Karachi, July 12, 2021 (PPI-OT): OMCs: Expect a strong quarter
We present earnings estimates for APL and SHEL ahead of the June-2021 result announcements. We expect strong earnings for the overall sector in the near absence of exchange losses and bullish oil prices in the international market that could translate to substantial inventory gains. Furthermore, we highlight that the industry has seen a significant 18% YoY rebound in overall POL sales as economic activity gained traction during the year.
Attock Petroleum Limited (APL)
For the full year FY21, we expect APL to post a Profit after Tax of Rs5.3bn (EPS: Rs53.55), a phenomenal increase of over 5x from the net earnings of Rs1.0bn (EPS Rs10.13) during FY20. Even though APL barely managed to sustain its volumetric sales around the 1.7mn ton mark, the sales mix has changed considerably. For instance major retail fuels Motor Spirit (MS) and High Speed Diesel (HSD) both declined by 7% and 12% respectively. On the other hand Furnace Oil (FO) saw a huge jump of 32% YoY. Moreover, the bullish international oil prices are expected to boost APL’s Gross Margins from 1.8% in FY20 to 5.4% this year. Moreover, we expect APL to pay out a final dividend of Rs15 per share.
Shell Pakistan Limited (SHEL)
Shell Pakistan Limited (SHEL) is expected to post a Profit after Tax of Rs3.9bn (EPS Rs18.47) for 1HCY21 as against a colossal Loss after Tax of Rs7.9bn (LPS Rs36.79) during the same period last year. Here too we believe that external factors such as policy changes have played a major role in the return to profitability. We expect SHEL’s gross margin to go from -1.5% in 1HCY20 to 7.7% in 1HCY21. To recall it was during 1HCY20 that US oil futures ventured into negative territory, causing major inventory losses not just to SHEL but to the overall downstream oil sector. However, SHEL’s performance during 1HCY21 cannot be downplayed. Its extensive retail network has afforded it the luxury of increasing overall sales by as much as 36% YoY. We expect SHEL to pay out a cash dividend of Rs6 per share.