Oil products data see positive trend in November 20

As per provisional data, overall OMC sales in November 2020 grew 21% yoy but 1% mom to 1.72mn tons. However, excluding furnace oil (FO) sales, petroleum sales rose an impressive 10% mom even though November typically has slow demand. HSD sales continue to impress, up 29% yoy and 20% mom to c.0.8mn tons, retaking its position as the highest volume fuel. Agricultural demand partly lifted HSD sales; it is also a testament to the rebound in industrial activity post lockdown. Mogas sales of c.0.7mn tons are up 20% yoy due to lower prices and momentum in auto sales, but is flat mom potentially due to reduced mobility amid smart lockdowns in place since mid-November.

PSO is winning. In an earlier note, we highlighted that HSD sales will be the benchmark for relative performance among the OMCs. Claiming about 49% market share in HSD (Nov) compared to 45% average during FY20 and also in October, PSO has done better than SHEL, APL and Hascol, the share of which were flat mom. PSO’s wide network and stake in the white oil pipeline are key reasons, in our view. But, according to channel checks, PSO briefly benefited from public anger towards France (following its President’s provocative statements on Islam), as people favored local OMCs for fuel purchases.

Overall market share in November: the shares of PSO, SHEL and Hascol were broadly stable mom at c.44%, c.8% and c.6%, while APL lost ground with almost 2ppt lower share at c.8% compared to c.10% average in FY20.

During 5MFY21, overall petroleum consumption rose 11% yoy (8% without FO), where a 12% yoy growth in HSD sales point to rising industrial activity, and 9% yoy growth in Mogas partly reflect the positive impact of lower pump prices, in our view. FO sales rose 31% yoy, because low prices have improved the economics for FO based captive power.

OMC margins increase due: Based on the average headline CPI of 10.8% during FY20, the next revision in fixed margins on HSD and Mogas could be about PKR0.30/liter from PKR2.81/liter at present to c.PKR3.11/liter. It has been pending since July 2020 (ECC embroiled in other pressing issues).  Intermarket Securities Limited estimate that this will have an annualized EPS impact of PKR3.5 / 3.3 / 3.5 per share on PSO / SHEL / APL. The revision is already incorporated in our estimates.

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