▪ Data from the Oil Companies Advisory Council (OCAC) showed that Oil Marketing
Companies collectively sold 1.07 MN tons of oil during Apr’20, higher by 4.6% M/M,
while lower by 35.6% Y/Y. The sequential increase was driven by a 41.8% M/M increase
in HSD offtake in the industry; effects of which were watered down by a 20% M/M
decline in MS volumes.
▪ On a Y/Y basis, the volumes were down by 35.6%, with the brunt of the decline coming
from MS volumes, down 35.6% Y/Y, or 241 KT. MS offtake averaged 616 KT per month
during the period between Jul’20 and Mar’20, with the Apr’20 offtake 29% lower than
the 9MFY20 average.
▪ On a cumulative basis, the 10MFY20 offtake was lower by 12.8% Y/Y, with the industry
having sold 13.3 MN tons during the period. The decline was driven by lower HSD
demand during the ongoing year, with volumes down 15.1% Y/Y or 913 KT.
▪ Lower Furnace Oil demand further dampened the offtake during the 10FY20 period,
with the black oil’s sales volumes having dipped by 31.7% or 774 KT.
Motor Spirit (MS):
▪ As earlier stated, the MS volumes saw a dip of 20% M/M to 436 KT. The dip is
explainable by the ongoing lockdown in the country, which has seen shortened hours
of retail and other activities, leading to lower demand for petrol.
▪ Furthermore, the lockdown was imposed on March 23, 2020 in Sindh, affecting demand
only during the tail end of the month; in comparison to which Apr’20 was entirely spent
under lockdown.
High Speed Diesel (HSD):
▪ HSD volumes saw a sequential increase during the month, to the tune of 41.8% or 161
KT, to 547 KT in Apr’20. In comparison, the offtake had averaged 510.76 KT per month
during the 9MFY20 period.
▪ The higher volumes during Apr’20 can be attributed to the resumption of industrial
activity in the country, albeit at a lower utilization rate and under strict adherence to
SOPs.
PSO has a strong April, while APL emerges as the laggard:
▪ PSO once again stood out amongst listed peers (SHEL, HASCOL and APL) during the
month—being the only company amongst the four to witness a sequential increase in
volumes.
▪ PSO’s prowess during the month was driven by a 49.6% M/M increase in HSD volumes,
with the company’s market share increasing by 2.2ppt M/M. APL emerged as the
laggard during the month, with volumes down by 15.6% M/M, and market share down
by 2.1ppt.
▪ HASCOL saw a 67bps M/M market share attrition, having sold 7.72% of total energy
products during the month. Out of the companies under our coverage (PSO, SHEL, APL
and HASCOL), HASCOL saw the least market share attrition, with strong MS offtake
during the month (↑2.9% M/M to 46 KT).
Volumetric Outlook:
▪ According to news reports, pump operators deferred ordering POL products in Apr’20,
in anticipation of an impending downward revision in product prices in May’20.
▪ Hence, we believe OMC volumes can post another sequential jump during the ongoing month. This is further supported by our expectation of the initial panic around the COVID-19 pandemic subsiding and industrial units getting back to production.
Recommendation:
▪ We continue to like the OMC sector, due to the inflation-hedge that it provides, and volumetric growth returning to the sector as the effects of the pandemic subside. Our top picks from the sector remain PSO (TP: PKR 197/sh; upside potential: 26%) and APL (TP: PKR 317/sh; upside potential: 17%). New TP Current Price.
