OMCs: Thoughts on raised margins and deregulation of HSD
Contrary to our previous stance, the GoP in an abrupt move, approved +5.81% increase in HSD and MS marketing margins. For FY18F PSO/APL margin increase is expected to raise NPAT by +3.00/+2.03% over previous estimates translating, while HASCOL's profitability is expected to climb +2.13/+3.61% for CY17E/CY18F. Additionally, news reports suggest that OGRA's role in tabulating HSD prices as per the import parity pricing regime has been delegated to the industry, effectively de-regulating the 2nd highest consumer POL product in the country (33.1% of total industry volumes). PSO/APL/HASCOL command 43%/10%/13% market share in the segment, where deregulation will significantly limit pricing variations reducing the possibilities of inventory losses as import costs will be passed on directly. Awaiting clarity on final pricing mechanism for HSD, we stick to our NEUTRAL stance on PSO with a bonus adjusted June'18 TP of PkR478/sh.
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.
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