1. Value Call
October 09, 2015
Oil Marketing Company TSL Research
Hascol Petroleum Ltd.
Growing by leaps and bounds
We initiate coverage on Hascol Petroleum Limited (HASCOL) with ‘Buy’ rating as the smaller
OMC would keep benefiting from i) efficient inventory management, ii) Immunity to circular
debt and iii) focus on high margin products i.e MS and HSD . In next 5 years, revenues would
grow by 28% CAGR while profit CAGR would be above 20%.
We have valued HASCOL on free cash flows and come up at Dec’16 price target of
PKR191/share, offering 30% price return, in addition to 5% dividend yield. Further, in CY15TD,
the price run in stock has yielded 100% return. The scrip is currently trading at a forward PE
and PB multiple of 9.1x and 3.5x, respectively.
Volumetric accretion; still more to come
As the demand for white oil products along with the overall energy requirements is continuously
growing, HASCOL is rightly positioned to reap the most benefits. Yielding the benefits of a smaller
player, the company is actively pursuing its retail expansion strategy where we expect above
normal volumetric growth for an extended period. We assert the company would speed up liters
sales of MS and HSD by a 5‐year CAGR (CY16‐20F) of 26% and 13%, to 1.2mntons and 1.0mnton,
respectively. Subsequently, revenue stream is likely to grow by 28% CAGR to PKR276.9bn in CY20
from PKR84.9bn in CY14.
Ace in hand; Inventory Management
To support growing retail network, the company is also investing in storage facilities to ensure
efficient supply chain management. The existing storage facilities (Mehmood Kot &
Machike) are situated near PARCO and PAPCO pipelines (Pakistan Oil Infrastructure Pipeline)
which not only permit effective inventory management but also bestow Hascol with the
leverage, in case of demand supply shocks. In next phase, Hascol would enhance storage capacity
of Mehmood Kot facility while a new storage would be build in Daulatpur. Moreover, Hascol is
successfully following its inventory management cycle by reducing the lead time (order placement
to delivery time) to around 24 hours compared to industry norm of 3‐4 days.
Rotating Cards; tilting revenue mix towards higher margin retail fuels
We project the product mix to skew towards high margin white oil products. Wherein, MS share in
volumetric mix would jump to 35% by CY18 from current 19% whilst FO volumetric share would
shrink to 33% from 44%. We opine, FO sales are likely to remain stagnant owing to altering energy
generation fuel mix towards more economical ones. In addition, company active involvement in
retail network expansion would result in higher reliance on MS, HSD and Lubricant business,
resulting in contracting FO share in sales mix.
Going forward; Entry in lubricants and jet refueling
In initial stages, Hascol is getting lubricants blended under a Toll Blending Agreement and will sub‐
sequently put up its own blending plant in Karachi. The company has inked a technical services
agreement with Emirates National Oil Company (ENOC), in order to start aircraft refueling.
CY15: Profitability to grow 104% to PKR1.3bn
We project Hascol’s profitability to double in CY15E PKR1.4bn from PKR640mn in CY14.
Subsequent to its stellar performance, we assert the company to payout a cash dividend of
PKR2.5/share in aforesaid year.
Please refer to the last page for Analyst Certification and other important disclosures.
Usman Riaz AC
usman.riaz@taurus.com.pk
Direct: +92‐21‐35216403
Continued on page 2
HASCOL PA BUY
Stock price 147.0
Target price 190.9
Current upside/(downside) 29.9%
Outstanding shares (mn) 120.7
Market Cap (PKR bn) 17.7
Free float 35%
3M Avg. daily value traded (PKR mn) 112.5
3M Avg. daily volume (mn) 1.0
3M High 140.8
3M Low 98.3
Key financials PKR bn
Year end CY14A CY15E CY16F CY17F
Net sales 84.9 80.5 105.1 143.5
Cost of sales 82.9 77.3 100.8 138.1
Gross Profit 2.0 3.2 4.3 5.5
Oper. profit 1.2 2.2 3.0 3.7
Finance costs 0.3 0.3 0.3 0.3
Net Profit 0.6 1.3 1.9 2.4
Key matrics
EPS 7.8 10.8 16.1 19.7
DPS 3.2 4.0 6.0 9.0
BVPS 30.7 32.0 41.7 52.5
P/E (x) 18.8 13.6 9.1 7.4
P/BV (x) 4.8 4.6 3.5 2.8
Dividend Yield 2% 3% 4% 6%
EPS growth 11% 38% 49% 23%
ROA 5% 8% 11% 11%
ROE 33% 39% 44% 42%
Debt/Equity 14% 13% 10% 9%
Price Performance
Source: Taurus Research
0
30
60
90
120
150
Aug‐14
Oct‐14
Dec‐14
Feb‐15
Apr‐15
Jun‐15
Aug‐15
Oct‐15
Hascol KSE100

2. Value Call TSL Research
Initiating coverage with lucid ‘Buy’; TP @ Rs191/share
We initiate our coverage on newly listed OMC, Hascol Petroleum Limited (Hascol), by foreseeing
Dec’16 price target of PKR191/share, offering a capacious 30% upside from its last closing price.
Our primary valuation methodology is discounted cash flow (FCFE), with a cost of equity of 15.6%.
Wherein, we have assumed risk‐free rate of 9%, beta 1.1 and risk premium at 6%.
At current levels, the scrip is trading at an attractive CY16F PE and PB of 9.1x and 3.5x,
respectively. In addition, we estimate Hascol to pay a cash dividend of PKR6.0/share till CY16F
translating into a 4% dividend yield.
Skewing revenue mix towards high margin white oil products
Reaping benefits of being an aggressive new entrant, HASCOL’s top‐line has grown at super
normal CAGR of 71% during CY11‐14. We believe the company has long way to go before its
saturation point and would continue to enjoy the accelerated ride, though with slower pace. In
upcoming five years, we expect company’s market share would climb up to 10% (in 2020) from the
current 5% which translates into revenue CAGR of 28% (CY16‐20). We opine, current FO heavy
sales mix to tilt towards MS which would take HASCOL market share in FO, HSD and MS from
6.0%, 5.6% and 4.4% to 9%, 11.1% and 12.5% , respectively.
Heads up for profitability growth; 20% CAGR during CY16‐20
In line with rising volumetric flows, we estimate PAT to grow at a CAGR of 20% during CY16‐20.
Further, we believe that profitability of the company would remain intact in foreseeable
future on the back of i) fixed margins (2.35/litre) on white oil products (MS & HSD) and ii) bottomed
out oil prices, resulting in largely stabilized FO prices hence intact FO margins.
Additionally, with no expectation of further dip in oil prices, we expect inventory losses to remain
muted.
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Continued on page 3
Discounted Cash Flows Dec‐16 Dec‐17 Dec‐18 Dec‐19 Dec‐20
Net Income 1,942 2,383 2,699 2,946 3,254
Add: Depreciation 158 174 184 195 207
Less: Capital Expenditure (517) (568) (444) (471) (499)
Working Capital (44) (58) (202) (314) (402)
Net Borrowing 30 103 181 214 244
FCFE 1,569 2,033 2,418 2,569 2,803
Discounted cash flows 1,569 1,759 1,810 1,663 1,569
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PV of cash flows 8,370
Discounted terminal value 14,672
Total NPV 23,042
Number of shares 120.68
Value per share 190.9
3% 4% 5%
8% 195 208 223
9% 181 191 203
10% 168 177 187
Terminal Growth Rate
Risk Free rate
Risk free rate 9.0%
Beta 1.1
ERP 6.0%
Cost of equity 15.6%
Terminal growth rate 4.0%
Valuation Statistics
Hascol Volumes (Mn Tons) & Market Share
Source: OCAC & Taurus Research
3%
4%
5%
6%
7%
8%
9%
10%
11%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
CY14A
CY15E
CY16F
CY17F
CY18F
CY19F
CY20F
Hascol PAT (PKR bn) and Net Margins
Source: Company Accounts & Taurus Research
0.0%
0.5%
1.0%
1.5%
2.0%
‐
0.5
1.0
1.5
2.0
2.5
3.0
3.5
CY14A
CY15E
CY16F
CY17F
CY18F
CY19F
CY20F
Profit after tax Net Margins (RHS)

3. Value Call TSL Research
Taurus research is available on Bloomberg under TAUR & Capital IQ
Continued on page 4
HASCOL Petroleum Limited: Financial Snapshot
Income Statement (PKR mn) CY14A CY15E CY16F CY17F CY18F CY19F CY20F
Net Revenue 84,914 80,471 105,077 143,518 183,275 241,912 276,859
Cost of sales 82,877 77,275 100,809 138,058 176,725 234,221 268,310
Gross Profit 2,037 3,196 4,269 5,460 6,550 7,691 8,550
Distribution expenses 769 885 1,050 1,435 1,649 2,177 2,491
Administrative 329 402 525 717 916 1,209 1,384
Other Income 299 248 326 388 454 531 616
Operating profit 1,237 2,158 3,019 3,696 4,439 4,836 5,290
Finance Cost 264 304 294 306 321 342 326
Worker welfare fund 108 111 136 169 206 225 248
Profit before tax 865 1,743 2,589 3,220 3,912 4,270 4,716
Profit after tax 640 1,307 1,942 2,383 2,699 2,946 3,254
Balance Sheet (PKR mn) CY14A CY15E CY16F CY17F CY18F CY19F CY20F
PPE 3,291 3,587 3,946 4,340 4,601 4,877 5,169
Long term investments 782 860 946 1,040 1,144 1,259 1,385
Total Non ‐ current Assets 4,642 5,021 5,463 5,952 6,318 6,708 7,126
Stock in trade 3,474 3,178 4,184 5,762 7,418 9,872 11,391
Trade debts 4,549 3,204 4,218 5,808 7,478 9,953 11,534
Deposits and prepayments 1,025 1,025 1,025 1,025 1,025 1,025 1,025
Cash and Bank balances 1,761 3,140 3,832 4,721 5,810 6,939 8,156
Total current assets 10,975 10,748 13,477 17,511 21,936 27,994 32,307
Total Assets 15,617 15,769 18,940 23,463 28,254 34,702 39,433
Share capital 906 1,207 1,207 1,207 1,207 1,207 1,207
Reserves 1,873 2,657 3,822 5,133 6,617 8,238 10,027
Total shareholders equity 2,779 3,864 5,029 6,339 7,824 9,444 11,234
Trade and other payables 8,103 7,025 9,001 12,110 15,235 19,849 22,547
Short term running finances 1,272 1,399 1,539 1,616 1,696 1,781 1,870
Total current liabilities 12,059 11,017 13,023 16,180 19,396 24,121 26,939
Total liabilities 12,518 11,585 13,591 16,803 20,109 24,937 27,879
Total Equity and Liabilities 15,617 15,769 18,940 23,463 28,254 34,702 39,433
Hascol ‐ Key Ratios CY14A CY15E CY16F CY17F CY18F CY19F CY20F
EPS 7.8 10.8 16.1 19.7 22.4 24.4 27.0
DPS 3.2 4.3 6.4 8.9 10.1 11.0 12.1
BVPS 23.0 32.0 41.7 52.5 64.8 78.3 93.1
P/E (x) 18.8 13.6 9.1 7.4 6.6 6.0 5.5
P/BV (x) 6.4 4.6 3.5 2.8 2.3 1.9 1.6
Dividend Yield 2% 3% 4% 6% 7% 7% 8%
Earnings growth 63% 104% 49% 23% 13% 9% 10%
ROA 5% 8% 11% 11% 10% 9% 9%
ROE 33% 39% 44% 42% 38% 34% 31%
EV/EBITDA 11.8 6.3 4.4 3.4 2.6 2.1 1.7
Source: Company Accounts & Taurus Research
Source: Company Accounts & Taurus Research

4. Value Call TSL Research
Taurus research is available on Bloomberg under TAUR & Capital IQ
Continued on page 5
Current Market Share of OMCs
Source: OCAC & Taurus Research
56%
10%
10%
5%
18%
PSO APL SHELL HASCOL Others
Hascol PAT (PKR bn) and net Margins
Source: Company Accounts & Taurus Research
0.0%
0.5%
1.0%
1.5%
2.0%
‐
0.5
1.0
1.5
2.0
2.5
3.0
3.5
CY14A
CY15E
CY16F
CY17F
CY18F
CY19F
CY20F
Profit after tax Net Margins (RHS)
Hascol Gross Profits (PKR bn)
Source: Company Accounts & Taurus Research
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
0.0
2.0
4.0
6.0
8.0
10.0
CY14A
CY15E
CY16F
CY17F
CY18F
CY19F
CY20F
Gross Profit Gross Margins (RHS)
Hascol Return on Equity & Return on Assets
Source: Company Accounts & Taurus Research
0%
10%
20%
30%
40%
50%
CY14A
CY15E
CY16F
CY17F
CY18F
CY19F
CY20F
ROE ROA
Hascol Retail Outlets
Source: Company Accounts & Taurus Research
Punjab Sindh KPK Baluchistan AJK
Hascol Earnings & Payout (PKR/share)
Source: PPIS & Taurus Research
‐
5.00
10.00
15.00
20.00
25.00
30.00
CY14A
CY15E
CY16F
CY17F
CY18F
CY19F
CY20F
EPS DPS

5. Value Call TSL Research
Hascol; Upcoming Robustly
Rejuvenating Industry demand
Pakistan fuel demand, which had grown at a steeper pace till the end of 90s, remained slow
afterwards due to rising petroleum prices and shift of consumption towards low cost gas. In last 30
years ending FY71‐00, Pakistan total oil/petroleum consumption has grown at a CAGR of 7%.
However, growth turned negative with the start of 21st
century owing to rising prices and lower
electricity generation on high cost furnace oil.
Over the period of last 10 years, Pakistan annual oil consumption has grown at a much lower CAGR
of 4.5% to 22.6mn tons. Rising electricity generation on FO/HSD was the only major growth driver
during the period while transportation and industrial demand for petroleum remained more or less
stagnant on account of sluggish economic growth.
We assert that the fuel demand would once again rise towards its historical averages and this time
on the back of higher consumption in transportation, industrial and Households segments. Our per
capita fuel consumption currently stand at ~140 liters. With growth foreseeing ahead, we foresee
this ratio would rise towards other Asian countries such as India(178 litres) & Sri Lanka (274 litres).
Product mix of Pakistan oil marketing companies is primarily dominated by FO, HSD and MS,
where Furnace oil is largely used for electricity generation while HSD is consumed in both power
and transportation sectors. During CY14, FO and HSD contributed 43% and 32% in total volumes,
respectively, while MS share stood at 19%. In coming years, we expect FO & HSD sales would
advance at much lower pace due to lack of new investments in FO based power plants, however
low oil prices might lure industries to restart their FO based power plants to improve productions.
Rising income levels to keep driving MoGas/Petrol sales; HASCOL to yield maximum benefit
Pakistan MS sales (MoGas) have depicted healthy 18% volumetric CAGR during CY09‐14 compared
to overall petroleum CAGR of 1% during the same period. Since MS sales are more inclined
towards disposable income levels, we attribute the rise to i) growing middle class, ii) development
of domestic bike industry, iii) improving car sales, iv) lower domestic fuel prices and v) curtailment
of CNG supply due to gas deficiency.
With the rapid economic recovery ahead, our per capita income would keep rising at accelerated
pace, which would eventually strengthen the middle class. As a result, we expect higher growth in
bike and car sales. Further, urbanization is widening the cities’ radius and augmenting daily
travelling of commuters to the city centers. Additionally, low petroleum prices are also pushing the
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Continued on page 6
Forecasted Volumes (000'Tons)
Source: Taurus Research
‐
2,000
4,000
6,000
8,000
10,000
12,000
CY15E
CY16F
CY17F
CY18F
CY19F
CY20F
FO HSD MOGAS
Historical Energy Consumption of Pakistan
Source: Economic Survery of Pakistan
0
5
10
15
20
25 1973‐74
1977‐78
1981‐82
1985‐86
1989‐90
1993‐94
1997‐98
2001‐02
2005‐06
2009‐10
2013‐14
Petroleum Consumption per Capita (Litres)
Country 2011 2012 2013 2014
Bangladesh 39 40 40 43
Nigeria 95 92 92 97
Pakistan 127 130 133 140
India 161 168 170 178
Sri Lanka 242 262 261 274
Vietnam 276 289 297 325
Indonesia 416 428 415 439
Source: IEA & TSL Research
Industry Historical Volumes (000'Tons)
Source: Company Accounts & Taurus Research
‐
2,000
4,000
6,000
8,000
10,000
CY05
CY06
CY07
CY08
CY09
CY10
CY11
CY12
CY13
CY14
FO HSD MOGAS

6. Value Call TSL Research
volumetric surge. In this scenario, HASCOL is rightly poised to reap maximum benefits on the back
of increasing number of outlets and strengthening brand value. Ultimately, this would result in
rising market share along with growing industry volumes.
Hascol HSD volumes to start growing at steady pace
High Speed Diesel (HSD) off takes, which directly moves with economic activity (especially in
transportation sector) and electricity generation levels on HSD, remained subdued in the recent
past on the back of i) stagnant transportation sector, ii) dismal performance of Pakistan
Railways and iii) unfeasible electricity generation owing to elevated HSD prices. Resultantly, HSD
market share in white oil has dried to 32% (6.9mn tons) in CY14 from 43% (7.8mn tons) in CY08.
Since petroleum prices have slashed around 30% from its peak levels a year ago, HSD sales have
started to pick up with 15% YoY growth witnessed in 1HCY15. Just to mention, HSD prices in
Pakistan have reduced by 25% to PKR85.1/litre. Further, economic recovery has also reciprocated
in growing transportation sector along with 40% high Commercial Vehicle (HCVs & LCVs) sales.
We assert HSD volumes would improve at better pace on the back of mega highway & motorway
projects along with firm demand in tractors and Heavy/Light Commercial Vehicle (HCV & LCV).
Once again, Hascol is rightly positioned to reap the benefits with its additional retail outlets, we
believe.
Taurus research is available on Bloomberg under TAUR & Capital IQ
Continued on page 7
HSD Market Share
Source: OCAC & Taurus Research
50%
11%
15%
5.6%
19%
PSO APL SHELL HASCOL Others
MS Market Share
Source: OCAC & Taurus Research
47%
7%
20%
4.4%
22%
PSO APL SHELL HASCOL Others
Hascol MS Volumes (Mn Tons),Market Share
Source: OCAC & Taurus Research
0%
2%
4%
6%
8%
10%
12%
14%
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
CY15E
CY16F
CY17F
CY18F
CY19F
CY20F
Sales Mkt Share (RHS)
Hascol MS Volumes (Mn Tons),Market Share
Source: OCAC & Taurus Research
0%
2%
4%
6%
8%
10%
12%
14%
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
CY15E
CY16F
CY17F
CY18F
CY19F
CY20F
Sales Mkt Share (RHS)

7. Value Call TSL Research
FO sales to shrink in sales mix
Furnace oil sales have remained more or less stagnant in the recent years due to rising cost of
electricity generation on FO. Though, recent fall in petroleum prices could result in higher FO
based power generation, we see low chances of this happening considering the cost of generation
which is still high compared to other energy sources. However, individual companies which already
have FO based generators and are facing energy load‐shedding can bring respite in FO sales,
though seems unlikely as a lot of projects are in pipeline to covert FO/HSD based plants into
cheaper fuel (coal etc).
In CY14, country furnace oil sales have depicted a nominal rise of 4% YoY to 9.2nm tons owing to
rise in power generation backed by eager demand from the industrial and domestic sectors. Going
forward, we foresee FO demand to grow at much slower pace and flatten afterwards as
commencement of several coal fired power plants are en route.
At present, FO contributes 44% to revenue mix of Hascol. In our point of view, it would rise up to
47% in CY15 and afterwards follow a sliding trajectory. We estimate FO sales mix would dip to 34%
by CY20.
Just to mention here, contrary to per litre fixed margins on MS and HSD, FO margins are based on
ex‐refinery prices. Consequently, revenue from FO would take an adverse hit with the FO prices
bottoming out. On the positive side, declining FO share in sales mix would reduce earnings
vulnerability towards international oil prices.
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Continued on page 8
FO Market Share
Source: OCAC & Taurus Research
67%
10%
1%
6%
16%
PSO APL SHELL HASCOL Others
Hascol Volumes (Mn Tons) & Market Share
Source: OCAC & Taurus Research
3%
4%
5%
6%
7%
8%
9%
10%
11%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
C
Y1
4
A
C
Y1
5
E
C
Y1
6
F
C
Y1
7
F
C
Y1
8
F
C
Y1
9
F
C
Y2
0
F

8. Value Call TSL Research
Profitability to improve on stabilizing margins and minimal inventory losses
Abrupt fall in international crude oil prices resulted in shrinking FO margins and higher inventory
losses to Pakistan oil marketing companies. Though OMCs’s margins on retail fuels (MS and HSD)
are fixed at PKR2.35/litre, deregulated products, especially furnace oil (43% share in Hascol total
sales mix in CY14), have faced the brunt as the margins are determined as a percent of rupee price.
Further, inventory losses are also incurred on all petroleum inventories at the time of price dip. Just
to mention, Arab‐light crude oil price (a benchmark for Pakistan oil sector) has shed 60% from a
high of USD111.2/bbl (July’14) to a low of USD44.36/bbl (Sep’15).
Post Iran deal, the possibility of further weakness in international petroleum prices in 1HCY16
cannot be ruled out. However, the dip would not be as large as witnessed in last fiscal year. There‐
fore, we do not envisage further compression in margins while inventory losses would also remain
on lower side in remaining CY15.
Hascol: Smaller player to keep expanding in a larger market
Usually bigger pond complacency offers better opportunities to a smaller fish to keep growing at a
steeper pace. Same can be witnessed in HASCOL performance wherein, the company has reported
95% volumetric surge vs. industry growth of 4% in last 2 years. At present, Hascol is actively
pursuing its organic growth strategy with expansion in retail network and enhanced storage capac‐
ity. The company is pursuing to launch 25‐30 more outlets in remaining span of CY15, taking total
number of filling stations to 300.
Recently, Hascol has also inked an agreement with Motorway Operation and Rehabilitation
Engineering private limited, a subsidiary of FWO, in which the company has acquired 20 retail
outlets located at Lahore‐Islamabad motorway. The newly acquired filling stations are further
strengthening the volumetric accretion and would grab incremental market share.
The new entrant would keep eating others’ market share by benefitting from competent
management, swift services and prompt response time. On the contrary, industry’s other players
are marred with bureaucratic barriers which results in more lead time and hassles for the dealers.
No circular debt; HASCOL supplies FO against unconditional bank guarantees
Circular debt is the one big issue for the domestic OMC Industry which considerably limits opera‐
tions and creates liquidity crunch. However, the issue lies with PSO mostly , which is a state con‐
trolled entity and provides fuel to the GENCOs and other IPPs under Govt. guarantees. On the
contrary, HASCOL’s FO sales are primarily reliant on the supplies to non Govt. entities such as
Nishat group and Liberty mills, which keep the company apart from the chain of inter‐corporate
debt. Moreover, Hascol follows a stringent payments mechanism, wherein the company require
irrevocable bank guarantee(s) from the buyer’s bank before FO supply.
We rule out any possibility of Hascol getting into the circular debt trap in future as the
management is not interested to tie‐up with any Govt. operated IPPs without unconditional bank
guarantees. On the contrary, however, this would result in slow FO sales growth for the company.
Taurus research is available on Bloomberg under TAUR & Capital IQ
Continued on page 9
Hascol's Forecasted Volumes (000'Tons)
Source: OCAC & Taurus Research
‐
200
400
600
800
1,000
1,200
1,400
CY14A
CY15E
CY16F
CY17F
CY18F
CY19F
CY20F
FO HSD MOGAS
Forecasted Market Share
Source: Company Accounts & Taurus Research
0%
2%
4%
6%
8%
10%
12%
14%
CY14A
CY15E
CY16F
CY17F
CY18F
CY19F
CY20F
FO HSD MS

9. Value Call TSL Research
Ace in Hand; Efficient inventory management
The company is aggressively developing its retail network along with efficient supply chain
management, which permits the company to efficiently manage its inventory. Moreover, Hascol is
successfully following its inventory management cycle by reducing the lead time (order placement
to delivery time). That said, it usually takes 3‐4 days from order placement to supply for other
OMCs, whereas, Hascol has been effectively supplying its liquid supplies within 24 hours.
Building infrastructure for future growth
The existing storage facilities (Mehmood Kot & Machike) are situated near PARCO and PAPCO
pipelines (Pakistan Oil Infrastructure Pipeline) which not only permit in effective inventory man‐
agement but also bestow Hascol with the leverage, in case of demand supply shocks.
Hascol has equipped its storage facilities at strategic locations such as Machike and Shikarpur. At
Keamari and Port Qasim, HASCOL has leased storage tankage under its own management
supervision. Moreover, the company has acquired land at Mehmood kot and Daulatpur to enhance
storage and logistics capacities. In order to further facilitate its MS supplies, the company has ac‐
quired 32k ton MS capacity at Port Qasim on 20‐year lease agreement.
Lubricants: Another segment yet to focus on
Hascol has inked arrangements with Fuchs Lubricants of Germany to produce and market full
range of Automotive/Industrial Lubricants & Greases. In the initial stages, Hascol is getting the
lubricants blended under a Toll Blending Agreement and will subsequently put up its own blending
plant in Karachi. At present, Hascol is a major supplier of Lubricants to the Pakistan Army.
Add Jet fuel to volumes
The company has inked a technical services agreement with Emirates National Oil Company
(ENOC), in order to start aircraft refueling. This would further ignite its supply side and open new
avenues of growth for the company.
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Continued on page 10
Storage Facility Capacity (MT) Ownership
Port Qasim 32,400 Long term agreement ‐ VTT Port Qasim (Pvt.) LTD.
Kemari 12,150 Long term agreement ‐ Al Raheem Trading
Kemari Import Terminal 15,000 Long term lease agreement ‐ Al Abbas Group
Shikarpur 6,500 HPL Owned
Machike 6,500 HPL Owned
Amangarh 1,500 Long term lease agreement with an option to buy
Source: Company Accounts & TSL Research
Inventory turnover
Source: Company Accounts & Taurus Research
‐
10.0
20.0
30.0
40.0
50.0
60.0
FY11
FY12
FY13
FY14PSO Shell APL Hascol
Receivable turnover
Source: Company Accounts & Taurus Research
‐
20.0
40.0
60.0
80.0
100.0
120.0
FY11
FY12
FY13
FY14
PSO Shell APL Hascol

10. Value Call TSL Research
Key Risks
Cap on volumetric growth/Delay in expansion plans
Any delay in acquiring new retail outlets would materially affect volumetric flows of the company
and would thus adversely impact our earnings estimations and valuations.
Further slide in oil prices
Fluctuations in domestic POL prices are directly correlated with Arab light crude oil price and
variations in international oil prices. Any further downturn to our base case (USD50/bbl) would
adversely hit the company’s revenue as well as profitability. It is pertinent to mention that margins
from FO would be hit in case of further slide in international oil prices. On the flip side, profitability
from White oil products (MS & Diesel) would remain immune owing to their fix margins. However,
international oil prices variations might result in inventory losses to the company.
Revival of CNG sector with LNG arrival
Finalization of LNG agreement (with Qatar) might adversely impact the company’s volumetric
accretion. Since it is widely perceived that the consumers would shift towards cheaper fuel. Just to
highlight, Govt. has once again allowed the installation of CNG kits to Auto sector of Pakistan.
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Continued on page 11

11. Value Call TSL Research
Fueling RoE
Return on equity of HASCOL is quite sturdy compared to peers, standing at 33.1% inCY14 . Digging into the details
revealed that the major factor behind the healthy ROE is above average asset turnover owing to efficient inventory
management and equity multiplier, which clocked in at 6.8x and 6.5x, respectively during CY14.
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Continued on page 12
Company Net Margin Asset Turnover Equity Multiplier ROE
HASCOL 0.8% 6.80 6.46 33.1%
PSO 0.9% 3.58 4.62 15.1%
APL 1.9% 5.37 2.34 24.0%
Source: TSL Research
Dupont Analysis
Strengths
Competent Management
Efficient inventory management
Circular Debt Immunity
Weaknesses
Lack of infrastructure
Low brand value
Higher reliance on HSD sales
Opportunities
Large room to capture market
Rising local demand
Threats
Entry of new/revival of existing OMC
Revival of CNG sector
Rising tendency towards Solar energy
Stringent Regularity regime
Source: TSL Research
Swot Analysis

12. Value Call TSL Research
Company introduction
Hascol Petroleum Limited (Hascol) was incorporated in the very beginning of 3rd millennium
(2001), primarily to take advantage of the petroleum sector deregulation and undertake a
programme for owning, leasing and renting oil storage facilities as well as importing petroleum
products for its own account. The company markets petroleum products, compressed natural gas
and blend and markets various kinds of lubricating products. Hascol’s main operations include
purchase, storage and sale/marketing of petroleum products such as Fuel Oil, High Speed Diesel,
Gasoline, Jet A‐1, LPG and Lubricants.
Hascol has remained involved with developing a retail network under the brand name of ‘HASCOL’
after it was granted with full marketing license by the Government of Pakistan in February, 2005.
The company has commissioned over 270 retail outlets across the country. The company is mulling
to elevate this number to 300 by December, 2015.
At the point in time, Hascol has fuel supply arrangements with refineries in Pakistan, including
Byco, Attock, Pak‐Arab refinery, Pakistan Refinery and National Refinery. Further, the company
has started a bunkering division and will be able to provide bonded supplies of High Sulphur Fuel
Oil (HSFO) and Marine Gas Oil (MGO) at Karachi and Port Qasim.
Currently, the company has 120.7mn shares outstanding, wherein available free float is of 35%
(42.24mn shares). Within shareholding pattern, Directors & CEO and associated companies hold
around 65.8% (79.4mn shares) shareholding in the company while general public stake is at 26.6%
(32.1mn shares).
Key Agreements
Hascol has fuel supply arrangements with all refineries in Pakistan.
Hascol is in contract with OOPL as its blending partner for lubricants in Pakistan.
Hascol is in contract with Sui Sothern Gas Company (“SSGC”) for the supply of LPG.
Hascol is in contract with Marshal Gas (Pvt.) Limited for the supply of LPG.
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Hascol Shareholding pattern
Source: Company Accounts
40%
26%
26%
8%
Mumtaz Hassan Khan
Marshal Gas Pvt Ltd & Fossil Energy Ltd
General Public
Others

13.
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preparation, writing and publication of this report, certifies that (1) the views expressed in this report are unbiased and independent opinions of the
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tion was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
The research analyst or any of its close relatives do not have a financial interest in the securities of the subject company aggregating more than 1%
of the value of the company and the research analyst or its close relative have neither served as a director/officer in the past 3 years nor received
any compensation from the subject company in the past 12 months. The Research analyst or its close relatives have not traded in the subject secu‐
rity in the past 7 days and will not trade in next 5 days.
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Value Call TSL Research
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be equivalent to TSL rating system. When total return (capital gain + dividends) exceeds 16%, a Buy rating is assigned. A Sell rating is issued when‐
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Frequently Used Acronyms
TP Target Price DDM Dividend Discount Model
FCF Free Cash Flows FCFE Free Cash Flows to Equity
FCFF Free Cash Flows to Firm PE Price to Earnings ratio
PBv Price to Book ratio BVPS Book Value per Share
EPS Earnings per Share DPS Dividend per Share
ROE Return on Equity ROA Return on Assets
Value Call TSL Research
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