EUR 4.62 For Business Accounts Only

APL: Expect a stronger performance in market share gains; Buy

• ​We upgrade our target price for APL by 15% to PkR726/sh and reiterate our Buy rating. APL promises to fare much better in FY17 at gaining market share than seen in FY16. Sizable inventory gains in 1Q drive our 17% higher FY17F EPS of PkR58.34. The stock is offering a handsome potential total return of 21%.
  
• Our optimism on APL regaining its position as the second largest OMC after PSO is driven by its plans to ramp up storage – particularly, beyond its foothold in Punjab. While competitors are doing the same, APL will also benefit from additional supplies from group refineries, which are expanding their capacity.
  
• While the stock is up 27% in the past 3mths and is presently trading at a FY17F P/E of 11.1x, we opine that it deserves to trade at a premium to the overall market, given a superior risk-reward profile, in addition to exposure to the Pakistan demand story.