SNGP held a corporate briefing today to discuss FY20 and 1QFY21 results.

Please see key takeaways below:

• Consumer base during the year increased by 0.3mn whereas the company still has a sufficient backlog of gas connection applications, which should aid CAPEX in infrastructure and hence, bottom-line in the future.
• Current consumer mix of SNGP includes domestic share of 36%, power share 30%, 6% CNG and 3% for fertilizer and commercial each. Whereas the remainder is general industry and cement sector.
• Share of RLNG now accounts for ~50% of the company’s sales mix compared to just 3% when import began in FY15.
• To recall, actual UFG for FY20 settled at 12.32% against 11.86% in SPLY. Whereas the quantum of disallowed UFG jumped up to PKR 11.3bn (FY19: PKR 10.5bn). As a result, profitability declined by 15% YoY.
• Albeit, UFG came down to 10% in 1QFY21 (disallowance of PKR 3.1bn) against 12% in 1QFY21 (disallowance: PKR 2.3bn). Pertinently, the company has adopted a new technology to monitor UFG losses which has allowed to company to identify low pressure areas via the GIS (Geographic Information System) mapping.
• Earning in the quarter witnessed a jump due to lower UFG, higher operating income and curtailed finance costs.
• The management also addressed the cut in Weighted Average Cost of Capital (WACC) as proposed by OGRA under the FY22 Estimated Revenue Requirement (ERR). The new calculation implies a return of 16.60% vs. 17.43% earlier for the next 3 years (FY22 onwards). However, the management reassured that given a cut in depreciation on transmission and distribution lines and consumer meter stations (estimated life of assets increased to 40 years from 16 years previous), should partially off-set the negative impact of reduction in return.
• Pakistan North South Gas Pipeline with Russia was also touched upon. The management highlighted that this USD 2.5bn, 1,100km pipeline from Karachi to Kasur will significantly add to SNGP’s profitability. Although, the company awaits governments announcement of final modalities of the project and the company’s share in it.

Courtesy – AHL Research