Pakistan Oil & Gas_Macros play in E&Ps' favor in 4QFY22; Super Tax dampens profits ,(AKD Daily, Aug 04, 2022)
AKD Daily
Pakistan Oil & Gas: Macros play in E&Ps’ favor in 4QFY22; Super Tax dampens profits
- AKD’s E&P Universe profitability is expected to tumble in 4QFY22, as growth in core profitability will likely be offset by higher taxation. The sector’s earnings before tax are expected to grow by 20.8%QoQ and 1.31xYoY, on the back of i) higher international crude prices, ii) PkR’s weakness against the USD, and iii) higher interest rates.
- Profitability is expected to be subdued by higher taxation during the period, as 10% Super Tax on FY22 earnings would likely be charged in 4QFY22. AKD’s E&P Universe is expected to post an effective tax rate of 65%, compared to 33% in the earlier quarter.
- Net sales of AKD’s E&P Universe are expected to show healthy growth of 15%QoQ and 69%YoY. OGDC/PPL/POL topline are expected to grow by 15.4%/14.4%/12.8%QoQ, with the effects of better macros being somewhat offset by lower production levels.
- Higher interest rates, along with exchange gains, are expected to lead to an increase of 84%QoQ in AKD’s E&P Universe’s Other Income—further augmenting 4QFY22 earnings.
- With an implementation plan for WACOG in the offing, receivable buildup for the sector is expected to lose steam, freeing up liquidity for exploration activities. We particularly like POL (TP: PkR 570/sh; upside potential: 41.3%), due to i) a relatively strong balance sheet (Receivables: 11% of Total Assets), and ii) dividend yield of 18%.
AKD Research
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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