AKD Securities Limited – Off the Analyst’s Desk

Karachi, October 12, 2018 (PPI-OT): APL: 1QFY19 Result Review

APL announced 1QFY19 NPAT of PkR1.55bn (EPS: PkR15.55), 20% below our estimates attributable to lower than forecasted inventory gains (PkR~300mn recorded vs. PKR~800mn expectation), highlighting possible drawdowns in storage levels of HSD and FO.

Lower inventory gains depressed GM’s to 4.4%, falling 68bpsYoY, while slightly higher operating expenses (+27%YoY/+5%QoQ) and finance costs (+49%YoY/+20%YoY) indicate on-boarding of storage additions and strains on working capital from PkR devaluation.

From the balance sheet, further strains on working capital are evident as the net outflow in working capital was of PkR3.68bn (vs. PkR3.99bn inflow for SPLY) while a lower current ratio of 1.33x vs. 1.42x as of June’18 indicate a terse operational environment.

We find the OMC has superior value credentials where additional storages should support retail outlet expansions, while MS sales growth could keep core profitability on an uptrend.