Dear Clients,

– Pakistan Petroleum Limited (PPL) announced its financial results for 2QFY21 with earnings clocking in at PkR11.9bn translating to EPS of PkR4.4/sh, in-line with our estimates, as compared to PkR10.3bn (EPS PkR3.8/sh) in the same period last year (up by 15% on Y/Y basis).

– PPL announced an interim cash dividend of PkR1.5/sh along with the result.

– Revenue for the quarter stood at PkR36.3bn down by 17% Y/Y on the back of a drop in oil prices and lower production. On a sequential basis revenues were reduced by 7% Q/Q.            

– Operating expenses saw a meager rise of 4% Y/Y to reside at PkR12.6bn for the quarter.

– Overall exploration expense declined to PkR0.9bn down 90% Y/Y owing to the absence of dry well costs. Last year the company booked an exploration expense of PkR8.9bn on recognition of dry wells costs.

– Other income stood at PkR1.1bn for 1QFY21, lower by 31% Y/Y likely from lower interest rates and lower cash balances.

– Other expenses stood at PkR1.8bn lower by 41% Y/Y from impairment charge for the period in comparison to last year.

– Resultantly, overall profitability stood at PkR11.9bn translating to EPS of PkR4.37/sh compared to PkR10.3bn (EPS: PkR3.79/sh) last year.

– We have an Outperform stance on PPL with a Jun21 TP of PKR 163/sh. We see triggers to price appreciation from improving oil rates and action against the proliferation of the circular debt, likely improving the company’s cash crunch. The stock is presently trading at an FY21 PE of 4.6x.

Regards,
KASB Research