Intermarket Pulse: Pakistan OMCs - Expect mixed trend in earnings but payouts may impress
For 4QFY17 results, we expect IMS OMC Universe (PSO, APL & HASCOL) to post cumulative profits decline of 10%QoQ/32%YoY. Key expectations for the results are: healthy jump in sales, but moderated by rise in expenses, super tax and meagre inventory gains. This may however be overlooked due to potential handsome payouts and impressive full-year FY17 growth.
Our EPS expectations for PSO/APL/HASCOL for 4QFY17 results are PRs12.41/16.16/3.48 which will be -19%/+12%/+13% QoQ. Growth for APL and HASCOL is led growth in volumes. We have only incorporated modest inventory gains for PSO and APL. In addition, we expect higher finance costs for PSO.​
We have an Overweight stance on the sector given likely trough valuations for all scrips except HASCOL despite strong growth in volumes/earnings. We prefer APL (TP: PRs762/sh) in the space, which offers a potential upside of 23%, while PSO is trading at a forward P/E of 5.7x.
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.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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