Analyst
Muhammad Noor Ul Haq
noorulhaq@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA maintains Entity Ratings of Gas & Oil Pakistan Limited
Rating Type | Entity | |
Current (01-Jun-23 ) |
Previous (03-Jun-22 ) |
|
Action | Maintain | Maintain |
Long Term | A+ | A+ |
Short Term | A1 | A1 |
Outlook | Stable | Stable |
Rating Watch | - | - |
The ratings incorporate Gas & Oil Pakistan Limited (GO), a strong presence in the oil marketing segment. The Company has augmented its market share in a competitive market, benefiting from the strategic positioning of the stations that it feeds. GO aims to carry out its expansion strategy by further penetrating the retail segment of semi-urban and rural areas. The primary sponsor of the Company has further solidified their stake in the company by acquiring shares from Vitol Dubai Limited. The Company has a storage capacity of ~ 205,200 MTs and intends to enhance it further. This complements GO’s plans to keep the pace of growth with the augmented storage capacity. GO further aims to inaugurate more company-owned and operated sites (COCOs). This is evident in the fact that they added 9 COCO sites during CY22. In order to ensure a consistent and reliable supply of high-quality fuels and to address the increased working capital requirements, the sponsors are planning to collaborate with a strategic partner. Despite a 11.6% decrease in the volumes, the Company experienced a substantial growth of 55.2% YoY in its topline during CY22, primarily attributable to rupee dollar parity. There was a decline in profitability, which was primarily due to high foreign exchange losses coupled with finance cost, offsetting the gains from increased topline and gross profit margin. GO has traditionally capitalized on strong managerial support from its sponsors who have significant knowledge in oil procurement and distribution. The equity base of the Company has taken support from internal capital generation and higher accumulated profitability. The management intends to keep the leverage indicators aligned with its risk profile. Moving forward, GO aims to diversify its revenue streams, strengthening its business risk profile. The governance framework of the Company is flanked by a diversified and experienced board.
The rating is dependent on the Company’s ability to sustain its business operations while enduring its expansionary business plan. The rollout of the planned business strategy and sustainable profitability is essential. In the meantime, financial metrics need to be upheld in terms of working capital ratios, coverages and capital structure. Given the nature of the business and muted growth in economy, any adverse change in consumption patterns, resulting in a decrease in sales volume, would be a key rating sensitivity.
About
the Entity
Gas & Oil Pakistan Limited incorporated in 2012, was granted the license as an OMC in 2012. Gas & Oil started its operation in 2014 in the Punjab region and later expanded its sales and marketing network into Sindh in 2016, KPK in 2017, and also Balochistan in 2019. With a network of approximately 1,078 retail outlets. GO has ~ 7.83% market share as of Dec'22 based on the basis of MS/HOBC/HSD sales. The Board of Directors comprises a total of nine experienced professionals, four members are representatives of GO. The other five members, including one female director, are serving as independent directors.