Karachi, June 08, 2022 (PPI-OT): APL and PSO: Projections incorporating macro-developments
We revisit our investment case for APL and PSO, revising TPs to PkR390/sh and PkR204/sh from previous PkR438/sh and PkR250/sh, respectively. Our models incorporate Rf at 15.5%, PkR/US$ at 198/210, and Arab Light at 95/90 US$/bbl in FY23/24F.
OMC sector continued with its annual volume uptrend trajectory, increasing by 28%YoY in May’22, however, was down 2% on a MoM basis. Industry volumes clocked in at 20.6mn MT for 11MFY22, up 18%YoY and is expected to end the fiscal year at ~22.5mn MT, up 17%YoY.
Moving into FY23, we expect a slowdown in demand due to i) complete elimination of fuel subsidy, ii) re-implementation of sales tax and PDL, iii) rising global/domestic slowdown fears and iv) measures to reduce petrol/energy consumption, such as 4-day work weeks and the elimination of GST on solar panels.
APL (TP: PkR390/sh) remains our top pick amongst the listed players, for reasons including i) aggressive capacity and retail network expansion to enhance market share, ~4x in last 3 years, ii) near-to-none leverage on books, protecting it against any hike in interest rates, iii) high payout ratio of the company, placing it in defensive category, and iv) retail centric revenue keeping it shielded from circular debt.