EUR 4.64 For Business Accounts Only

APL: Best risk-reward play in the OMC space; Buy

• We revise our estimates for APL and reiterate Buy stance with a Jun’17 target price of PkR762/sh. We incorporate details on the Capex of 5 new storage facilities as well as the impact of Supreme Court’s decision on WWF ordinance which resulted in a significant reversal during 2Q. The scrip offers a potential total return of 28%.

• We believe APL is set to regain its lost market share in MS and HSD markets as it adds about 90,000MTs in capacity at different strategic locations including one at Port Qasim; this coupled with supplies from expanding group refineries will enable it to expand beyond Punjab, where it traditionally operates.

• APL currently trades at FY17F P/E of 10.4x at a 5% discount to the market where we believe that it should trade at a premium because of low-risk leverage to robust POL demand in the country, focus on regaining market share, relative immunity to circular debt and high payouts.