Pakistan Petroleum Limited (PPL) reported its 2QFY22 result today where the company’s profitability stood at PkR17.7bn (EPS: PkR5.4), this took the cumulative profitability during 1HFY22 to PkR31.7bn (EPS: PkR11.7). The result was below our expectations on account of share of loss of associate from Pakistan International Oil Limited (POL). Along with the result, the company also announced a payout of PkR1.5/sh.

Following are the key takeaways from the announcement.

· The company’s topline during the quarter clocked in at PkR46.4bn (up 27%YoY). This took the cumulative number during 1HFY22 to PkR89.5bn, up ~19%YoY. The growth in topline is driven by price related factors where the volumetric offtake had come down significantly due to lower production from Adhi, Nashpa, and TAL block (Oil, Gas and LPG declined by 9.5%YoY, 7.8%YoY and 1.8%YoY, respectively during 2QFY22).

· Exploration expense increased by 321%YoY given higher exploratory and drilling activities due to strengthening of oil prices and slightly higher recoveries made during this year, in our view.

· Exchange gains on FX denominated assets helped increase PPL’s other income to PkR2.7bn during 2QFY22 primarily after the currency had depreciated by ~4.1%QoQ.

· PPL booked loss of PkR2.4bn under share of profit from associate with respect to 3D seismic cost incurred by the associate PIOL which dented the bottom-line.

· We have a BUY call on the scrip with a TP of PkR166/sh, offering an upside of 115% from the last close. The scrip trades at a forward PER of 3.1x only.

Courtesy- AKD Research