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Jan 25, 2017 - Research Entity Notification Number: REP-005. POL: 1HFY17 .... 8%, the stock currently offers a total return of 11% at our TP of PKR745/sh -.
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Research Entity Notification Number: REP-005

POL and APL

Wednesday January 25, 2017

POL - UNDERWEIGHT

POL: 1HFY17 EPS expected at PKR19.1, up 23%YoY

Target Price: PKR 496 Current Price: PKR 537 POL Performance 1M

3M

12M

Absolute %

-1%

26%

169%

Relative to KSE %

-9%

3%

108%

Bloomberg

POL.PA

Reuters

PKOL.KA

MCAP (USD mn)

1,212

12M ADT (USD mn)

8.3

Shares Outstanding (mn)

237 Source: PSX, BMA Research

APL - OVERWEIGHT Target Price: PKR 745

The board meeting of Pakistan Oilfields Limited (POL) is scheduled on Friday January 27, 2017 to declare its 1HFY17 financial results. We expect the company to post NPAT of PKR4.5bn (EPS: PKR19.1) in 1HFY17 compared to PKR3.7bn (EPS: PKR15.5) in the corresponding period last year, up a significant 23%YoY. The notable increase in earnings is expected on the back of i) a 5%YoY increase in oil production and ii) subdued exploration cost. The increase in oil production can primarily be attributed to i) tie in of Mardankhel and ii) increased flow from Adhi and Balkassar. However, a cumulative ~21%YoY reduction in oil production from Maramzai and Pariwali fields will likely contain the upside in overall oil production from POL. In addition to steady core operations, higher dividend payout from NRL at PKR20/sh in FY16 (FY15 payout: PKR10/sh) will also contribute to the earnings growth. In 2QFY17 alone, earnings of the company are expected at PKR2.2bn (EPS: PKR9.3), depicting a decline of 5%QoQ. The decline in earnings is expected on the back of a steep decline in other income due to absence of dividend from associated companies. However, operating profit of the company is expected to report a 25%QoQ growth following i) 11%QoQ recovery in oil prices, ii) 8%QoQ and 5%QoQ higher oil and gas production, respectively and iii) steep decline in exploration costs. The result announcement is expected to accompany an interim cash dividend of PKR17/sh for 1HFY17. Based on reserve based DCF valuation, we currently have an underweight stance on the scrip at our TP of PKR496/sh.

Financial Summary

Current Price: PKR 719

1HFY17

1HFY16



2QFY17

1QFY17



12,338

12,243

1%

6,614

5,724

16%

Operating Expense

4,153

4,468

-7%

2,128

2,025

5%

PKRmn APL Performance

Net sales 1M

Absolute % Relative to KSE %

3M

12M

4%

23%

68%

Operating Profit

5,581

3,985

40%

3,103

2,477

25%

-3%

1%

7%

Profit before tax

5,753

4,181

38%

2,926

2,827

3%

Profit after tax

4,512

3,671

23%

2,194

2,318

-5%

Bloomberg

APL.PA

EPS

19.07

15.52

23%

9.28

9.80

-5%

Reuters

APL.KA

DPS

17.0

15.0

13%

17.0

-

-

MCAP (USD mn)

569

12M ADT (USD mn)

0.6

Shares Outstanding (mn)

83 Source: PSX, BMA Research

Sajjad Hussain [email protected] +92 21 111 262 111 Ext: 2062

www.jamapu