Cnergyico Pk Limited (CNERGY) held its analyst briefing earlier today, wherein the following was discussed:

 ·         To recall, the company posted earnings of PkR4.7bn (EPS: PkR0.90) for FY22, higher by 34.2% compared to the earlier year. CNERGY’s Net sales for the year were PkR170bn, higher by 20%YoY.

·         During the year, the company approved 57.37% stake in Puma Energy Ltd. Puma currently has 542 retail outlets and 2 storage terminals. Further, CNERGY has two under construction storage terminals currently at Shikarpur and Machike.

·         Price differential claims (PDC), Letter of Credit/import issues and exchange losses posed significant challenges for CNERGY during the outgoing period. Post acquisition, market share of retail outlets will increase to 9.8% (current: 4.4%).

·         Competition commission approval’s regarding the acquisition is currently awaited, once done, company will officially notify PSX. 

·         Company’s consistent capacity utilization decline is largely due to exchange rate volatility which has been rampant since few years. As per company presentation, PkR has depreciated by 87% during these years.  

·         Currently, the refinery upgradation plans are on hold until the official announcement of the ‘Pakistan Refinery Policy’. ECC is expected to meet this week to discuss the policy’s prospects. Company plans to finance the project upgradation with a mix of ‘equity injection from the market’ and debt.

·         CNERGY was the most affected refinery in the recent floods, as collapse of the bridge at Hub Chowki severly impacted the supply chain process, reducing POL product upliftment from OMCs. Company’s utilization for the 1QFY23 stood at 25-30% of total refining capacity, lowest in the sector.    

·         Post-upgradation, RFOs share in refined product production is expected to fall to 7.5% vs. current 30-40%.

·         RFO demand usually declines during the winter months, company plans to export the excess fuel oil during these months at a significant discount. Although, if RLNG supply remains restricted during the winter months, RFO offtakes may be a possibility. 

·         As per company, there seems to be no foreign interest in the country’s refinery sector, although that may change if the refinery policy is lucrative enough.

Courtesy – AKD Research