Report
Team AKD Research
EUR 9.06 For Business Accounts Only

Pakistan OMCs: What's happening in the downstream space, (AKD Daily Aug 22, 2019)

  • Faced with a range of macro-headwinds and a drastically different 'FO-lite' operational environment, we assess the shifts taking place in the operational strategy for domestic OMCs, while coloring our analysis with expected shifts in the regulatory environment .
  • Based on our conversation with industry participants and managements of listed players, we highlight three major trends taking shape, namely: 1) constrained CAPEX with a focus on forecourt retail expansion/upgradation as opposed to the prior focus on storage and 2) negotiations with OGRA to enhance monthly import parity pricing mechanism to account for PkR/US$ settlement rate based on import facilities, as opposed to spot rates.
  • Additionally, we believe developments on the regulatory front, particularly concerning the upgraded OMC licensing criteria could lead to significant upheaval, as reported details concerning CAPEX commitments, key operational requirements and higher fee structure pushes off a fight for securing market share.
  • As per our channel checks, OMC margin indexation to CPI is likely to be raised to PkR2.90/ltr, hike of 9.8% from the coming month—a trigger for profitability. In this backdrop we retain our liking for mid-market APL where the absence of leverage and stable operations (where conservatism reigns supreme) are value accretive. Our TP of PkR354/sh implied 38% upside with FY20 D/Y of 9% takes total return to 48%.

AKD Research

Underlying
Hascol Petroleum

Hascol Petroleum Limited is a Pakistan-based company, which is engaged in procurement, storage and marketing of petroleum and related products. The Company is involved in the sale of petroleum products, such as fuel oil, high speed diesel, gasoline, Jet A-1, liquefied petroleum gas (LPG) and lubricants. The Company offers products, such as Tiger Super, Rocket Diesel and Furnace Oil. The Company offers Fuchs Lubricants products, which include corrosion preventives, quenching oils, industrial lubricants, open gear lubricants, greases, automotive oil and metal working fluids. The Company also markets LPG as an automotive fuel through its retail network. The Company is engaged in owning, leasing and renting oil storage facilities, as well as importing petroleum products. The Company has storage facilities at Machike, Shikarpur and Daulatpur. The Company sells its product to dealers, government agencies and autonomous bodies, independent power project and other corporate customers.

Provider
AKD Securities Limited
AKD Securities Limited

AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.

AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.

Analysts
Team AKD Research

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