Attock Petroleum Limited Analysis - March 2026 Quarter

Executive Summary

Attock Petroleum Limited delivered a sharply stronger 9MFY26, with profit after tax rising 92% YoY to PKR 14.76bn and EPS improving to PKR 118.67, despite a 4% decline in sales volumes. The result was driven by higher average petroleum prices, inventory gains, stronger gross margins, and disciplined operations. Online industry developments also support the story: Pakistan’s OMC volumes recovered in March 2026, while LNG disruptions and higher furnace oil usage may temporarily support fuel demand. However, frozen OMC margins, regulatory pressure, lower finance income, and competitive fuel retailing remain key issues.

Current Developments

APL reported net sales of PKR 369.65bn in 9MFY26, up 7% YoY from PKR 346.74bn. The revenue increase was not volume-led; management clearly stated that overall volumes declined 4% due to lower furnace fuel oil offtake, weak bitumen demand from a subdued construction sector, and stronger competition across key product categories.

Profitability improved much more strongly than revenue. Gross profit rose to PKR 27.72bn from PKR 13.41bn, while profit after tax increased to PKR 14.76bn versus PKR 7.70bn last year. EPS improved to PKR 118.67 from PKR 61.88. This reflects a powerful margin cycle supported by higher petroleum prices, inventory gains, and stronger core operations.

The broader OMC market has shown signs of demand recovery. Pakistan’s OMC volumes reached 1.44mn tons in March 2026, up 19% YoY and 13% MoM, while 9MFY26 cumulative sales reached 12.40mn tons, up 5% YoY. This matters for APL because a recovering industry volume base can support throughput across its expanding network, even though APL’s own 9MFY26 volumes were still down due to product-mix pressures.

However, the recovery is not linear. April 2026 data showed refinery output rising while OMC sales declined 7%, with higher fuel prices weighing on demand. This means APL is operating in an environment where margins and inventory gains can lift earnings, but end-user affordability remains a risk to sustainable volume growth.

APL expanded its retail network aggressively during the period, commissioning 33 new outlets and taking its total retail footprint to 811 outlets by March 31, 2026. The expansion is focused on high-growth urban areas, housing developments, motorway corridors, industrial zones, and underserved regional markets.

A major operational milestone was APL’s formal entry into the LPG segment through the commissioning of its LPG storage and filling facility in Rawalpindi. The facility has received approvals from OGRA and the Department of Explosives and is now operational, giving APL a new revenue stream beyond traditional liquid fuels.

APL is also moving into EV charging. The company signed a collaboration agreement with HUBCO Green in April 2025 to develop and market EV charging infrastructure at selected APL locations across Pakistan. This aligns with APL’s own report, which mentions continued expansion of EV charging and DC fast-charging infrastructure in collaboration with HUBCO Green and Huawei.

Future Outlook

APL’s near-term outlook remains favorable but uneven.

The strongest support comes from:

• Higher petroleum prices and inventory gains
• Gradual recovery in Pakistan’s fuel demand
• Expansion of retail outlets
• LPG entry
• Storage and logistics investments
• Strategic supply arrangements with institutional customers

Pakistan’s energy situation could also support selected product demand. Reuters reported that Pakistan has been using more furnace oil and seeking additional LNG supplies due to LNG disruptions, hydropower weakness, and power shortages. This could temporarily benefit OMCs with fuel supply and logistics capability, especially if furnace oil demand remains elevated during energy shortages.

That said, the longer-term furnace oil outlook remains structurally challenged because Pakistan’s energy mix continues shifting away from expensive residual fuels toward LNG, coal, renewables, nuclear, and distributed solar. APL’s own report already shows lower furnace oil volumes, confirming that any furnace oil recovery may be cyclical rather than structural.

The EV theme is a longer-term optionality rather than an immediate earnings driver. Pakistan’s National Electric Vehicle Policy 2025–2030 reportedly targets 10,000 EV charging stations by 2030, with tariff reductions to encourage investment. APL’s nationwide retail footprint gives it a natural advantage if EV charging adoption accelerates, because its stations already sit on high-traffic transport corridors.

Lower interest rates are a mixed development. They can support economic activity and fuel demand, but they reduce finance income from APL’s large investment portfolio. This is already visible: finance income declined to PKR 4.28bn in 9MFY26 from PKR 5.66bn last year.

Growth Plans

APL’s growth plan is clearly built around three layers: more outlets, deeper infrastructure, and broader revenue streams.

Retail expansion remains the most visible growth lever. The company added 33 outlets in 9MFY26 and reached 811 total outlets. This continued expansion improves brand visibility, geographic reach, customer convenience, and volume-capture ability in high-growth traffic corridors.

Infrastructure expansion is another major focus. APL is progressing:

• A 10,000 MT PMG storage tank at Rawalpindi Bulk Oil Terminal
• An 18,700 MT PMG tank at Port Qasim
• Bulk oil terminal development at Taru Jabba for KP logistics
• LPG storage and filling capability in Rawalpindi

These projects matter because storage and logistics are key competitive advantages in Pakistan’s OMC sector. Better storage improves supply reliability, reduces bottlenecks, supports import handling, and strengthens APL’s ability to serve retail, institutional, and strategic customers.

Revenue diversification is becoming increasingly important. APL is expanding into:

• LPG distribution
• EV charging
• Non-fuel retail
• Restaurant partnerships at COCO locations
• Branded car care products
• Solar installations at outlets and terminals
• Digital payment and product tracking systems

The company’s balance sheet supports these plans. APL had PKR 47.87bn in other financial assets, including treasury bills, PIBs, and mutual funds, along with PKR 25.80bn in cash and cash equivalents. This gives the company strong liquidity to fund expansion while continuing dividend payouts.

Risk Assessment

The biggest risk remains regulated OMC margins. APL’s management explicitly stated that OMC margins have remained frozen for the last two years and continue to lag behind rising operating and compliance costs. This is a structural issue because even a strong operator can face margin pressure if regulated margins do not keep pace with inflation, logistics cost, compliance cost, and infrastructure spending.

Demand risk is also important. While March 2026 OMC sales were strong, April 2026 showed a decline in OMC sales due to higher fuel prices. This suggests that fuel affordability remains a constraint, especially in a fragile macro environment.

Key risks include:

• Frozen or delayed OMC margin revisions
• Lower fuel affordability due to high petroleum prices
• Competition from other OMCs
• Illicit fuel trade and market discipline issues
• Lower furnace oil demand due to energy-mix transition
• Weak construction demand affecting bitumen sales
• Currency volatility impacting imported petroleum products
• Geopolitical risks affecting global oil prices and supply chains
• Lower finance income as interest rates decline

APL also carries legal and regulatory contingencies, including matters related to OGRA freight recoveries, tax disputes, petroleum shortage inquiries, and associate-related contingencies. Management has stated confidence in its legal position, but these matters still represent headline and cash-flow risk if outcomes become unfavorable.

The company’s liquidity partly reduces financial risk, but it also creates earnings sensitivity to interest rates. As benchmark rates fall, finance income from T-bills, PIBs, bank deposits, and mutual funds can decline, potentially reducing non-operating support to earnings.

Strategic Significance

APL remains one of Pakistan’s strategically important OMCs because it combines retail reach, storage infrastructure, aviation fuel operations, institutional supply contracts, and strong financial capacity.

Its role is not limited to ordinary fuel retailing. The company continued annual fuel supply arrangements for HSD, PMG, and jet petroleum with the Pakistan Army, reinforcing its position as a trusted supplier for strategic customers.

APL also participates in the New Islamabad International Airport fuel farm and hydrant refueling system through a 50% joint operation with PSO. This strengthens its aviation fuel relevance and embeds the company deeper into critical national fuel infrastructure.

Strategically, APL is trying to future-proof itself in four directions:

• Traditional fuels through retail expansion and storage additions
• LPG through its new Rawalpindi facility
• EV charging through HUBCO Green and Huawei-linked infrastructure
• Non-fuel retail through restaurants, car care, and value-added services

This makes APL more than a pure petroleum price-cycle play. It is gradually positioning itself as a broader downstream energy and mobility platform.

Among PSX-listed OMCs, APL’s investment case remains anchored in:

• Strong balance sheet
• High liquidity
• Expanding retail network
• Strategic fuel supply role
• Diversification into LPG and EV charging
• Resilient profitability despite volume pressure

The key conclusion is that APL’s 9MFY26 earnings were exceptionally strong, but not entirely volume-driven. The next phase of the story depends on whether management can convert its infrastructure, LPG, EV charging, and non-fuel retail initiatives into recurring earnings growth while navigating regulated margins and volatile fuel demand.