Karachi, August 09, 2021 (PPI-OT): PSO and APL – 4QFY21 Result Previews

PSO: 4QFY21 EPS expected to clock in at PkR12.2: Pakistan State Oil (PSO) is expected to post PAT of PkR24.0bn (EPS: PkR51.1) for FY21 against LAT of PkR6.5bn for FY20 on the back of heavy inventory losses for FY20. For 4QFY21, PAT is expected to clock in at PkR5.7bn (EPS: PkR12.2) against LAT of PkR9.5bn for 4QFY20 while on QoQ basis, profitability is expected to decline by 34% as high inventory gains during last quarter kept the base high. PSO’s overall market share for 4QFY21 increased to 46.3% against 44.5% for 4QFY20 where major increase was witnessed in furnace oil with PSO’s market share standing at 50% against 15.4% for 4QFY20 while an increase in retail fuel volume of 15.4%YoY against 19%YoY of the industry resulted in retail fuel market share declining to 45% for 4QFY21 against 47% for 4QFY20. Despite decline in interest rates, we expect PSO’s finance cost to cost to increase on QoQ basis as furnace oil demand from power sector increased during the quarter, resulting in increased need for short term borrowings. PSO (TP: PkR305.6/sh, 38% upside) is our top pick where near term developments include clearance of circular debt and shift in profile of cash flows due to increased share of retail fuels while focus on improving storage infrastructure will result in company sustaining the recently gained market share, moving forward.

APL: 4QFY21 EPS expected to stand at PkR9.3: Attock Petroleum Ltd. (APL) is expected to announce results on 11th August, 2021 for FY21 where we expect the company to post PAT of PkR4.6bn (EPS: PkR46.1), up 355%YoY, majorly due to low base as significant inventory losses for FY20 kept the base low. For 4QFY21, PAT is expected to stand at PkR979mn (EPS: PkR9.8) up 130%YoY mainly due to low base as significant inventory losses depressed profitability in 4QFY20. However, on QoQ basis, profitability is expected to decline by 39% as significant inventory gains kept the base high in 3QFY21. APL’s market share has witnessed a slump, standing at 8% for 4QFY21 against 9% for 4QFY20 as HSD consumption by power plants decreased while smaller players are also eating up company’s share in retail fuels. Along with the result, we expect APL to announce dividend of PkR10/sh. Even though market share has declined recently, we maintain a Buy stance on the stock premised upon enhancement of storage infrastructure which will aid in expanding footprint. Our TP of PkR406.8/sh provides an upside of 22% – Buy.