Attock Petroleum Limited (APL) reported its 3QFY20 earnings earlier today, where the company reported a loss of PKR 710 MN (EPS: PKR -7.14/sh) for the quarter, against our expectations of a profit of PKR 2.74/sh, compared to earnings of PKR 3.57/sh in the earlier quarter and PKR 2.86/sh in the same period last year.

▪ For the 9MFY20 period, company reported earnings of PKR 870 MN (EPS: PKR 8.75/sh), lower by 64%.

▪ The company reported a gross-level loss for the quarter, pointing towards inventory losses being more profound-than-expected. Gross Loss came in at PKR 345 MN, compared to Gross Profit of PKR 927 MN in the preceding quarter.

▪ To recall, due to the slump in international crude oil prices and POL products, MS and HSD ex-refinery prices fell by PKR 18.85/liter and PKR 14.45/liter, respectively.

▪ Further drag on the company’s gross profitability was in the form of lower volumes during the quarter due to an ensuing lockdown and depressed economic activity. According to data from OCAC, APL sold a total of 391KT of product during the three-month period, lower by 14% Q/Q and 15% Y/Y.

▪ The company also saw a 27% Q/Q/ 24% Y/Y increase in operating expenses, which came in at PKR 987 MN for the quarter (1.97% of net sales; vs. 1.36%/1.63% in 2QFY20/3QFY19).

▪ Some respite came in the form of a tax reversal during the quarter, to the tune of PKR 310 MN or PKR 3.1/sh.

▪ We hold an “Outperform” rating on APL, with a Target Price of PKR 317/sh, representing an upside of 29% over current levels. The stock is currently trading at 4.22x its FY21 projected earnings, compared to the 1-year TTM P/E of 8.45x.