Result Previews PSO, PSMC and NCPL
Wednesday October 27, 2015
PSO ‐ BUY
Pakistan State Oil (PSO): 1QFY16 Earnings Preview
Target Price: PKR 453 Current Price: PKR 314 PSO Performance 1M
3M
12M
Absolute %
6%
‐17%
‐11%
Relative to KSE %
3%
‐11%
‐23%
Bloomberg
PSO.PA
Reuters
PSO.KA
MCAP (USD mn)
830
12M ADT (USD mn)
5.2
Shares Outstanding (mn)
272
The board meeting of Pakistan State Oil (PSO) is scheduled on Wednesday 28th October, 2015 to declare its 1QFY16 financial results. We expect the company to post NPAT of PKR1.1bn (EPS: PKR4.1) in 1QFY16 compared to PKR5.2bn (EPS: PKR19.3) in 1QFY15, depicting a massive decline of 79%YoY. On a sequential basis, earnings will likely post a decline of 70%QoQ compared to PKR13.6/sh in the preceding quarter. The sharp decline in earnings can primarily be attributed to inventory loss of ~PKR1.5bn in 1QFY16 compared to inventory gains of PKR3.0bn and PKR0.4bn in 1QFY15 and 4QFY15, respectively. In addition, a 6%YoY/33%QoQ and 16%YoY/10%QoQ declines in the volumetric sales of HSD and FO, respectively, will further dampen the earnings. The aforementioned variables coupled with 54%YoY/26%QoQ decline in FO margins will also result in a heavy toll on gross profit, expected to decline by 53%YoY and 42%QoQ. We expect the dismal trend in quarterly earnings to bottom‐out in 1QFY16 as i) absence of inventory losses on stable oil prices, ii) reduced finance cost and iii) growth in HSD and MOGAS sales will likely keep earnings steady in subsequent quarters. Moreover, reduced burden of circular debt pile up owing to an expected 25%‐30% lower average FO price in FY16 will further improve the cash flows of PSO. Thus, we re‐iterate our stance on PSO (TP: PKR453/sh) as our top pick in Oil and Gas chain, offering a total return of 48%. Financial Summary (PKR mn)
1QFY16
1QFY15
S
4QFY15
S
Net Sales
204,076
290,435
‐30%
230,877
‐12%
Gross Profit
5,484
11,615
‐53%
9,427
‐42%
Expenses
4,310
4,371
‐1%
4,037
7%
Other Income
2,800
3,373
‐17%
4,712
‐41%
PAT
1,109
5,243
‐79%
3,694
‐70%
EPS
4.1
19.3
‐79%
13.6
‐70%
PSMC ‐ BUY
Target Price: PKR 530
Current Price: PKR 462 PSMC Performance
1M
3M
12M
Absolute %
10%
6%
56%
7%
11%
44%
Relative to KSE %
Bloomberg
PSMC.PA
Reuters
PKSU.KA
MCAP (USD mn)
347
12M ADT (USD mn)
0.9
Shares Outstanding (mn)
82
BMA Research
Source: BMA Research
Pak Suzuki Motor Company Ltd. (PSMC): 9MCY15 Earnings Preview The board meeting of Pak Suzuki Motor Company (PSMC) is scheduled on Oct 29’15 to consider the financial results for 9MCY15. As per our expectations, 9MCY15 earnings
