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AKD Securities Limited – Off the Analyst’s Desk (September 22, 2022)

Karachi, September 22, 2022 (PPI-OT): APL: FY22 Analyst Briefing Takeaways

APL’s market share for FY22 stands at 10% (FY21: 9.4%), with total retail outlets standing at 730 with 63 newly commissioned during the outgoing year.

APL’s retail outlet concentration lies more towards highways/motor ways (share: 54%) while outlets in urban centers only account for 39%. Province wise, Punjab/Sindh/KPK account for 64%/14%/12.5% of total outlets, respectively.

Gross profits on sale of retail fuels currently stand at ~1.5%, compared to historical margins which usually stood between 3-3.5%. Hence, extremely low margins are barely covering operating costs at this point and it is the dire need to raise these numbers in for sustainability of sector.

Even though earnings have remained robust in the outgoing year, working capital situation still remained tight on the back of risen costs of supply, LC margins and PDC claims. Even then, APL managed to increase its market share compared to peers amid the very volatile FY22.

Inventory gains during FY22 is estimated to be over 50% of the gross profits. Average days of inventory stood between 30 and 40 days during FY22

Govt’ and OGRA have consulted APL alongside other OMCs with regards to deregulation. Tentative timeline is 1st Nov’22. In the event of deregulation, Govt’ wants IFEM to continue for the time being while OMCs require fixed dealer margin to be discontinued.

With regards to future demand, a slowdown is imminent as is the case globally. Domestically, there are still levies and taxes outstanding which Govt’ is yet to add to the fuel prices, hence management expects near-term demand to remain on the lower end compared to FY22.

With regards to EV segment, company has one 180KW charging station in Islamabad, and plans to add more charging stations onto motorways, as well as major cities such as Karachi, Lahore and Rawalpindi. Management believes these developments to unfold in 2-3 months.

With regards to increasing retail presence in the South, company plans to add outlets in major cities across the Sindh province, with 20-25 outlets planned for Karachi alone.

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