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Pakistan Economy: Inflation could move easing goal post! (AKD Daily, Jan 17, 2020)

APL to post an EPS of PkR23.5 for 1HFY20: Attock Petroleum Ltd. (APL) is expected is announce results on 21st Jan'20 for 1HFY20 where we expect the company to post PAT of PkR2.3bn (EPS: PkR23.5), up 11.4%YoY, despite a decline in volumes of 7.5%YoY, courtesy inventory gains. Topline of the company is expected to stand at PkR132.8bn, increasing by a meagre 1.1%YoY after increasing prices compensated for disappointing volumes. Market share of APL has suffered (10.5% in 1HFY20 vs. 11.4% in 1HFY19) as influx of grey product (mainly HSD) has started hurting while aggressive strategy of competitors is also playing a part. For 2QFY20, an exuberant growth of 1.0xYoY is expected with PAT standing at PkR1.1bn (EPS: PkR11.2) against PkR556mn (EPS: PkR5.6) in 2QFY19 on the back of inventory gains and higher finance income (short term investments stood at PkR2.1bn as of Sep'19, up 1.4xYoY). Sequentially, a decline of 8.8%QoQ is expected on the back of lower volumes (down 2.5%QoQ) coupled with lower inventory gains. Along with the result, we also expect a payout of PkR12/sh, maintaining the payout ratio of ~50%.  We have a Buy stance on the stock with TP of PkR434/sh, implying 13.0% upside coupled with dividend yield of 7.0%, taking the total return to 20.0%. â€‹

 

Earnings post moderate declines on high base, slow production: POL will announce its 1HFY20 results on Jan 21st, where we estimate the company to post cumulative consolidated earnings of PkR7.8bn (EPS: PkR27.57), lower by 1%YoY. Stable profitability is expected from: 1) -7%YoY/+2%QoQ variations in oil prices keeping revenues stable, where a lagging production profile (oil/gas production for 2QFY20 depleting by 2.5/10.4%QoQ) keeping expected topline on a weak footing (1HFY20 net sales down 3%YoY), 2) lack of aggressive devaluations witnessed during 1HFY19, where a modest pullback in the PkR vs. Greenback (2QFY20 average +16%YoY/-2%QoQ) during 2QFY20 diminished the role of macro factors in covering for production declines and 3) lack of major exploration and production activity (PPIS data shows one exp well – Balkassar Deep -1 vs. none in 1HFY2) keeping below the line costs slightly elevated. In short, the relative high base on both the macro front, and production should keep earnings in check for 1HFY20. On a sequential basis, 2QFY20 NPAT should rest at PkR3.94bn (EPS: PkR13.89/sh), marking -9%QoQ decline, with NM receding to the ~34% mark vs. 37.2% for 1QFY20 on the back of modest exploration and drilling activity. In line with its payout ratio we expect the company to announce a payout of PkR20.0/sh.

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