EUR 3.54 For Business Accounts Only

Pakistan OMCs: Soft sales in May’17 but handsome growth in 11MFY17

• OMC industry sales were flattish in May’17; however, overall 11MFY17 sales (up 9.3%) remained strong led by robust demand in all major products. Sales of HSD/Mogas are growing phenomenally (up 10/16% YoY) as per our expectations. FO sales declined 4% YoY in May’17, however, overall demand remained strong throughout the year amid increased FO based power generation.

• For FY18, we expect demand for all major POL products to remain strong. For Mogas, increased motorization and low fuel prices would continue to propel demand, while higher industrial utilization and commercial transportation would drive HSD demand growth in double digits. We also expect modest growth in FO demand as a result of increased power generation in the election year to curtail load shedding.

• Recent news flow of deregulation of HSD margins could turn out to be neutral to negative where possibility of collusion (consensus on margins) amongst OMCs seems thin given PSO is majorly owned by GoP. Slow-down in demand may result in increased competition while possibility of higher margins could emanate from areas of low fuel station density.