PSO,PPL & INDU_1QFY20 Result Previews, (AKD Daily, Oct 29, 2019)
PSO expected to EPS of PkR5.70 for 1QFY20: Pakistan State Oil (PSO) is expected to announce results for 1QFY20 on 30th Oct'19 where we expect the company to post PAT of PkR2.7bn (EPS: PkR5.70), down 36/43% YoY/QoQ on the back of expected inventory losses of PkR848mn despite volumes increasing by 10%YoY with the PSO's market share for the quarter standing at 47% against 39/47% in 1QFY19/4QFY19. PkR/USD strengthened during the quarter, appreciating by 2.3%, which we believe will result in exchange gains for the company after witness significant exchange loss of PkR2.3bn in 4QFY19. Moreover, finance cost is expected to decline on QoQ basis on the back of improved liquidity with company receiving overdue payments from power and LNG sector. LNG receivables decreased by PkR11-12bn during the quarter while according to data presented in latest analyst briefing, company received payments of PkR12.7bn from power sector against supplies of PkR3.8bn. Moving forward, revision in margins is expected to be the main trigger while clarity on second tranche of Sukuk will provide further impetus. ​
Depleted profitability as production disappoints: PPL is slated to report 1QFY20 results tomorrow (30th October) where we expect the firm to report NPAT of PkR15.9bn (EPS: PkR5.85/sh on bonus adjusted number of shares) rising 12.3%YoY backed by lower realized oil/gas prices (mainly due to 14%YoY lower benchmark crude) and moderate indexation movements (~2%YoY firmer PkR/US$). Major underlying aspects of forecasted performance include: 1) -8/-3%YoY shift in oil/gas sales where recent CAPEX on older fields (particularly Sui) managed to sustain production at near peak levels, as Boyle’s law played out to keep 3QCY19 production of gas flat QoQ, 2) exploration expenses remaining elevated mainly due to high dry well expense (three wells in blocks Kotri, Nashpa and Sadiqabad, respectively) for the quarter vs. three booked in 1QFY19 (Tal, Nashpa & Hala blocks), and 3) muted exchange gains and depreciative other charges where the firm continues to book windfall levy charge on Tal block oil production. In the absence of any additional Sukuk payment to clear circular debt, we assign low probability to payouts for PPL, where management remains appointed on acting basis.
Forgettable quarter for auto heavyweight: We project INDU to file NPAT of PkR1.17bn (EPS:PkR14.85) sinking -66.7%YoY/-66.2%QoQ, following the drastic dwindling of sales volumes as “sticker shock” coupled with regulatory impediments continuing to depress demand for premium automobiles. After failing to exhibit significant pricing power this time around, where the depressed demand that ensued has clearly indicated that marginal propensity of demand has peaked. To recall, INDU raised prices of its models by a volume weighted average of ~13% during FY20TD and ~43%YoY hike, while unit sales remained stagnant for the now “stale” Corolla. Additionally, depleted ST investments and near cash items as the firm embarks on aggressive production capacity CAPEX, which we believe will curtail payouts to PkR10/sh for the quarter.
AKD Research
Pakistan Petroleum Limited (PPL) is a supplier of natural gas. The Company is principally engaged in conducting exploration, prospecting, development and production of oil and natural gas resources. The Company operates nine producing fields, which include Sui, Kandhkot, Adhi, Mazarani, Chachar, Adam, Adam West, Shahdadpur and Shahdadpur West. It has working interests in approximately 20 partner-operated producing fields. Its partner-operated fields include Qadirpur Gas Field, Tal Block, Miano Gas Field and Sawan Gas Field. The Company, along with its subsidiaries, has a portfolio of approximately 40 exploration blocks, of which over 20 are operated by the Company, including Block-8 in Iraq, while approximately 20 blocks consisting of three offshore leases in Pakistan and two onshore concessions in Yemen are operated by joint venture partners. Its gas production from its operated and partner-operated fields is approximately one billion cubic feet of gas per day.
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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