The Bell about Oil & Gas – Elixir Securities Limited

Karachi, August 16, 2011 (PPI): SHEL: 1HCY11 EPS expected at PKR25.50

According to Elixir Securities Limited,

 

Shell Pakistan Ltd     Outstanding Shares: 68mn
PKRmn 2QCY11E 2QCY11A YoY 1HCY11E 1HCY10A YoY
Net Sales 56,974 47,300 20% 115,565 90,152 28%
Cost of Products Sold  53,229 44,060 21% 108,028 84,422 28%
Gross Profit 3,746 3,240 16% 7,538  5,730 32%
Distribution Expenses 903 1,107 -18% 2,077 1,788 16%
Admin & Marketing Expenses  867 888 -2%  1,759 1,952 -10%
Other Operating Income 43 116 -63%  96 387 -75%
Other Operating Expenses 291 242 20%  597  340 75%
Operating Profit 1,727 1,119  54%  3,201  2,036 57%
Finance Cost 379 306 24% 753 569 32%
Share of Profit from Associates 183 202  -10% 360  295 22%
Profit before Tax 1,531 1,015 51% 2,808 1,762  59%
Taxation 543 697 -22% 1,061 1,042 2%
Profit after Tax 988 318 211% 1,747 720 143%
EPS (PKR) 14.43 4.65 211% 25.50 10.52 143%
DPS 7.00 4.00 75% 7.00 4.00 75%
Source: Elixir Research, Company accounts

 

Improved 1HCY11 volumes despite dismal 2QCY11

Despite of 3% lower HSD, Shell’s volumes were up by 5% YoY during 1HCY11, primarily due to FO and Jet Fuel which were up by 34% and 19% YoY, respectively. Entire of the growth in volumes came in the 1QCY11 as 2QCY11 volumes were down by 12% primarily due to 70% plunge in FO sale coupled with 9% decline in HSD volumes. However, dismal 2QCY11 volumes are expected to be offset by 13% YoY higher margins per ton and estimated inventory gains of PKR1.4bn during 2QCY11. In addition, 9% YoY higher Lube volumes, which is responsible for more than 40% of Shell’s core earnings, are also expected to cover up part of lower energy product sales. 1HCY11 lube volumes were up by 2% YoY.

Opex/GP ratio expected to decline

Secondary transportation cost, which is mainly driven by FO volumes, is expected to decline in 2QCY11 on the back of 76% QoQ lower FO sale. Thus, with lower transportation cost amid 32% YoY higher expected gross profit; Opex/GP ratio is expected to decline to 51% in 1HCY11, compared with 65% in corresponding period of last year.

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