Pakistan OMCs_Margin revision having mixed connotations, (AKD Daily, Mar 10, 2021)
AKD Daily
Pakistan OMCs: Margin revision having mixed connotations
- According to news reports, a summary has been moved by Petroleum Division to increase OMC margins by 6.8%. To note, historically OMC margins were increased on overall CPI however the aforesaid increase is based on average core inflation (NFNE – Urban) of CPI for the period Oct’19 to Sep’20.
- An increase of 6.8% and a three month delay against our base case estimate of margin revision of 10.7% from Jan’21, results in a decrease in our earnings estimates for FY21 by 4.5%each for APL/PSO (not incorporated yet).
- Petroleum Division has also proposed for OMCs to be compensated for the delay by OGRA making a prior period adjustment for the period starting Jul’20. Though the mechanism isn’t clear, basing our calculation on 8MFY21 sales of the industry (taking 16/8%YoY increase in HSD/MS for full FY21), OGRA will have to increase margins by an additional amount of PkR0.55/ltr to compensate industry for the delay.
- We continue to like PSO (TP: PkR293.1/sh, 29.5% upside) on the back of company continuing to garner market share in retail fuels where upcoming storages are only going to further augment retail footprint. Additional impetus to our thesis will arise from ongoing resolution of circular debt where release of payments will be a major near term trigger, in our opinion.
AKD Research
Attock Petroleum Limited is engaged in the procurement, storage and marketing of petroleum and related products. The Company offers a range of lubricants blended with base oils and additives at its Automatic Batch Blending facility. Its products include diesel engine grades, such as GOLD TURBO PLUS, GOLD TURBO, GOLD XTRA and GOLD-50; gasoline engine grades, such as HIDRIVE SUPREME, HIDRIVE SUPER and ATTOCK T-2; industrial grades, such as ATTOCK Hydraulic Oil AW Series, ATTOCK Gear Oil EX Series and ATTOCK TURBINE Oil, and gear oils, which include various specifications, such as EP 140, EP 90, 85W/90 and 85W/140. It has a multi-fuel retail network of approximately 540 retail outlets. The Company's retail outlets also offer compressed natural gas, as well as non-fuel retailing options, such as tuck shops, car services and lubricants. It supplies various types of fuels to various businesses, including manufacturing industry, armed forces, agricultural customers and power producers.
Pakistan State Oil is a petroleum group based in Pakistan. Co.'s principal activities are the procurement, storage and marketing of petroleum and related products. Co. also blends and markets various kinds of lubricating oils.
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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