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Attock Petroleum Limited (APL) is scheduled to announce its 9MFY17 results on 17th Apr’17. We anticipate the company to report earnings of PKR4.09bn (EPS: PKR49.28) for the period, depicting an uptick of 72% YoY owing to 42%/7% surge in MS/HSD volumes coupled with heightened sales of asphalt and lubes during 9MFY17. In 3QFY17, the company is expected to post 34% YoY growth in its top-line to PKR31.49bn on the back of 18/21% rise in MS/HSD volumes with an increase of 13/14% in their ex-refinery prices. Gross margin is expected to inch up marginally by 23bps to 4.38% supported by nominal inventory gains of PKR120mn. We believe lower naphtha production from ATRL would decrease its handling income, while better performance from its group companies would positively impact the bottom-line in the form of profits from associates. Consequently, our forecasts suggest 3QFY17 earnings to scale up by 24% YoY to PKR931mn (EPS: PKR11.22) against PKR735mn (EPS: PKR8.87) in SPLY.
The Board of Directors of Attock Petroleum Limited (APL) is scheduled to meet on April 17, 2017 to discuss 3QFY17 results, wherein we expect the company to post an EPS of Rs10.06 for the quarter (+13.4%/-47.7% YoY/QoQ). Cumulatively, this is likely to translate into 9MFY17E EPS of Rs48.12, reflecting a growth of 68.0% YoY during the period. Large increase in 9MFY17E earnings and decline in 3QFY17 earnings on a sequential basis (-47.7% QoQ) can be attributed to one-off WWF reversal booked by the company during 2QFY17. Accordingly, we adjust our FY17E EPS estimate upwards to Rs60.74 (Rs57.93 previously).
Our "Buy" stance on APL remains intact with Dec-17 TP of Rs796. The stock provides upside of 26.5% from current levels along with FY17E D/Y of 8.4%. At current levels, APL trades at FY17E/18E P/E of 10.36/10.94x.
APL: 3QFY17 EPS Estimated at PKR15.6: Attock Petroleum Limited (APL) is scheduled to announce its financial result on 17th April 2017, where we expect the company to report 9MFY17 EPS of PKR53.7 (+87% YoY). 3QFY17 EPS is expected to clock in at PKR15.6 (+76%YoY/-19%QOQ). While the yearly increase in 3QFY17 EPS is expected to be a result of i) 34% increase in core profits & ii) inventory gains of ~PKR300mn in 3QFY17, sequential decline in earnings is attributable to one-offs WWF reversals in 2QFY17 (PkRx/share). However, core profitability of the company is expected to improve sequentially (+8% QoQ) on the back of 1) ~2%QoQ growth in cumulative volumes to 537k tons led by high margin HSD (+4%QoQ to 193ktons) & 2) 18ppt increase in FO margins to ~PKR1450/ton. Moreover, we estimate the company to book timing gains equivalent to ~PKR300mn with ex-refinery prices increasing by ~PKR6/liter for HSD & Mogas, where higher than estimated inventory gains can result in positive earnings surprise. APL is currently trading at a FY17 PE of 9.6x with our Dec-17 PT of PKR760/sh offers an upside of 21% along with a FY18 D/Y of 8%. Buy.
Attock Petroleum Limited
OMC Result Review: 9MFY17 EPS of PKR 52.56
The Board of Directors of Attock Petroleum Limited announced a Profit after Tax (PAT) of PKR 1.2bn (EPS: PKR 14.5) in 3QFY17, up 63% YoY and down 25% QoQ. With this announcement, the PAT in 9MFY17 settled in at PKR 4.4bn (EPS: PKR 52.6), up by a stellar 83% YoY.
Company recorded Net Sales of PKR 34.7bn in 3QFY17, up 16% QoQ. The growth can be primarily attributable to rising product prices in addition to a volumetric growth of 2.3% QoQ in total energy products.
The gross margins in 3QFY17 settled at 5.2%, slightly lower vis-à-vis 5.4% witnessed in 2QFY17, however, the margins still stand tall when compared to 4.1% in 3QFY16. Lower gross margins can be owed to fixed absolute margins (per liter) on retail products in a rising selling price environment. Albeit, gross margins in 9MFY17 at 6.0% remained higher in comparison to 4.0% in 9MFY16.
Company recorded effective taxation of 27.8% in 3QFY17 (2QFY17: 30.1%).
Going forward, rising product prices may adversely impact the sales volumes of OMCs and thereby the profitability. However, APL’s approach to target retail products (instant cash generating products) in times of rising circular debt bodes well for the company. Currently we have a BUY stance on APL with our Dec’17 target price of PKR 730.6 per share.
The Board of Directors of Attock Petroleum Limited (APL) is expected to announce the financial results for FY17 on 11th Sep’17. During 4Q the company is anticipated to book PAT of PKR 1.31bn (EPS: PKR 15.83), up by 9% QoQ while taking full year profitability to PKR 5.67bn (EPS: PKR 68.39), up by 48% YoY. Reasons for the surge in bottom-line during the year are i) higher gross profit on the back of 18% YoY rise in POL volumes, and ii) absence of inventory losses. On a sequential basis, the uptick in profitability is due to similar reasons (jump in topline was noteworthy at 26% QoQ). Along with the result, the company is expected to declare a final cash dividend of PKR 35.00/share (FY17E: PKR 50.00/share).
Result Review: FY17 EPS of PKR 63.89
The Board of Directors of Attock Petroleum Limited (APL) announced a Profit after Tax (PAT) of PKR 0.9bn (EPS: PKR 11.3) in 4QFY17, down 35%/22% YoY/QoQ. With this announcement, the PAT in FY17 settled in at PKR 5.3bn (EPS: PKR 63.89), up by a stellar 38% YoY. Along with the results the company declared cash dividend of PKR 27.50, taking full year cash dividend to PKR 42.50/share.
Company recorded Net Sales of PKR 42.5bn in 4QFY17, up 23% QoQ. The growth can be primarily attributable to surge in volumetric sales by 26% QoQ, excluding non-energy products.
The gross margins in 4QFY17 settled at 3.8%, lower vis-à-vis 5.2% witnessed in 3QFY17. Lower gross margins can be owed to inventory loss booked in 4Q, we view. Albeit, gross margins in FY17 at 5.3% remained flattish when compared to FY16.
Company recorded effective taxation of 39% in 4QFY17 on account of 3% super tax (3QFY17: 28%).
Going forward robust outlook on white oil sales segment should keep the company’s profitability upbeat.
APL: Rising tide raises all ships
Catching on to catalysts for OMC's, APL has undergone significant upswing in profitability between FYI 3-17, backed by: 1) 3YR MS/HSD total sales growth CAGR 20&/7%, 2) 32.6%/25.6% reduction in retail price of MS/HSD since June'14 and 3) reduced usage of CNG as low availability and lower cost differential prompting the switch to liquid fuels. However, not completely on the coattails of external factors, the OMC has gone far in extending its retail network with a tilt to long term contracts and business retention (Pakistan Army for HOBC, Government for Jet fuel). Despite APL tightening its grip on the POL product pie (5YR historical average market share of 9.5%), increasing M&A activity in the Pakistan's downstream oil landscape (Puma energy's acquisition of Admore) presents heightening competitive headwinds. Moreover, a leaner balance sheet (current ratio of 1.47x vs. 1.30x for PSO), manageable receivables (19 days vs. 88/60 days for PSO/HASCOL) and better liquidity (CFO/Sh of PkR 10.4) as of June'17 make for a value driven investment thesis. Following an 11% slide CYTD, at current levels the scrip offers healthy FY18/19F DIY of 10.7111.6%, making for a compelling BUY, to our FCFE based June'18 TP of PkR745/sh.
Initiatives to firming up market share:
APL has initiated long term supply contracts with government entities, large scale contractors and engineering service providers executing projects throughout the country. Indicative of these income streams is the bitumen supply contact (concluding Sept' 18) for the Karachi Peshawar highway (Multan to Hyderabad section to be completed 2HFY18) providing direct exposure to repeat sales from a flagship projects under CPEC. Additionally, the OMC plans on building company owned, company operated outlets in urban areas, a strategy increasingly gaining prominence, particularly for its spill over benefits on visibility. Projects in the pipeline: Expansions such as the recently completed Furnace oil gantry capable of handling 40-50,000 Mton per month (an average shipment is 50,000+ Mtons) extends APL's presence in a product segment undergoing a secular decline (shift to coal, phasing out of older projects). Having infrastructure in strong footfall locations, matched with a targeted penetration strategy focusing on landmark projects (new Islamabad airport fuel farm completed June'17) affording measured acess to emerging income streams.
Apart from exchange rate and inventory risks prevalent in the OMC space, APL has been sidestepped by emerging competitive dynamics. Beyond the 21 OMC licenses issued, where we believe many of the new players may not materially impact market shares for the larger players (due to heavy CAPEX requirements) more pertinent, in our opinion is the increasing toehold by foreign players in the domestic downstream space. The latest of which has been the entrance of Puma Energy (subsidiary of Singapore based global physical commodity trading conglomerate Trafigura) through its acquisition of Admore. This allows the entry of a South Asian, African and Latin American downstream oil retailer in the local market, with 470 pump network already established under Admore. This follows on the heels of Vitol's acquisition and subsequent JV's with HASCOL concluded in CY16.
Consolidation, new entrants and moves by foreign players into the country raise the stakes for acquisitions in the space. Following on, APL with its unleveraged balance sheet may form the ideal partner for such a move, where it could form JV's or position itself in a consortium as an acquirer of related downstream interests. Ending a stellar year for profitability, ex of WPPF reversal for the years 20011-16 of PkR661mn (PkR7.96/sh) the OMC recorded NPAT growth of 21.10/0YoY, which is a trend we believe will sustain for FYI BE. Moreover, a leaner balance sheet (current ratio of 1.5x vs. 1.3x for PSO), manageable receivables (19 days vs. 88/60 days for PSO/HASCOL) and better liquidity (CFO/Sh of PkR10.4) as of June' 17 make for a value driven investment play. Following an 11% slide CYTD, at current levels the scrip offers healthy FY18/19F DIY of 10.7/11.6%, making for a compelling BUY, to our FCFE based June'18 TP of PkR745/sh.
Attock Petroleum Limited (APL) is expected to announce the financial results for 1QFY18 on 19th Oct’17. We expect the company to record a PAT of PKR 1,404mn (EPS: PKR 16.92), down by 10% YoY and up by 49% QoQ. Topline of the company is poised to register a growth of 18% YoY to PKR 37.2bn with increasing product prices and total volumetric growth of 8.2% YoY (volumes of Mogas, HSD and FO grew by 3%, 10% and 13% YoY) coming into play. Gross margins are expected to settle at 5.1% in 1QFY18 compared to 7.3% in SPLY amid inventory losses recorded in the period under review. On a sequential basis, net sales went down by 12% QoQ given HSD and FO volumes declined by 18% and 4% QoQ, respectively. APL is shifting its focus from FO to MS and HSD amid new RLNG and coal based power projects; which may dampen demand of FO going forward.
Attock Petroleum Limited (APL) has announced the financial result for 1QFY18, whereby company posted profit after tax (PAT) of PKR 1.33bn (EPS: PKR 16.04) against PKR 1.56bn (EPS: PKR 18.85) in 1QFY17, down by 15% YoY. On sequential basis, earnings increased by 41% QoQ on the back of improved gross margins amid low inventory loss and higher margins on deregulated products.
Topline of the company settled at PKR 38.5bn for 1QFY18, up by 22% YoY on account of higher product prices along with volumetric growth which grew by 8.2% YoY (volumes of Mogas, HSD and FO went up by 3%, 10% and 13% respevtively).
The gross margins of the company decline by 216 bps to set at 5.11% compared to 7.27% in 1QFY17. In our view, the decline in margins can be attributable to realization of inventory loss compared to significant inventory gain in SPLY.
Finance cost jumped by 99% to PKR 122mn given rise in markup charged on delayed payments.
The company recorded an effective taxation of 27.3% in 1QFY18 flat when compared to 28.9% in 1QFY17.
Currently, we have ‘BUY’ call on the stock with a Dec’17 target price of 729.6/share.
Result Previews for 2QFY18
Demise of Furnace Oil Reducing Earnings
APL: Earnings to Decline by 6% QoQ
Attock Petroleum Limited (APL) is scheduled to announce its 2QFY18 financial result on 24th Jan’18. The company is expected to record a PAT of PKR 1,252mn (EPS: PKR 15.09) in 2Q, down by 21% YoY and 6% QoQ. Topline is expected to grow by 20% YoY on the back of increasing product prices and total volumetric growth of 8.6% YoY (volumes of Mogas and HSD grew by 49.7% and 4.7% whereas FO witnessed a decline of 17.9% YoY). Gross margins are expected to settle at 5.6% in 2QFY18 compared to 5.4% in SPLY amid inventory gain of PKR 168mn in the period under review along with revision of margins from Nov’17 onwards. On a sequential basis, topline of the company is poised to register a decline of 6% QoQ to PKR 36.1bn amid decline in volume of Furnace oil by 26.6% QoQ to 0.14mn tons vis-à-vis 0.18mn tons. While volumes of Mogas and HSD also went down by 10.2% and 3.6% QoQ, respectively. APL is shifting its focus from FO to MS and HSD amid commencement of new RLNG and coal power projects, which may dampen demand of FO going forward.
Attock Petroleum Limited - Oil Marketing Companies
Result Review – Profitability Surged by 11% QoQ
Earnings up by 11% QoQ
Attock Petroleum Limited (APL) has announced the financial result for 2QFY18, whereby the company posted a profit after tax (PAT) of PKR 1.48bn (EPS: PKR 17.85) against PKR 1.59bn (EPS: PKR 19.21) in 2QFY17, down by 7% YoY. On a sequential basis, earnings ticked higher by 11% QoQ on the back of improved gross margins amid inventory gains compared to inventory loss in last quarter and higher margins on regulated and deregulated products.
Topline of the company settled at PKR 37.8bn during 2QFY18, up by 26% YoY on account of higher product prices along with volumetric growth (+8.6% YoY; volumes of Mogas and HSD grew by 49.7% and 4.7% whereas FO sales witnessed a decline of 17.9% YoY).
Gross margins of the company inched up by 99bps to 6.42% compared to 5.43% in 2QFY17. Increase in margins can be attributable to inventory gain in the period under review along with revision of margins from Nov’17 onwards.
Finance cost jumped up by 94% to PKR 136mn given rise in markup charged on delayed payments.
The company recorded effective taxation at 28.2% in 2QFY18 compared to 30.1% in SPLY.
Currently, we have a ‘BUY’ call on the stock with our Dec’18 target price of 714.50/share.