Attock Petroleum saw inventory gains boost earnings during 3QFY24

Attock Petroleum Ltd (APL) has reported 3QFY24 NPAT of PKR3.0bn (EPS: PKR23.96), up 17% QoQ but down 31% YoY—slightly higher than our estimated EPS of PKR22.65. The sequential increase in earnings is primarily due to an increase in GMs by 1.4ppt to 3.7% amid inventory gains. The result brings 9MFY24 NPAT to PKR10.8bn (EPS: PKR86.65), up 10% YoY; the growth is mainly due to large inventory gains reported in 1Q.

Key highlights for 3QFY24 result:         

APL’s net revenue arrived at PKR123.8bn, declining 9% QoQ but up 9% YoY – above our expectations. The sequential decline is attributable to lower average white oil prices (diesel and petrol) and a slight reduction of volumetric sales by 1% QoQ.

APL reported gross profit of PKR4.6bn with a QoQ increase of 48%, in line with our estimated gross profit of PKR4.4bn. The sequential increase in gross profit was led by inventory gains (estimated at c.PKR0.6bn) reported during the quarter which took GMs to 3.7% from 2.3% reported in the previous quarter.

The company booked net finance income of PKR1.8bn, down 7% QoQ but up 2.3x YoY. We understand a decline leads the quarterly decline in net finance income in short-term investments. Nonetheless, the amount is still fairly high, contributing 38% to PBT amid elevated interest rates. We projected net finance income of PKR1.7bn.

Among other line items: (i) Opex of PKR1.6bn fell 44% QoQ, likely due to exchange losses amid appreciating USD/PKR rate, and (ii) effective tax rate increased by 3ppt QoQ to 39% in 3QFY24.  

APL’s profitability increased due to one-off inventory gains (estimated PKR3.5/sh) amid rising white oil prices during the quarter. Going forward, earnings are expected to improve further due to an expected increase in white oil margins by 1QFY25 coupled with improving economic activity. The company is actively expanding its network in the South region, particularly in Karachi, which should result in an improvement in market share, which currently stands at c.10%. We maintain a Buy on APL with a June 2024 TP of PKR457/sh.

Courtesy – IMS Research 

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