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xResearch

Active Member
Apr 9, 2017
1,537
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#31
Topline Securities (Private) Limited
Thursday, 30 November 2017

Oil & Gas Marketing Companies: OGRA proposes lower return for Gas companies


Oil & Gas Regulatory Authority (OGRA) is in the process of reviewing the existing tariff regime for the natural gas sector in Pakistan in view of the prevalent integrated companies, proposed unbundling of gas companies and changing business dynamics in the local market and best international practices.

For the purpose, OGRA is conducting public consultation session in five different cities of the country starting from today to discuss proposed plan and its implications. The notifications in this regard was posted on OGRA’s website on November 14, 2017.

The existing tariff regime operates on the cost transfer pricing mechanism and provides a fixed rate of return on operating fixed assets at 17.5% in case of SNGPL and 17% in case of SSGCL.

The existing tariff regime operates on the cost transfer pricing mechanism and provides a fixed rate of return on operating fixed assets at 17.5% in case of SNGPL and 17% in case of SSGCL.

Effectively, the new return of ~11% is lower than the existing tariff that offers 12.25% return (17.5% return adjusted for tax).
 
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xResearch

Active Member
Apr 9, 2017
1,537
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#32
AKD RESEARCH
6 December 2017


OMCs: Nov'17 sales suffer from FO generation halt

Seasonal weakness aggravated by the abrupt closure of FO fired plants for the majority of the month weighed down Nov'17 POL product sales, amounting to 1.91mn tonnes (-22%MoM/-7%YoY). FO sales fell -55%MoM/-29%YoY, while supply chain constraints and ensuing refinery disruptions kept MOGAS/HSD volumes on a soft note (-9%/+2%MoM and +6%/-2%YoY). Total POL sales volumes for major OMCs moved -29%/-22%/-22%MoM for PSO/APL/HASCOL
and -28%/-8%/+29%YoY, highlighting the tenuous situation of POL storage and transport infrastructure due to unplanned FO plant closures. Market shares for major OMCs remained sticky, with PSO/APL/HASCOL commanding 52%/8%/11% of total product market share for Nov'17 while cumulative 11MCY17 market shares are at 55%/8%/10% vs. 56%/7%/7% for 11MCY16. Highlighting PS0's attractive multiples (FY18E P/E of 4.9x) and earnings cushion from RLNG handling income (2.5% of DES price) as key triggers. At a target price of PkR413/sh the potential upside of 34% is alluring.

SmartSelectImage_2017-12-09-01-03-28.jpg

Prominent impact of FO weakness: As expected, PSO's leadership in the FO segment mark share (74% for lIMCY17) hampered volumes drasctically, pulling overall volumes for the OMC lower by -29%MoM/-28%YoY to 0.98mn tonnes. FO sales volumes dropped by 0.38mn tonnes MoM and 0.34mn tonnes YoY, selling -57%MoM/-54%YoY volumes, effectively halving average monthly sales. Total POL sales volumes for major OMCs moved -29%/-22%/-22%MoM for PSO/APL/HASCOL and -28%/-8%/+29%YoY, highlighting the tenuous situation of POL storage and transport infrastructure was under due to unplanned FO plant closures.

Outlook: Market shares for major OMCs remained sticky, with PSO/APL/HASCOL commanding 52%/8%/11% of total product market share for Nov'17 while cumulative 11MCY17 market shares are at 55%/8%/10% vs. 56%/7%/7% for 11MCYI 6. In light of resumption of power offtake from FO fired plants backed by seasonal downtick in hydel generation and prevalence of low load factors for newly energized power projects (8-9month period between energization and COD), we believe Dec'17 sales should resume their seasonal trajectories.

Investment Perspective: Standing by our previous prudent stance of FO total industry sales tapering -11%YoY, we believe PSO's share price decline of -12%MoM remains unwarranted, highlighting attractive multiples as play (FYI 8E P/E of 4.9x) and earnings cushion from RLNG handling income (2.5% of DES price) are key triggers. At a target price of PkR413/sh the potential upside of 34% is alluring.

SmartSelectImage_2017-12-09-01-19-54.jpg
 
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xResearch

Active Member
Apr 9, 2017
1,537
1
38
#33
OMCs Sales Statistics Oct'19: Fuel demand dips 3.2% in October



· As per the data released by OCAC, overall sales of petroleum products declined by 3.2% in October to 1.60m tons as compared to 1.65m tons in same month of preceding year. The drop in fuel demand was mainly due to significant increase in prices of petroleum product, decelerating economic activity and limited use of FO as source in the power sector.



· However, on sequential basis sales surged 7.2% in Oct’19 to 1,601K tons. On month-on-month basis, MS and HSD sales increased by 5.2% and 18.9% to 681k and 650k tons respectively. While the FO sales recorded a drop of 15.7% to 200k tons.



· Company-wise highest MoM growth of +70.7% in sales of petroleum products was recorded by HASCOL, mainly contributed by growth in sales of MS (+90% MoM) and HSD (+73% MoM). SHEL witnessed growth of +8% MoM to 134K tons mainly contributed by +17.3% and +3.3% surge in HSD and MS sales. Following the trend, PSO recoded largest volumetric surge in its sales to 732K tons of petroleum products, mainly contributed by 13.7% surge in sales of diesel.



· Market share of PSO increased during the month to 46% (+2pps MoM), while SHEL and APL’s share remained flat at 8% and 10%. On the other hand, HASCOL and BYCO lost their market share to 8% (-3pps MoM) and 5% (-1 pps MoM) respectively.

Thanks & Regards

Research Team
Aba Ali Habib Securities3
 

xResearch

Active Member
Apr 9, 2017
1,537
1
38
#34
BMA Capital Report

PSO despite stiff competition and macroeconomic challenges, continued to lead the downstream oil market with an increased overall market share of 46.6% compared to 40.1% in SPLY in Liquid Fuel. The Company’s market share improved primarily due to volume growth of 5.8% in White Oil. Consequently, the market share of White Oil increased to 45.0% compared to 39.6% in SPLY. The increase in market share was achieved through focused approach of Management to incentivize its customers and dedicated team efforts.

PSO also managed to bring further efficiencies in its supply chain by sourcing 42% of Refinery production during the period compared to 33.6% in SPLY while 54% of industry imports were handled by PSO.
The Company has reported Profit after Tax (PAT) of Rs. 3.53 bn compared to Rs. 4.18 bn in SPLY. Major reasons for reduction in PAT is significant increase in financing cost on account

of higher discount rates set by the State Bank of Pakistan, partially offset by exchange gain due to appreciation of Pakistani Rupee. On a consolidated basis, the group achieved a net turnover of Rs. 340.64 bn which translated into a Group PAT of Rs. 3.48 bn.

Due to increase in OMC margin 8% by the GOVT. and stability in dollar and g crude prices and in future interest rate cut our stance a "Buy" call for PSO stock with a healthy growth in second quarter with a target price of Rs 240 till December 2019
 
Apr 11, 2017
131
1
18
#35
*Impacts of Cut in Petroleum Prices on the Economy*

Government has passed on petroleum product prices today by an _average 26%, or PKR 22/ltr on average, from last levels, which is 70% of what has OGRA suggested_ . CNG prices are also down by ~15%.

With this, impact on _Inflation, Revenues and Relief efforts_ is expected/estimated to be as follows:

*1)- Inflation*

This 26% decline on average in petroleum products would have an estimated direct impact of *2.6% in the form of decline in CPI inflation* in the coming months. CPI currently standing at over 10%, should go down to around 7.5% in the coming months. Good for the masses and the economy at large.

Though a support to traditional rate cut thesis, but the *Policy Interest Rate should be cut irrespective!*

*2)- Taxes*

As per sensitivity at last petroleum prices, *every PKR 10/ltr leads to revenue impact of about PKR 15bn/month for the GoP*. So, passing on PKR 22/ltr on average, there should be an estimated PKR 34bn/month impact on taxes, while remaining should still be saved for relief efforts.

*3)- Relief to 'All'*

After this balancing act by the GoP, the leftover tax benefit can be best put to use by providing relief to both, common man as well as industries and businesses; *Common man thru social safety nets/programs, while some reduction in taxes (Indirect/Direct both) should lead to support to employment and overall economic activity.*

Hope, together we are able to fight these challenging times well. InshaAllah.

Best,
*Khurram Schehzad*
 
Apr 11, 2017
131
1
18
#37
OMC Apr’20 Sales Data


Data from the Oil Companies Advisory Council (OCAC) showed that Oil Marketing Companies collectively sold 1.07 MN tons of oil during Apr’20, higher by 4.6% M/M, while lower by 35.6% Y/Y. The sequential increase was driven by a 41.8% M/M increase in HSD offtake in the industry; effects of which were watered down by a 20% M/M decline in MS volumes.

- On a Y/Y basis, the volumes were down by 35.6%, with the brunt of the decline coming from MS volumes, down 35.6% Y/Y, or 241 KT. MS offtake averaged 616 KT per month during the period between Jul'20 and Mar'20, with the Apr'20 offtake 29% lower than the 9MFY20 average.

- On a cumulative basis, the 10MFY20 offtake was lower by 12.8% Y/Y, with the industry having sold 13.3 MN tons during the period. The decline was driven by lower HSD demand during the ongoing year, with volumes down 15.1% Y/Y or 913 KT.

- Lower Furnace Oil demand further dampened the offtake during the 10FY20 period, with the black oil’s sales volumes having dipped by 31.7% or 774 KT.

- We believe OMC volumes can recover in the short-term with the initial panic regarding the COVID-19 pandemic subsiding and industrial activity ramping up in the country.

- We continue to like the OMC sector, due to inflation-hedge, and our opinion that volumetric growth would return to the sector. Our top picks from the sector remain PSO (TP: PKR 197/sh; upside potential: 26%) and APL (TP: PKR 317/sh; upside potential: 17%).

Regards,
KASB Research