Elixir Securities Limited – Flash Note

Karachi, August 15, 2018 (PPI-OT): Attock Petroleum Limited – Lower Cash Payout with Tighter Cash Flows

Attock Petroleum (APL) announced its FY18 result, where it posted PAT of PKR5.7bn (EPS: PKR68.19), 7%YoY higher than PKR5.3bn (EPS: PKR63.89) in FY17. The earnings came in slightly higher than our expectation of PKR66.65/share mainly due to higher gross profit.

APL announced lower than expected final cash dividend of PKR25/share (taking full year DPS to PKR40; payout: 59% in FY18 vs. 67% in FY17) due to tighter cash flows, however, it announced a 20% bonus issue.

Earnings growth of 7%YoY in FY18 was dwarfed by 33%YoY growth in Gross Profit (led by 28%YoY growth in Topline) owing to 1) Other Operating Expenses standing at PKR439mn vs. PKR301mn reversal last year, 2) 35%YoY growth in Operating Expense with increase in volumes, and 3) 38%YoY decline in Net Finance Income due to lower cash and short term investments.

On quarterly basis, earnings grew by 48%YoY to PKR1.4bn (EPS: PKR16.79) in 4QFY18. This has been attributable to 79%YoY growth in Gross Profit led by higher offtake, higher margins with increase in international oil prices, and inventory gains.

Sequentially, earnings declined by 4%QoQ owing to higher effective tax rate of 41% in 4QFY18 vs. 28% in 3QFY18 due to imposition of super tax. Pre-tax earnings grew by 18%QoQ led by 16%QoQ growth in Gross Profit and 47%QoQ growth in Other Income.

We maintain our BUY call on the stock with Jun-19 PT of PKR674/share.