POL 3Q earnings come in at PKR 5.20/sh, beat expectations

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▪ Pakistan Oilfields Limited (POL) reported its 3QFY20 earnings earlier today, reporting Profit after Tax (PAT) of PKR 5,379 MN (EPS: PKR 18.95/sh), higher than our expectation of PKR 16.55/sh. The company’s bottomline grew by 17.9% Q/Q, 63.6% Y/Y.

▪ For the 9MFY20 period, the company reported earnings of PKR 13,947 MN or PKR 49.13/sh, higher by 24.8% Y/Y.

▪ POL’s revenues came in at PKR 10,737 MN for the three-month period, higher than our expectations of PKR 9,866 MN. POL’s topline contracted by 6.3% sequentially, while higher by a mere 0.5% Y/Y. The sequential decline is explained by the 5% Q/Q dip in oil production, along with a 16% decline in average oil prices.

▪ To recall, the company produced ~ 6,337 BPD of oil and ~86 MMCFD of gas during the quarter.

▪ Finance costs for POL increased by 3.1x Y/Y to PKR 1,240 MN, which was offset by a 2.6x Y/Y increase in Other Income—likely driven by higher-than-anticipated exchange gains.
▪ The company’s bottomline growth during the quarter was further buoyed by a lower effective tax rate of 20%, compared to 26% in the earlier quarter and 30% in the same period last year.

▪ We await full quarterly accounts and management discussions for further details on the results.

▪ POL is currently trading at 4.98x its FY21 projected earnings, and FY21 P/B of 1.86x. We have an “Outpefrom” rating on the stock with a TP of PKR 534/sh, representing an upside potential of 84% from current levels.

Annotation 2020 04 27 182411

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