EUR 4.64 For Business Accounts Only

Pakistan OMCs: Expect flattish earnings due to non-recurring items from 2Q results

• We expect IMS OMC universe to post an NPAT of PkR7.26bn down 4% on a sequential basis where normalization of one offs will be offset by expectation of healthy inventory gains resulting from a PkR7-8/litre increase in POL product.

• Possible surprises in the results can emanate from higher inventory gains, penal income in case of PSO and higher than expected distribution/finance costs in case of HASCOL. OMC industry is experiencing tremendous growth in volumes (up 9% YoY in 9MFY17) but with rising competition ahead.

• We prefer APL (TP: PkR762/sh) in the IMS OMC Universe due to its superior risk/reward profile with exposure to deregulated market and higher distributable earnings while PSO's cash flow concerns are building up and HASCOL is incurring higher expenses to maintain the pace of growth