Equity Analysis /
Pakistan

Pakistan OMCs – Sales slowdown in Feb but may recover upon reduction in prices

  • As per provisional data, overall OMC sales in February 2022 rose 10% yoy but fell by a sharp 15% mom to c.1.54mn tons.

  • Overall industry sales during 8MFY22 rose 14% yoy to 14.5mn tons, with 18%10% yoy growth in HSD/MS sales

  • We think that a slower volume in Feb sales was due to reopening of CNG stations and increase in fuel prices in Feb

Rahul Hans
Rahul Hans

Head of Research

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Intermarket Securities
2 March 2022

  • As per provisional data, overall OMC sales in February 2022 rose 10% yoy but fell by a sharp 15% mom to c.1.54mn tons. Even excluding Furnace oil (FO), sales were down 15% mom. Record level of retail fuel prices, along with slower demand from Agriculture and Power sectors dragged overall demand, in our view.     

  • HSD sales fell 20% mom in February to 0.59mn tons, after an increase of 20% mom in the previous month (high base); which is attributed to lower demand from Agriculture sector owing to end of harvesting season in January. Also there was unusually high demand for HSD from Power sector previous month. Furnace oil sales declined 13% mom to 0.22mn tons; this could partly be because of lower intake from IPPs amid better supplies of RLNG for power generation, in our view. Mogas sales also declined, by 12% mom to 0.65mn tons, where we attribute resumed operations of CNG stations in Sindh and Baluchistan by 15 February after 2.5 months long closure.

  • Market shares: While overall market share of PSO rose for the second consecutive month in February, up 0.6ppt mom to 48.3%, it was largely due to higher share in FO market. PSO lost 5ppt share in the HSD market (to 50%); SHEL, on the other hand, regained its share in HSD to 8.6% (up 1.4ppt mom). We think this points to normalized HSD sales to Power sector and potentially greater smuggled volumes in the market (sold by small and newer OMCs). APL’s overall share increased by 0.8ppt to almost 10% after a decline of 0.7ppt mom in previous month, with gains in share of FO and Mogas markets.            

  • Overall industry sales during 8MFY22 rose 14% yoy to 14.5mn tons, with 18% yoy growth in HSD sales, 14% yoy in FO sales followed by 10% yoy growth in Mogas. Jet fuel sales rose 61% yoy to 0.29mn tons due to normalizing travel but are still below pre-Covid levels. HOBC sales fell 2% yoy to 0.11mn tons due to significantly high prices.        

  • Outlook: We think that a slower volume in February sales was due to reopening of CNG stations and massive increase in fuel prices in recent months. Going forward, however, consumption should recover after a PKR10/liter cut in MS and HSD prices, in the Relief package of the PM. The catalyst will be complemented by higher demand from agriculture amid sowing of Rabi crop (in March-April) and recovery in exports from March onwards (mostly textiles for summer season to Western markets).