Performance: Revenue increases as margins compress

• The Group’s bottom-line increased marginally by 2.3% y/y to ~GHS 79.0m in 9M2021

• Top-line was the primary driver of growth, increasing by 41.6% y/y to GHS 5.1b, owing mainly to an increase in fuel prices and higher volume sales

• GOIL’s ex-pump price for the period increased by 34.3% y/y, as did its BDC – Go Energy’s ex-refinery refinery price also increased by ~60.6% y/y, evoked by the rise in global crude oil price by ~88.6% y/y

• Revenue for the period was also supported by a ~8.4% y/y increase in GOIL’s retail fuel consumption and a ~17.6% y/y increase in Go Energy’s volume of petroleum products distributed

• Despite the strong growth in revenue, gross profit margin dipped by 2.1ppts to 6.0% in 9M2021, owing to forex and inflationary losses as well as an increase in purchases for the period, evident from the 176.3% y/y increase in inventory

• Cost of sales and Opex increased by 44.8% y/y and 14.1% y/y respectively

• Resultantly, operating margin compressed by 120bps to 2.4% and net profit margin decreased by 60bps to 1.5%

Outlook: Diversification to expand margins

• We continue to expect the Group to register positive growth in revenue and earnings on the back of increased consumption and diversification into higher-margin products

• With bitumen production scheduled to start in 4Q2021, we anticipate margins to be expanded as well as FX inflow from sales within the sub-region

• Go Energy, GOIL’s bulk oil distribution business is expected to be the critical driver of growth and provide margin insulation going forward as well as offer the OMC a competitive advantage in pricing and fuel availability at pumps

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 P/E of 7.1x and EV/EBITDA of 7.2x