Friday, July 29, 2016 8:59am/ FBNQuest Research
Event: Mobil Oil Nigeria (Mobil) reports Q2 2016 results
Implications: Upward revision to consensus 2016 estimates expected
Positives: Q2 sales of N27.6bn up 80% y/y; PBT up 87% y/y to N3.8bn
Negatives: No obvious negatives
Late yesterday, Mobil reported Q2 2016 results which showed impressive growth for all key P&L line items. Sales of N27.6bn were up 79.9% y/y while PBT and PAT grew by 86.6% y/y and 82.5% y/y to N3.8bn and N2.6bn respectively. Topline growth more than offset a marginal gross margin contraction of -29bp y/y, a 14.9% y/y rise in opex and a double-digit decline in other income to N920m.
During the quarter, in a bid to resolve persistent nationwide fuel shortages, the federal government adjusted the national petrol pricing template to reflect a more market realistic fx rate (N285/US$ at the time) and a new price ceiling of N145/litre. However, the naira has depreciated by more than 30% to c.N300 to the US$ since June following the central bank’s adoption of a floating fx regime.
To our minds, this is potentially problematic given the FG’s price modulation policy as petrol pump prices could quickly rise on the back of a weakening naira, thus escalating pressure on the consumer. As an option, the government may have to re-introduce subsidies to partially shield consumers from the adverse effects of rising costs.
Sequentially, sales, PBT and PAT all grew by 21.6% q/q, 41.7% q/q and 42.4% q/q respectively. Compared with our estimates, sales beat by 33.3% while PBT was ahead by 58.1%. The variance on the topline was the primary driver behind the better-than-expected earnings.
H1 sales of N50.3bn grew by 57.9% y/y, while PBT and PAT were also up, by 58.3% and 51.7% respectively. On an annualised basis, Mobil’s sales and PBT are currently tracking ahead of consensus full year 2016E estimates of N80.5bn and N9.2bn respectively. As such, we expect upward revisions to consensus estimates for 2016E.
We also expect a positive reaction by the market. At current levels, on our published estimates, Mobil shares are trading on a 2016E P/E multiple of 8.5x for an EPS decline of -4% in 2017E. Year to date, Mobil shares are flattish, outperforming the NSE ASI by 3.3%. We rate the stock Neutral.
Our estimates are under review.
Mobil Oil Nigeria Q2 2016 results: actual vs. FBNQuest Research estimates (N millions)