Equity Analysis /
Pakistan

Pakistan OMCs: HSD sales jumped significantly in April

  • OMC sales rose 13% mom in April due to very strong HSD sales

  • Demand from Agriculture lifted HSD sales, while sales of other fuels fell sequentially

  • We expect OMC sales to slow in May because of lockdowns in some cities and long Eid holidays

Intermarket Securities
4 May 2021

As per provisional data, overall OMC sales in April 2021 grew 13% mom to c.1.67mn tons (up 57% yoy). The sequential rise in sales was led by an impressive 47% mom increase in HSD sales, offsetting the decline in sales of Mogas and Furnace oil. The yoy comparison, however, is distorted by Covid-19 lockdowns last year.

HSD sales were revived by demand from Agriculture (which constituted nearly one-third of total sales), and these sales are expected to last until June, as per channel checks. Note that HSD sales in April of 0.78mn tons nearly surpassed the peak sales level since May 2018. In contrast, Mogas sales (petrol) fell 2% mom to 0.67mn tons because of reduced work hours amid Ramadan, worsened by lockdowns in some cities and closed schools. Furnace oil sales fell 17% mom amid greater availability of RLNG for the Power sector (corroborated by the decline in PSO’s share in FO sales by 12ppt mom).      

Overall market share trends in April: PSO’s overall market share was nearly flat mom at c.46.5%, but its share in HSD/ Mogas rose by more than 2ppt mom to c.48%/45%, thanks to its nationwide presence. In contrast, SHEL and Total-Parco are urban centric and are prone to lose share amid lockdowns (as happened last year). Overall share of SHEL and APL fell 0.6ppt to c.8.0% for each; the two OMCs underperformed in both the retail fuel markets, compared with Total-Parco and Go.

Petroleum consumption during 10MFY21 rose 20% yoy to c.15.8mn tons (ex-FO, 15% yoy). HSD and Mogas sales grew 20% and 14% yoy, respectively, given the broad-based economic rebound and crackdown on smuggled fuel (Mogas sales could have been better, if schools were open throughout the period). FO sales were up 50% yoy due to low availability of RLNG for power generation and low oil prices in the initial months of the period. PSO gained market share by c.3ppt yoy, while SHEL/APL lost share by 0.4/1.7ppt yoy.

It is worth pointing out that the strong sales in recent months have defied high prices of over PKR100/liter (testament to the strength of demand, but also because the government contained further price hikes). Nonetheless, we expect sales growth to slow substantially in May due to lockdowns in many Northern cities of Pakistan and long Eid holidays.