Performance: Upward price adjustment aids sales growth

• The Group’s revenue came in strong at 33.1% y/y, a little above Total Petroleum Ghana’s (“TOTAL”) 31.2% y/y, mainly supported by an increase in fuel prices and consumption
• The increase in fuel prices resulted from tax adjustments implemented in 2Q2021 and an uptick in global oil market price by ~88.2% y/y
• As a result, GOIL experienced ~32.9% y/y increase in ex-pump prices while its Bulk Distribution Company (“BDC”) experienced ~41.1% increase in ex-refinery rates y/y
• A 6.5% y/y rise in retail fuel volume and a 13.9% y/y increase in bulk distribution sales volume also contributed to revenue growth
• The Group’s gross profit increased by 28.8% y/y to ~GHS 208.3m, surpassing TOTAL’s 13.0% y/y increase
• However, gross profit margin declined by 2ppts to 6.5% y/y in 1H2021, pressured by the 33.4% increase in cost-of-sales
• Despite heightened inflationary and forex pressures, which drove operating costs higher by 13.8% y/y, operating profit grew 52.4% y/y to GHS 91.4m, propelled by revenue growth
• Consequently, operating margin improved by 4ppts to 2.8% y/y
• The Group’s net profit jumped 75.7% y/y to GHS 60.3m, posting a Net Profit Margin (“NPM”) of 1.9% (+5ppts)
• GOIL’s NPM, however, trailed behind TOTAL’s, which increased by 94ppts to 4.2% due to better efficiency

Outlook: Diversification and price to contribute to topline in the years ahead

• We expect the Group to continue to register positive growth in revenue and earnings on the back of increased consumption and diversification into higher margin products
• The introduction of bitumen production in 3Q2021 is expected to support margin expansion as well as FX inflow from sales within the sub-region
• GoEnergy, GOIL’s bulk oil distribution business is expected to be the key driver of growth and provide margin insulation going forward
• Currently, GOIL is the only player in the downstream sector with a bulk oil distribution license, giving the OMC a competitive advantage
• We are however concerned about the OMC’s CAPEX given its investments in the construction of the Bitumen plant as well as a new Head Office

Valuation: Under Review

• We are in the process of re-initiating coverage on GOIL and have therefore placed our recommendation under review
• GOIL is however trading at a PE of 5.1x and PB of 1.0x