated by 12%qoq against the US$.

    Petroleum volumes were also stable on qoq basis (although down 9%yoy). More importantly, APL has improved its market share in both MS/HSD on a yoy basis. In 4Q, MS share is up by 0.9ppt to 9.2% while HSD share is up by 0.4ppt to 9.4%. This market share is sustainable in our view, given appropriate addition in retail sites and storages. Our topline forecast is of PKR54.0bn (down 4%yoy due to lower volumes). We do not expect any material changes in other income and effective tax rate.

    Our TP of PKR432/sh for APL implies a Buy stance. However, we are concerned with near-term issues related to OMC sector. These include implication of IFRS-9 (not factored here) and possible delay in increasing OMC margins (as margins were not increased as per FY19 CPI in Jul’19 prices).