Morning Call about Attock Petroleum Limited – Arif Habib Limited

Karachi: Net earnings likely to grow by 10% YoY in FY2011

Attock Petroleum Limited (APL) is scheduled to announce its FY11 financial result on September 10, 2011.

According to Arif Habib Limited expects the company to achieve a 19% QoQ growth in 4QFY11 to PKR 1,195mn (EPS: PKR 17.28), mainly on account of healthy volumetric recovery in Asphalt coupled with strong oil price movement during the period under review. This healthy performance in the last quarter may take full year earnings to PKR 3,948mn (EPS: PKR 57.11) in FY11, a 10% YoY increase, when compared with PKR 3,594mn (EPS: PKR 52.0) in FY10.

Arif Habib expects the company to announce a final cash dividend of PKR 23.5/share, taking full year payout to PKR 35/share in FY11, in contrast to PKR 30/share distributed in FY10.


Financial Highlights
(PKRmn) 4QFY11 3QFY11 QoQ FY11 FY10 YoY
Net sales  40,888 29,033 41% 109,021 82,792 32%
Gross profit 1,394 1,067 31% 4,141 3,760 10%
Other operating income 500 446  12% 1,937 1,309 48%
Operating expenses 188 154 22% 634 481 32%
Operating profit 1,707 1,359 26% 5,443 4,588 19%
Income on bank deposits 191 244  -22% 942 981 -4%
Profit before tax 1,651 1,376 20% 5,417 4,846 12%
Profit after tax 1,195 1,003 19% 3,948 3,594 10%
Earnings per share (PKR) 17.28 14.52 57.11 52.00    
Sources: Company financials and AHL estimates



Strong pricing scenario and volumetric growth may yield 32% YoY growth

APL is expected to post a 32% YoY increase in the net sales during FY11. This is anticipated on account of a 15% YoY volumetric growth, which was well supported by the rising trend in the oil prices. Despite suffering a 37% YoY volume contraction in Asphalt, the company managed to bag overall volumetric growth mainly emanating from YoY growth of 52%, 36% and 7% in Furnace Oil (FO), Motor Spirit (MS) and High Speed Diesel (HSD), respectively. A 25% YoY rise in the Arab Light Crude Oil price has also resulted in YoY average price increase of 21%, 18% and 12% in FO, HSD and MS, respectively.

Other operating income may increase by 48% YoY

Arif Habib expects the company to achieve a 48% YoY growth in the other operating income, mainly due to improvement in the commission and handling income coupled with mark up received on the late payments.

Income on bank deposits may suffer a 4% YoY drop

APL has suffered a 31% decline in Cash balances and investments since June 2010, which is likely to result in a 4% YoY drop in the income on bank deposits and short term investments. This effect is far more visible in 4QFY11, where income on bank deposits in expected to drop by 22% YoY, in line with the cash balance decline during 3QFY11.


Arif Habib’s DCF based target price for APL works out to PKR 444.6./share, which offers an attractive upside potential of 20.4% from last closing price of PKR 369.3/share; thus Arif Habib recommends a Buy.

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