14 May 2022

GOIL 1Q2022 Results: Stronger Volume Growth Boosts Performance

In brief

Ghana Oil Company (“GOIL” or the “Group”) released its unaudited 1Q2022 financial results today, posting a profit of GHS 45.5m. GOIL reported strong double-digit growth in revenue on account of stronger volume growth and upward price adjustments. Our on-the-ground research revealed that GOIL, enabled by GoEnergy, cushioned consumers from the soaring fuel prices in 1Q2022, by pricing lower than its arch competitors – TOTAL and SHELL. While this increased volume sales and market share, it also reduced margins.

Performance: Strong revenue outturn on higher volume growth and price increase

  • GOIL’s bottom-line increased by 19.0% y/y to GHS 45.5m, posting an EPS of GHS 0.12 in 1Q2022
  • Revenue increased by 105.9% y/y to GHS 3.1b, owing to an increase in fuel prices and higher volume sales
  • GOIL’s ex-pump prices increased by 51.5% in 1Q2022, mainly driven by a 36.6% increase in global crude oil market prices and a 20.5% USD/GHS depreciation in 1Q2022
  • The rise in global crude oil prices was exacerbated by the Russia-Ukraine conflict, as Russia is the world’s second-largest exporter of crude oil
  • Consequently, GOIL’s BDC – Go Energy’s ex-refinery price also increased by 85.1% in 1Q2022
  • Revenue growth for the period was also supported by a 22.0% y/y increase retail fuel consumption and a 21.5% y/y increase in Go Energy’s sales volume
  • As a result, market share for GOIL, the OMC, and Go Energy increased by 3.7pp y/y and 3.6pp y/y to 18.9% and 19.1% respectively in 1Q2022
  • Despite the strong revenue performance, gross profit margin dipped by 2.7pp to 5.2% on the back of higher cost of sales
  • Cost of sales increased by 111.9% y/y on the back of the increase in global crude oil prices and forex pressures
  • OPEX also increased by 41.0% y/y mainly driven by inflationary and forex pressures
  • Resultantly, operating margin and net profit margin slipped by 1.6pp and 1.1pp to 2.2% and 1.5% respectively in 1Q2022

Outlook: Getting ahead on effective pricing strategy

  • With Go Energy enabling GOIL to price below its arch competitors, we expect the advantage in pricing to drive the Group’s sales volume and market share in the coming quarters
  • This is because, given the upside risks to inflation and the elevated energy prices, we believe that consumers’ purse strings will come under pressure in the near term, causing them to shift to OMCs with relatively cheaper fuel prices
  • We also expect the Group to register positive growth in revenue and earnings on the back of increased consumption and diversification into bitumen production
  • With GOIL’s bitumen production, we anticipate the project to help expand margins from exports to neighbouring countries in the sub-region

Valuation: Under Review 

  • GOIL is currently trading at a P/E of 15.7x and EV/EBITDA of 8.5x
  • We intend to re-initiate coverage in 2H2022