Listed oil marketing companies (OMCs) earn major revenue from deregulated products

LAHORE: All three listed OMCs, including PSO, APL and SHEL, are deriving a major chunk of their revenues from deregulated products.

According to energy experts, PSO derives 40 percent of its gross profit from FO sales which yields margins of 3.5 percent while APL derives 45 percent of its gross profit from Asphalt; SHELL, on the other hand, derives 50 percent of its gross profit from Lubes.

Nonetheless, EPS sensitivity suggests that SHEL is relatively most exposed to this upside risk in margins for both the products. Change in OMC margin on HSD and MS from current levels of Rs 1.35/ltr and Rs 1.50/ltr to Rs 1.85/ltr and Rs 2.00/ltr respectively can increase SHEL’s CY12E EPS by 30 percent, while under the same scenario 15 percent and 6 percent appreciation in FY12E EPS is expected for PSO and APL respectively.

According to reports, ECC is considering upward revision of OMC margins on regulated POL products by Rs 0.5/ltr on Motor Spirit, High Speed Diesel and Kerosene. Currently OMC Margins on MS and HSD stand at Rs 1.50/ltr and Rs 1.35/ltr respectively. Simultaneous change in OMC margin on HSD and MS by Rs 0.5/ltr can increase SHEL’s CY12E EPS by 30 percent, while under the same scenario 15 percent and 6 percent appreciation in FY12E EPS is expected for PSO and APL respectively.

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