Earnings Report /
Pakistan

Attock Petroleum: Q1 FY 20 results: Earnings beat on higher finance income/opex reduction

    Ahmed Raza
    Ahmed Raza

    Investment Analyst

    Intermarket Securities
    16 October 2019

    Attock Petroleum Limited (APL) posted Q1 FY 20 NPAT of PKR1,225mn (EPS: PKR12.31), down 21% yoy/22% qoq. This came in higher than our projected EPS of PKR8.81, majorly due to higher finance income and reduced operating expenses.

    Key highlights:

    • Net sales of PKR59bn, up 2% yoy due to higher prices even though petroleum volumes declined (down 12% yoy). During Q1 FY 20, APL’s market share in HSD remained stable on yoy basis (10.9%), but declined slightly in MS by 0.8ppts on yoy basis (8.9%)
    • Gross profits of PKR2,100mn which were slightly higher than our expectation, but down 21% yoy due to lower sales. We do not suspect any material inventory gains as prices remained stable on qoq basis (period end prices).
    • Operating expenses of PKR558mn, down 19% yoy where we were expecting higher depreciation charges after increased storage capacity. We also expect some FX gains as PKR appreciated by 2% against US$ on a sequential basis. However, these costs are likely to pick up in the coming quarters as per historical accounts.
    • Finance income of PKR516mn, up 63% yoy due to higher interest rates and potential jump in markup on delayed payments. This is partly countered by higher finance costs.

    This is a good result despite the absence of any material inventory gains, in our view. Unless oil prices become volatile, APL will book similar gross profits in the oming quarters, courtesy a stronghold on market share while costs may rise modestly. 

    Our Jun’20 TP of PKR390/sh for APL implies a Buy stance. While a delay in OMC margin revision remains a concern, APL’s presence in deregulated products and debt-free balance sheets makes it an attractive play in the OMC sector.

    Risks: (i) Exchange/inventory losses, ii) delay in increase in OMC margins, and iii) halt in group refinery operations.