Petroleum products sales surge in Pakistan during Dec 20

As per the OCAC numbers, MS, HSD and FO sales showed recovery of 4.8/13.0/108.4% YoY respectively, taking petroleum sales to 1.6mn Tons in Dec’20, down/up 7/16% MoM/YoY.

According to Pakistan Investment Research, Resumption in economic activities coupled with relatively cheaper FO prices (USD 300-340/ton in Dec’20) pulled total petroleum sales to 9.75mn Tons (↑10.9% YoY) in 6MFY21. On a s sequential basis, FO sales witnessed an uptick of 41.3% due to aforesaid reason.

Pakistan State Oil (PSO) outperformed the peers with MS/HSD market share of 41.9/47.9% (↑2.0/2.6ppts) during 6MFY21 whereas Attock Petroleum Limited (APL) market share diluted by 1.7/3.3ppts to 7.3/7.1% during the same period. Going forward, we expect MS and HSD sales to continue their recovery, whereas FO sales may remain elevated during the winter season due to lower gas availability. Petroleum sales surged 16.2% YoY but recorded a decline of 7% on MoM: Improving economic activity fueled the surge in petroleum sales across all key segments as MS/ HSD/FO recorded a YoY uptick of 4.8/13.0/108.4% in Dec’20.

On a sequential basis, MS and HSD sales declined by 3/22% in Dec’20, however, a significant increase in FO sales ↑41.3% have kept the downside limited. The decline in MS and HSD sales during the month was mainly attributable to seasonal slowdown due to winter season along with the Covid‐19 based restrictions. Whereas, uptick in FO sales was mainly driven by the combination of cheaper FO prices and lower availability of natural gas. Going forward, we expect MS and HSD sales to continue this momentum while FO sales may start to dilute after the ongoing winter season.

PSO outperformed peers by gaining market share: Pakistan State Oil Company Limited (PSO) emerged as the outperformer by increasing its market share in MS and HSD by 2% and 2.6% respectively during 1HFY21. Market share of APL and SHEL in MS/ HSD declined by 1.7/3.3ppts, 1.4/0.2ppts to 7.3/7.1% and 10.4/7.7% during 1HFY21. The top pick in the sector: We continue to prefer PSO among peers on the back of increasing market share and improving liquidity. The company is also one of the key beneficiaries of potentially another round of cash injections in the energy sector. Hence, we have a BUY call on the scrip with Dec’21 target price of PKR 282/sh, offering a total return of 17.0% from the last close.

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