APL posted 2QFY26 NPAT of PKR2.6bn

Attock Petroleum Limited (APL) posted 2QFY26 NPAT of PKR2.6bn (EPS: PKR20.97), down 32% QoQ and 5% YoY, above our expected EPS of PKR17.25, with the positive variance primarily driven by stronger-than-anticipated gross margins. The sequential decline in earnings was largely due to the normalisation of inventory gains, which compressed gross margins by 2.5ppt to 3.9%. On a cumulative basis, 1HFY26 NPAT stood at PKR6.4bn (EPS: PKR51.60), reflecting a robust 25% YoY increase. The result was accompanied by an interim cash dividend of PKR20/sh, exceeding our expectation of PKR14/sh, according to a report released by IMS Research.

Key highlights for 2QFY26 results:

§ Net revenues clocked in at PKR123bn, up 3% YoY and 4% QoQ, broadly in line with our estimates. Sequential growth was primarily driven by improved volumetric sales, particularly diesel, which rose 14% QoQ. On an annual basis, revenue growth was largely price-led, with MS and HSD prices rising 6% and 9% YoY, respectively, more than offsetting the decline in overall volumes.

§ Gross margins contracted by 2.5ppt QoQ to 3.9%, mainly due to the normalisation of sizable inventory gains recorded in the previous quarter. However, margins remained above our projected 3.2%, with the positive variance likely stemming from efficient inventory management, likely resulting in modest inventory gains compared to our estimated inventory losses of PKR342mn.

§ Net finance income declined 21% YoY but increased 6% QoQ to PKR975mn. The annual drop reflects the impact of lower interest rates amid ongoing monetary easing, while the sequential improvement is attributable to higher average cash balances and short-term investments during the quarter.

Attock Petroleum Limited (APL)’s profitability normalised during the quarter in the absence of one-off inventory gains recorded previously; however, prudent inventory management helped limit losses, enabling the company to post a respectable gross margin of 3.9%. Notably, APL raised its payout ratio to 39% for 1HFY26, signalling a strategic shift toward higher dividend distributions, which we believe could unlock value going forward. The company continues to maintain a strong balance sheet, with a sizable cash position of c. PKR400/sh, providing ample room to sustain elevated payouts. We reiterate our Buy stance on APL with a target price of PKR650.0/sh.