Attock Petroleum Limited

Attock Petroleum Limited (APL) is scheduled to announce its 1QFY23 financial result on October 25, 2022. APL is expected to post profit after tax of PKR124 million (EPS: PKR1.0), down by 95%YoY and 98%QoQ. The likely decline can be attributed to falling ex-refinery prices over the last quarter, having peaked in mid-June 2022, MS at PKR249 and HSD at PKR277 per liter.

Analysts expect the Company to record inventory losses of PKR855 million (EPS: PKR8.6) for 1QFY23, subsequently resulting in gross margins for the quarter to end at 1.1%.

On the topline front, Company’s revenue is expected to clock in at PKR114.1 billion, up 56%YoY, down 11.5%QoQ, as offtakes for the quarter declined by 26%QoQ. Declining sales volumes for the company are correlated with an overall economic slowdown, as depicted by falling LSM index. Furthermore, the volumetric downturn is also due to the floods in the affected regions (mainly Sindh/Baluchistan/KPK), as agriculture destruction and muted thermal generation may have had a say in APL’s falling quarterly offtakes for HSD/RFO, down 31%YoY/36%QoQ.

Exchange losses are expected to mar the company’s profitability by PKR1 billion as well, as currency depreciation during the quarter stood at 15%, as against 10% during 4QFY22).

Finally, analysts expect effective tax to clock in at 78% for the period as against 4QFY22 at 50%), as minimum turnover tax (0.5% on gross POL sales) hampers the already beat-down bottom-line. At a normalized tax rate of 33%, the earnings per share would have clocked in at PkR3.12/sh.

With fuel prices (MS/HSD) forming a new base at current levels, analysts believe this to be the end of exorbitant inventory gain/loss fluctuations in the near-term, normalizing earnings in the forth-coming quarters.

Fundamentally, the Company continues to focus on its long term growth prospects through continuous storage and retail expansions, as 40,000 ton storage depots and 63 retail outlets were commissioned in the previous two fiscal years. The Company has storages worth 40,500 ton and 25 retail outlets in the pipeline for the coming year.

APL is a top pick from the sector, with the company being a perfect mix of capital upside and dividend yield.

Overall, aggressive retail expansion propelled by planned commissioning of storage facilities provides a solid foundation for APL to capture a bigger slice of the retail fuels pie going forward.

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