ATRL: Sturdy inventory gains led to robust 1QFY12 earnings

Strong 1QFY12 earnings: ATRL’s 1QFY12 EPS clocked in at PKR10.47 (up 53% YoY), nearly 2x of our estimates, despite of high financial charges and nil non refining income, primarily due to inventory gains. In line with the historical trend, ATRL did not announce any dividend with 1QFY12 result.

Inventory gains flared up bottom line growth: ATRL’s realized 1QFY12 GRM clocked in at USD8.10/bbl, 46% higher than running GRM, primarily due to timing gains on crude procurement/product sale. ATRL is estimated to have realized inventory gains of PKR908mn during 1QFY12.

Robust non-refining income expected in 2Q to mark another splendid quarter: Strong earnings shall continue in 2Q as well, as ATRL is expected to book dividend income of PKR1.2bn from its associate companies, translating to PKR12.38/share. ATRL shall book PKR500/424mn from NRL/APL, while PKR274mn is expected from AGL during 2QFY12, as has been the case in past. Furthermore, GRM for the first two months of 2QFY12 clocked in at USD5.22/bbl, which is estimated to yield an EPS of PKR2.15 from refining operation, translating overall EPS to PKR14.53/share during 2QFY12.

FY12 estimates raised: We have revised up FY12 GRM by 7% and have incorporated stellar 1QFY12 earnings, which have resulted in 70% increase in FY12 EPS. At last closing price, the scrip offers an upside of 12% to our Jun-12 PT of PKR140/share. BUY!

Inventory gains flared up bottom line growth

Helped by estimated inventory gains of PKR908mn, ATRL’s 1QFY12 earnings exceeded our estimates by nearly 2x, despite of 267% YoY higher financial charges and zero non refining income booked in 1Q. ATRL’s realized 1QFY12 GRM at USD8.10/bbl was 46% higher than the running GRM of USD5.56/bbl. Moreover, 39% YoY increase in late payment income on overdue receivable jacked up the other income, which was however offset by exchange loss, which went up 263% YoY amid 2% depreciation in PKR.

Robust non-refining income expected in 2Q to mark another splendid quarter

ATRL’s associates companies, NRL and APL, have gone ex – dividend in Oct-11. Thus ATRL shall book dividend income of PKR953mn from these companies in 2QFY12. Moreover, ATRL is also expected to book income from AGL during 2Q which is estimated at PKR274mn, translating total non – refining income to PKR1.2bn or about PKR12.53/share. Furthermore, GRM for the first two months of 2QFY12 clocked in at USD5.22/bbl, which is 34% higher than 2QFY11 GRM and estimated to yield an EPS of PKR2.15 from refining operation. However, refining income shall remain sensitive to crude oil price which has started moving north during Nov-11 after having dropped in Oct-11.

Economic & Political News

Monetary policy on November 30

State Bank of Pakistan (SBP) will announce the monetary policy statement on November 30, 2011. According to the SBP spokesman, the Central Board of Directors of the Central Bank will approve the monetary policy statement for next two months in its meeting to be held on November 30.

Sales tax rate for five zero-rated sectors: FBR restores status quo ante

The FBR has stopped implementation of the SRO.1012(I)/2011 and temporarily withdrawn 5% sales tax on commercial importers and suspended application of single rate of 5% sales tax on zero-rated sectors and previous rate of 4-6% has been temporarily restored.

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