Attock Petroleum Ltd (APL) has posted a NPAT of PKR1.5bn (EPS PKR15.25) for 3QFY21, up 130% qoq (and coming off a loss SPLY). This takes 9MFY21 NPAT to PKR3.7bn (PKR36.81/sh), up from PKR0.87bn SPLY. The result beats our 3Q EPS estimate of PKR13.5/sh due to higher-than-expected inventory gains.
Key Highlights for 3QFY21:
- Net Sales of PKR45.7bn is up 2% qoq (down 9% yoy), even though its HSD volumes fell 14% qoq and Mogas sales were flat. The decline in volume sales is offset by 8-10% increase in retail prices. APL’s overall market share stood flat at 8% – though improved by 1ppt in HSD – compared with last year, its share fell 3ppt from 11% (weakness in all major products), partly due to disrupted supplies from group refineries and PSO/Total-Parco competing with a larger retail network (PSO also regained strength in the furnace oil market). Net sales misses our estimate, possibly due to lower-than-expected sales of deregulated products (such as asphalt).
- Gross profit of PKR2.9bn exceeds our estimate of PKR2.5bn – indicating greater-than-expected inventory gains; given that Revenue missed our estimate, we infer that inventory gains played the major part in lifting GP. Gross margins of 6.3% is the second highest level since 2QFY18 (APL booked c.6.8% in 1QFY21). Pump prices of HSD and Mogas (retail fuels) rose by PKR8-10/liter during the quarter.
- Opex of PKR0.9bn remain high (c.1.6% of Net sales), but this is now a normal for APL – following the significant investment in storages and network in recent years. Prior to 2019, Opex used to average 1.0-1.2% of Net sales.
- Other income of PKR0.7bn, up 16% and 10% yoy, is lifted by exchange gains to the tune of PKR0.1bn, in our view. Otherwise, it includes late payment surcharges, but they are offset by LPS of nearly the same amount in Finance costs.
- Effective tax rate has come in at 30% – higher than 23% in the previous quarter.
This is a good result by APL, where healthy inventory gains is the fruit of significant investment in the network and storages in recent years – where APL can maintain up to 20/40 days’ worth of inventory of Mogas/HSD (better than in case of PSO). We are less impressed, however, by APL’s performance in retail fuel market share where gains have been relatively modest. Our Buy stance on the scrip (TP PKR400/sh) is based on its superior risk-reward profile in the OMC space, where it is offering a FY22 DY of 10%.
Courtesy – Intermarket Securities Limite