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Todays Daily
OMCs: Earnings and volumes keeps the tires kicking

Passing through the crest of IPP and retail led seasonal fuel demand KSE100 - Index
Current 46,533.43
OMC sales for July'17 grew +9%MoM/+8%YoY pulled by HSD/MOGAS
Previous 46,010.45
sales. Cumulative 7MCY17 industry sales stood at 14.89mn tonnes
Chg. 1.14%
(up 2%YoY), falling short of long term growth rates in all segments
except HSD. In this backdrop, PSO continued to fend off competition Mkt Cap. (PkRbn/US$bn)
and preserve market share, whereas HASCOL and APL underwent Current 9,657 / 91.63
significant growth in volumes. Reporting on Monday, August 7th, Previous 9,547 / 90.59
Chg. 1.15%
we expect PSO to post a full year FY17E EPS of PkR65.71/share
vs. PkR37.81/share in FY16A backed by significant inventory gains
Daily Turnover (mn)
and volumetric growth in MOGAS/FO/HSD of 8%/10%/1%YoY. At Current 256.14
current levels the stock trades at FY18/19E P/E of 5.9/5.5x implying Previous 319.14
significant value on offer. Chg. -19.7%
AKD Daily
Wednesday, Aug 02, 2017

Value Traded (PkRmn/US$mn)

Current 17,610 / 167.10
Previous 18,767 / 178.07
Chg. -6.2%

News and Views

Delivering his maiden speech in the House after becoming the prime
minister-elect, Shahid Khaqan Abbasi said that strengthening economy
and agriculture sector, promotion of tax culture, bringing more investment
and integrated security would be his top priorities during the interim (share mn) (Index)

period of 45 days. 950 53,000

850 51,000
750 49,000
Moody's Investors Service (Moody's) has said that disqualification of 650 47,000
550 45,000
Nawaz Sharif as prime minister by Supreme Court in the Panama Papers 450 43,000
350 41,000
case increases 'policy uncertainty'. Moody's expects domestic political 250 39,000
150 37,000
risk to continue to constrain Pakistan's credit profile in the near and 50 35,000
medium term. -50 33,000
Sep-16

Feb-17
Aug-16

Dec-16
Jan-17

Jun-17
Jul-16

Nov-16

Jul-17
Oct-16

Apr-17
May-17
May-17
Mar-17

The headline inflation inched up by 2.91 percent in July 2017 over the Volume (LHS) KSE-100 Index
same month a year before due to a considerable increase in health and
education cost.

NEPRA has approved upfront tariff of Rs 7.1129 kWh for coal-fired Ali Asghar Poonawala
Captive Power Plants (CPP), which will remain applicable till Dec 31, ali.poonawala@akdsecurities.net
111-253-111 Ext: 646
2018. The tariff will comprise of reference fuel cost component of Rs
5.7310 kWh and fuel cost component of Rs 1.3819 kWh. .

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.
OMCs: Earnings and volumes keeps the tires kicking

Passing through the crest of IPP and retail led seasonal fuel demand
OMC sales for July'17 grew +9%MoM/+8%YoY pulled by HSD/MOGAS
sales. Cumulative 7MCY17 industry sales stood at 14.89mn tonnes
(up 2%YoY), falling short of long term growth rates in all segments
except HSD. In this backdrop, PSO continued to fend off competition
and preserve market share, whereas HASCOL and APL underwent
significant growth in volumes. Reporting on Monday, August 7th, we
expect PSO to post a full year FY17E EPS of PkR65.71/share vs.
PkR37.81/share in FY16A backed by significant inventory gains and
volumetric growth in MOGAS/FO/HSD of 8%/10%/1%YoY. At current Volume Based Marketshare
levels the stock trades at FY18/19E P/E of 5.9/5.5x implying significant PSO July'17 June'17 May'17 7MCY17 7MCY16

FO 75% 77% 76% 75% 72%

value on offer.
HSD 41% 41% 42% 42% 48%
MOGAS 40% 39% 38% 38% 40%
July'17 Volumes: OCAC reported volumes for July'17 with total industry Total 55% 56% 54% 54% 56%

sales of 2.31mn tonnes +9%MoM/+8%YoY pulled by HSD/MOGAS sales

AKD Daily
Wednesday, Aug 02, 2017

APL July'17 June'17 May'17 7MCY17 7MCY16

growth of +18%/9%MoM and +36%/+14%YoY, whereas FO sales were FO 7% 8% 8% 7% 6%

HSD 11% 11% 11% 11% 8%

fickle (-10%YoY/+2%MoM). Cumulative 7MCY17 industry sales stood at MOGAS 9% 9% 9% 9% 8%

14.89mn tonnes up 2%YoY, led by HSD/MOGAS offtake of +6%/13%YoY Total 9% 9% 9% 9% 7%

HASCOL July'17 June'17 May'17 7MCY17 7MCY16
while FO faced declines of 7%YoY. Overall industry sales fell below long
FO 6% 6% 7% 7% 6%
run growth rates over 7MCY period (2%YoY growth in 7MCY17 below 5YR HSD 16% 13% 13% 13% 8%

CAGR of 6%), where uptick in HSD sales (+6%YoY vs. 5YR CAGR of 4%) MOGAS 13% 12% 13% 12% 8%

Total 11% 10% 10% 10% 7%

were pronounced. Source: OCAC & AKD Research

Growth is disparate: For the month of July'17, OMCs undergoing significant

volumetric growth were HASCOL/APL with total offtake +24/+5%MoM,
+69%/+25%YoY while PSO consolidated market share (volumetric sales
growth of +6%MoM/+3%YoY). Cumulative market shares for
PSO/HASCOL/APL for 7MCY17 amounted to 54/10/9% vs. 54/7/7% for
7MCY16, with HASCOL being the only OMC to continue growing at par
with its long term growth trend (7MCY17 sales growth of 45.9%YoY vs.
5YR CAGR of 46.3%).

4QFY17E PSO Preview: We expect PSO to post a full year FY17E EPS PSO: Volumetric snapshot
of PkR65.71/share vs. PkR37.81/share in FY16A backed by inventory PSO 4QFY17E YoY QoQ FY17 YoY

gains amounting to ~PkR1.5bn for FY17E (vs. PkR0.69bn in 9MFY17). FO 1,852 0% 23% 6,975 10%
HSD 957 -22% 20% 3,768 1%
For 4QFY17E, we expect NPAT to read at PkR4.17bn (EPS:PkR15.35/sh) MS 676 3% 8% 2,627 8%
a decrease of 36%YoY where the significant other income booked in Source: OCAC & AKD Research

4QFY16 (PkR5.87bn) are largely absent, balanced to some extent by

higher income from RLNG (volumes of ~3.9mn tonnes moved in FY17
increasing 1.98xYoY adding ~PkR1.15bnYoY to NPAT) and significant
inventory gains (PkR774mn for 4QFY17E). Additionally, volumetric growth
in MOGAS/FO/HSD of 8%/10%/1%YoY and RLNG income expected to
add PkR14.5/share from the government's LNG procurement (margin of
2.5% on DES price which climbed 22%YoY). Accompanying results we
expect the company to announce a payout of PkR10.0/sh taking FY17E
full year DPS to PkR20/sh.

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Investment perspective: PSO is set to benefit from: 1) sustained offtake

in the power segment, where FO may be substituted by RLNG both of
which PSO is expected to remain exposed to and 2) support from
consolidating oil prices where a band between US$50-55/bbl is expected
to prevail. Additionally, an improved liquidity situation (from receipt of
PkR43.87bn), access to low cost of borrowing (including FE-25 trade
loans) and cushioning from RLNG income, support our Bullish hypothesis
on the OMC. We have a FCFF based TP of PkR498/sh on the stock which
trades at FY18/19E P/E of 5.9/5.5x.

July17 and 7MCY17 OMC Volumes Snapshot (000 Tonnes)

Industry July'17 July'16 YoY MoM 7MCY17 7MCY16 YoY 5YRCAGR 10YRCAGR

FO 856 951 -10% 2% 5,309 5,724 -7% 1.7% -3.7%

HSD 754 555 36% 18% 4,990 4,699 6% 3.6% -4.2%

MOGAS 616 543 14% 9% 3,993 3,547 13% 18.8% 11.7%

AKD Daily
Wednesday, Aug 02, 2017

HOBC (95/97RON) 11 4 182% 8% 70 23 200% - -

JP 55 81 -31% -3% 448 503 -11% -0.2% -4.4%

KERO 11 9 18% 7% 72 66 10% -4.6% -10.4%

LDO 2 1 132% 59% 11 10 13% -2.0% -22.2%

Total 2,305 2,144 8% 9% 14,893 14,573 2% 5.6% -1.7%

PSO July'17 July'16 YoY MoM 7MCY17 7MCY16 YoY 5YRCAGR 10YRCAGR

FO 642 699 -8% -1% 3,957 4,103 -4% 0.2% -4.6%

HSD 312 251 24% 20% 2,084 2,275 -8% -3.9% -7.8%

MOGAS 247 221 12% 11% 1,536 1,432 7% 12.8% 9.3%

HOBC (95/97RON) 4 2 131% -5% 33 11 188% - -

JP 50 50 1% -3% 370 325 14% 6.1% -1.9%

KERO 7 5 29% -3% 48 44 9% 0.8% -10.9%

LDO 1 0 232% 188% 4 5 -8% 7.7% -23.3%

Total 1,264 1,228 3% 6% 8,032 8,196 -2% 1.1% -4.2%

APL July'17 July'16 YoY MoM 7MCY17 7MCY16 YoY 5YRCAGR 10YRCAGR

FO 59 56 7% -11% 397 329 21% 2.7% -3.1%

HSD 82 53 54% 14% 532 378 41% 3.9% 11.7%

MOGAS 57 50 14% 13% 343 276 24% 27.0% 25.8%

HOBC (95/97RON) 1 0 1628% 47% 3 0 - - -

JP 0 0 -7% -53% 4 4 -4% 0.6% -26.8%

KERO 3 3 -9% 18% 17 17 0% -2.3% -0.7%

LDO 1 0 299% 9% 5 1 - - -

Total 203 162 25% 5% 1,301 1,005 29% 7.3% 3.5%

HASCOL July'17 July'16 YoY MoM 7MCY17 7MCY16 YoY 5YRCAGR 10YRCAGR

FO 51 65 -21% -4% 348 340 2% 21.7% -

HSD 119 46 161% 39% 645 391 65% 66.5% -

MOGAS 83 40 107% 26% 490 288 70% 84.1% -

HOBC (95/97RON) 1 - - 66% 3 - - - -

Total 254 151 69% 24% 1,486 1,019 46% 46.3% -

Source: OCAC & AKD Research

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Wednesday, Aug 02, 2017

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