GOIL FY2022 Results: Margins Drift Downwards but Earnings Maintain Positive Course

Performance: Margins dwindle but market share wins

  • GOIL’s profit-after-tax increased by 24.7% y/y to GHS 127.5mn on the back of a strong revenue outturn
  • Revenue increased by 175.3% y/y to GHS 20.7bn, owing to increases in ex-pump fuel prices and higher sales volume
  • GOIL’s ex-pump prices for petrol and diesel increased by 136.2% y/y* and 181.4% y/y*, respectively in FY2022, mainly driven by the high successive increases in global crude oil prices for the first two quarters of the year (+38.7% in 1Q2022, +10.0% in 1Q2022), before decreasing by 21.1% in 3Q2022 and 7.0% in 4Q2022
  • The growth in GOIL’s ex-pump price was also supported by the 24.7% average depreciation of the Cedi against the US Dollar in FY2022. For more context, the Cedi depreciated by 15.6% in 1Q2022, further weakening by 1.6% in 2Q2022, and 24.7% in 3Q2022 before appreciating by 12.0% in 4Q2022. Moreover, as at November 2022, the Cedi had depreciated by 54.4% cumulatively
  • In the same vein, GOIL’s BDC – Go Energy’s ex-refinery price increased by 231.9%* for petrol and 306.9%* for diesel in FY2022
  • GOIL’s revenue growth was also supported by a 20.4%* y/y increase in retail fuel consumption and a 16.8%* y/y rise in Go Energy’s sales volume in FY2022
  • The Group recorded strong sales volumes on the back of its strategy of holding prices for some time, before aligning with domestic price trends. As a result, GOIL’s market share increased by 4.9pps y/y to 20.19% in FY2022
  • Cost of sales accounted for 97.0% of revenue in FY2022, compared to a 3-year (FY2021, FY2020, FY2019) average of 93.4%. This reflects the increased inflationary and forex pressures experienced in FY2022 and explains the fall in gross profit margin by 3.2pps y/y to 3.1%
  • Operating expenses also increased by 43.3% y/y to GHS 478.7mn, mainly driven by inflationary and forex pressures
  • Resultantly, operating margin and net profit margin slipped by 1.2pps and 0.7pps to 1.0% and 0.6%, respectively, in FY2022
Outlook: Margins to decrease, while earnings increase 
  • In the coming quarters, we expect GOIL’s sales volume and market share to continue to increase on the back of benefits derived from its backward integration with GOENERGY. As a result, we remain bullish on GOIL’s revenue outturn
  • On the cost front, we expect GOIL’s input and operating costs to remain elevated in the short-to-medium term, owing to Ghana’s prevailing macroeconomic challenges such as elevated inflation, high utility costs and forex pressures
  • With the Cedi already depreciating by 19.1% in January 2023 coupled with hikes in electricity and water tariffs by 30.0% and 8.3%, respectively, in February 2023, we foresee further decrease in margins in the coming quarters on the back of the higher costs
  • Despite the above, we expect that once GOIL’s bitumen production begins, it should help to expand margins
Valuation: Under Review
  • GOIL is currently trading at a P/E of 5.2x and EV/EBITDA of 3.6x
  • We are in the process of re-initiating coverage on GOIL and have therefore placed our recommendation under review