During 1HFY21, we expect the company to report a PAT of PKR 9.8bn (EPS: PKR 20.84), up by 52% YoY compared to PKR 6.4bn (EPS: PKR 13.71) in 1HFY20. This is attributable to volumetric growth of 11% YoY (FO, HSD and MS volumes increased by 26%, 18% and 12% YoY) and inventory gains of PKR ~1,800mn expected in the period under review compared to an inventory loss of PKR 800mn in the same period last year resulting in improvement of gross margins by 117bps YoY to 3.92%.

Despite the increase in overall volumes by 13% YoY during 2QFY21, the company’s top line is anticipated to decrease by 10% YoY due to decline in prices of petroleum products. Gross margins are expected to increase by 151bps to 3.74% amid volumetric growth coupled with inventory gain of PKR ~600mn compared to an inventory loss of PKR ~2bn in SPLY. The turnaround in profitability is due to inventory gains and lower financial charges compared to massive inventory losses and higher finance cost. Along with this, we expect the company to announce a dividend of PKR 5.00/share.

Courtesy – AHL Research