Equity Analysis /

Pakistan OMCs: Sales jump in January, but outlook for slowdown remains intact

  • OMC sales rose 20% mom in January due to strong demand from the Power sector

  • FO sales doubled mom and HSD rose 20% mom. PSO gained 2ppt share

  • We continue to expect a slowdown ahead

Intermarket Securities
2 February 2022

As per provisional data, overall OMC sales in January 2022 rose 20% mom and 19% yoy to c.1.80mn tons. Excluding Furnace oil (FO), however, sales rose 12% mom. The big driving factor for demand was the Power sector, evident not only from doubling of FO sales mom but also strong HSD sales – benefitting PSO in particular.      

HSD sales rose 20% mom in January to 0.74mn tons (after falling 24% mom in the previous month); where, we understand from industry sources that the demand growth was led not by the Transport sector but the Power sector (greater usage at gas/RLNG based plants, where HSD is used partly for starting the plant, in our view). Furnace oil sales doubled mom to 0.25mn tons, but this could partly be because of off-take by IPPs, encouraged by the government to ensure refineries offload excess FO inventory and avoid shutdowns. Mogas sales rose 6% mom to 0.74mn tons, where the positive effect of closure of CNG stations was moderated by lower mobility in Punjab due to winter fog.  

Market shares: PSO fared well, because of its high exposure to the Power sector; its overall market share rose 2ppt to 47.7% (after two consecutive months of mom decline). APL’s overall share fell 0.5ppt, despite similarly good presence in the Power sector as PSO, where it underperformed in both FO and HSD markets. Underutilization of Attock group refineries can be attributed for weak show by APL, in our view. SHEL’s share fell 1.4ppt to 7.5% because of weakening demand from urban centers and bulk transport – amid high prices and slowing industrial activity.            

Overall industry sales during 7MFY22 rose 15% yoy to 12.91mn tons, with 19% yoy growth in HSD, 13% yoy in FO sales and 11% yoy growth in Mogas. Jet fuel sales rose 47% yoy to 0.25mn tons due to normalizing travel but are still below pre-Covid levels. HOBC sales fell 10% yoy to 0.09mn tons due to high prices.        

Outlook: We think the jump in January sales was due to some one-off factors which will not sustain in the coming months. Underlying demand continues to slow, under pressure from high retail prices and slowing industrial activity.