IGI Securities Limited – Day Break

Karachi, June 11, 2019 (PPI-OT): Oil and Gas Marketing Companies – May-19: Volumes contract by 31%YoY as recent price hikes and economic slowdown take a toll MS/HSD sales

Industry volumes for oil marketing companies for the month of May-19 witnessed a decline of 31%YoY to 1.68mn ton bringing industry volumes for 11MFY19 to 16.96mn ton down by 25%YoY. Furnace Oil (FO)/ High Speed Diesel (HSD)/ Motor Spirit (MS) sales registered drop of 66%/21%/5%YoY during May-19,

MS sales dropped by 5%YoY in May-19, while on sequential basis, volumes are down by 11%MoM to 0.60mn ton likely on the back of lower demand due to price hike. For 11MFY19, MS volumes are up by +2%YoY to 6.80mn ton. HSD sales dropped down by 21%YoY to 0.71mn ton in May-19, while on monthly basis volumes are up by +9%MoM. The drop in sales is likely attributable to higher domestic prices, slowdown in commercial transport and grey market sales. FO volumes depicted a decline of 66%YoY to 0.29mn ton in May-19 as demand remained subdued owing to lower demand from FO based power plants which was also substituted by new low cost LNG/Coal plants operating at priority basis,

We maintain BUY stance on APL, PSO and HASCOL with our Dec-19 target prices of PKR 403.79/share, PKR 219.49/share and PKR 112.44/share offering +41%, +31% and +23% upside respectively from its last close.

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