AKD Securities Limited – AKD Daily (January 17, 2023)

Karachi, January 17, 2023 (PPI-OT): Pakistan Refinery: Global yields surge, domestic sector fate hangs in balance

Global refining margins have continued to tick upwards amidst drop in refinery utilization due to snow storms in Texas, offsetting demand lows from holiday season resulting in larger than anticipated fuel inventory declines.

Gasoline cracks have also continued to inched higher by US$9.3/bbl MoM amidst optimism on Chinese demand ahead of Lunar Year holiday at the end of the week.

With the Govt. finalizing of draft refining policy (for the third time) for domestic refineries last month, this is anticipated to breathe new life into the sector’s prospects (if and when implemented).

Moving forward, refinery profitability may remain elevated in the near term as they reap impacts of high yields on both MS/HSD, respectively.

Given elevated margins, our liking stems towards ATRL majorly due to consistently higher white-product throughput and one of the lowest FO yields (-ve margins) in the sector.