As per latest monthly numbers (Jan’21), oil sales posted a healthy increase of 12.4% YoY to close the month at 1.5mn tons. However, on an MoM basis there was a decline of 4.7% due to cold weather up north. Breaking it up, MS/HSD/FO volumes showed an improvement of 4.3/13.8/34.2% YoY respectively. Broad based recovery in sales volume is credited to resurgence in economic activity post lockdown and reduction in availability of gas during winters (in the case of FO).

Volumes recover post COVID outbreak: In 7MFY21, the increase clocked in at 11.1%

YoY which looks slightly on the higher side as 2HFY20 was marred by COVID-19 outbreak. On a relative performance basis, PSO turned out to be the best performer having undergone 13.2% YoY volume accretion that in turn led to a ~90bps expansion in its market share which rose to 46.2%. Going forward, we opine that uptrend in sales is likely to continue owing to improving passenger car sales, accommodative monetary policy and broad based economic recovery. We reiterate our liking for PSO in the wake of positive news flows on circular debt settlement and regaining market share.

Petroleum sales down/up 4.7/12.4% MoM/YoY respectively:

In the outgoing month, the recent rising trend of FO sales continued as the general industry resorted to it following limited gas availability. This looks short lived as natural gas prices in the international market have normalized and winter is coming to an end. On the flip side, 13.8/11.7% YoY surge in HSD sales in Jan-21/7MFY21 is a welcome sign. MS sales recorded an increase of 4.3% on a YoY basis. Moving forward, we expect MS/HSD to lead the recovery in sales volumes while growth in FO is forecasted to slow down.

PSO and BYCO gained while the others lost:

PSO and BYCO turned out to be the top performers in the industry as both underwent a ~90bps accretion in their market share courtesy 13.2/31.0% YoY increase in sales volume. PSO and BYCO stood to benefit as other industry players namely SHEL, APL, PARCO & HASCOL lost their footing. Cumulatively, the four companies lost 464bps of market share while PSO and BYCO added 176bps combined.

Recommendation: We reiterate our liking for PSO on the back of subsiding circular debt issues, improved working capital position and rising market share. We have a BUY rating on the scrip with a Dec’21 TP of PKR282/sh, offering total return of 15.1%.

Courtesy of BMA Capital Management Ltd.