OMCs: CY17 retail sales update
Supremacy of retail POL product sales has long been expected, having materialized in CY17 largely on the back of: 1) tipping point for power generation base on FO, casting doubt over viability of sales in the industry’s largest segment by volumes , 2) gross profit contribution by segment resting with CPI-linked MOGAS and HSD’s rigid deregulation (yet to be enacted, for Jan’18 margins continue at PkR2.41/ltr) and 3) theme of building pressure on PkR to be detrimental to import-reliant OMCs (particularly those importing refined fuels). Commenting on lower crack spreads for refined fuels we believe taxes and levies added on to the final pump price have lessened the impact of import-parity based ex-refinery price movements on the final price and propensity for consumption, going forward. Additionally, we focus on the industry-wide softness of retail fuel sales for 4QCY17, where average sales/outlet for listed OMCs (APL, HASCOL, SHELL, PSO) fell to 699.2K/outlet down ~16%QoQ/~10%YoY. PSO added eight pumps during 4QCY17 taking the total annual additions to 68 pumps, supporting our bullish case. Our DCF based June’18 TP for PSO stands at PkR399.1 offers 29.8% upside, backed by appealing multiples (FY18E/17F PE of 5.7/5.3x) making for a BUY.
Hascol Petroleum Limited is a Pakistan-based company, which is engaged in procurement, storage and marketing of petroleum and related products. The Company is involved in the sale of petroleum products, such as fuel oil, high speed diesel, gasoline, Jet A-1, liquefied petroleum gas (LPG) and lubricants. The Company offers products, such as Tiger Super, Rocket Diesel and Furnace Oil. The Company offers Fuchs Lubricants products, which include corrosion preventives, quenching oils, industrial lubricants, open gear lubricants, greases, automotive oil and metal working fluids. The Company also markets LPG as an automotive fuel through its retail network. The Company is engaged in owning, leasing and renting oil storage facilities, as well as importing petroleum products. The Company has storage facilities at Machike, Shikarpur and Daulatpur. The Company sells its product to dealers, government agencies and autonomous bodies, independent power project and other corporate customers.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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