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Pakistan OMCs_3QCY18 Retail update and the race for growth

The outgoing month's OCAC numbers round up 3QCY18 where retail fuels growth (HSD sourced for transport, HOBC & MS) remained the only avenue for volumetric growth, as power based FO demand falters

• Collating retail outlet numbers with transport sourced retail fuels during 3QCY18, we highlight an average throughput of 566K ltrs/outlet, where HASCOL/APL/SHEL/PSO maintained 1,098K/730K/579K/488K ltrs/outlet of throughput through their retail networks across the country
• In 3QCY18 on a YoY basis, HASCOL/APL/PSO added 45/29/54 outlets, while HASCOL/APL /PSO throughputs shift -25%/+0%/-24%YoY signifying the mean reversion of throughputs, as network additions result in lower throughputs.
• During 3QCY18, HSD/MS prices climbed 1.2%/0.95%QoQ and 37.7/29.8%YoY crossing the perceived high price benchmark of PkR100/90ltr for HSD/MS marginally suppressing discretionary demand growth
• We contrast PSO with the aggressive HASCOL, highlighting the variations in MS and HSD throughput which are meant to imply greater emphasis on fleet sales and direct depot deliveries to corporate consumers, illustrating the significant lead HASCOL enjoys in both retail segments.

3QCY18 numbers show growth is all about retail: 2MFY19 numbers confirm what FY18 source-wise volume data signified, transport demand is the only source of growth for the downstream space. 63% of total POL energy and non-energy fuels used for transport in FY18 (rising to 71.3% for 2MFY19), its highest point ever, recording growth of 7%YoY when overall sales slipped 5%YoY. These numbers signify the prominence of retail fuels growth, while the only other demand base, power generation, falls from favor.

Outlet throughput is falling from peaks: During 3QCY18 we earmark HSD (for transport demand using applicable sector source shares), MS & HOBC, revealing an average retail throughput of 566K ltrs/outlet, where HASCOL/APL/SHEL/PSO maintained 1,098K/730K/579K/488K ltrs/outlet of throughput through their networks across the country. On a YoY basis, HASCOL/APL/SHEL/PSO throughputs moved -25%/+0%/+3%/-24%YoY largely a product of swings in quarterly sales (-18%/+5%/+2%/-23%YoY) and retail network expansion/reduction. On a YoY basis for 3QCY18 HASCOL/APL/PSO added 45/29/54 outlets over 12 months, while SHEL curtailed its outlet count by 2 pumps, signifying continued push on outlet additions. By and large, the continued addition of retail outlets matched with tapering throughput levels highlight mean reversion in the retail space.

Outlook: As throughput levels come-off their peak levels, we contrast PSO with the aggressive 2nd place HASCOL, bifurcating MS with HSD throughput levels with sector average over the same period. We aim to demark possible variations arising from corporate and fleet sales, particularly for HSD sales (5YR average transport sector sale of 87%). Higher variations between the two are meant to imply greater emphasis on fleet sales and direct depot deliveries to corporate consumers. Comparing PSO with HASCOL, variations in MS and HSD throughput show the significant lead HASCOL enjoys in both retail segments. Lastly, the same analysis for SHEL shows that despite maintaining significant MS throughput advantages, reclaiming significant HSD sale volumes is crucial to be in the running for growth. â€‹

​AKD Research