GOIL Plc (“GOIL”) released its unaudited 1Q2025 financial results this week, posting a 4.6% y/y increase in profit-after-tax to GHS 33.6mn. The upturn in earnings was on the back of a 4.6% y/y growth in revenue to GHS 5.0bn, a surge in sundry income by 73.2% y/y to GHS 25.4mn and a 0.3% y/y decline in operating expense to GHS 142.7mn. Input cost increased by 4.9% y/y to GHS 4.8bn. The growth in input cost outpaced the growth in revenue, leading to a 0.2% y/y decline in gross profit. In our view, the growth in revenue is attributable to an 11.1% y/y and 6.4% y/y increase in GOIL’s ex-pump prices in petrol and diesel respectively, despite the 9.4% y/y and 3.3% q/q decline in sales volume. The drop in sales volume led to a 3.2% y/y decline in market share to 10.4%. Operating expense was well contained despite a 17.1% y/y depreciation of the cedi and a 23.0% average 1Q2025 inflation (vs 24.2% in 1Q2024). An 18.2% y/y rise in finance expense to GHS 37.7mn is attributable to an 81.7% y/y surge in debt to GHS 795.5mn amidst the high cost of borrowing. Overall, we are concerned about the 9.4% y/y and 3.3% q/q decline in sales volume. While we perceive that revenue growth has been largely driven by price increases, we note that net profit increased at the same growth as revenue, suggesting limited operational leverage. However, with ex-pump prices moderating in 2Q2025, the momentum in revenue growth appears vulnerable if price declines persist in the near term without volume recovery. Although the factors supporting bottom-line growth during the period were favorable, we remain cautious about their sustainability in maintaining earnings momentum going forward.

Outlook: Cautious on near-term revenue and earnings momentum

• GOIL’s 4.6% y/y revenue growth in 1Q2025 was largely driven by price increases, with ex-pump prices for petrol and diesel rising by 11.1% y/y and 6.4% y/y, respectively. However, as ex-pump prices begin to moderate in 2Q2025, the company’s ability to sustain revenue growth may come under pressure, particularly if sales volume continue to decline. A sustained decline in sales volume could potentially erode year-on-year revenue gains, posing a risk to revenue growth in the near term.

• The 9.4% y/y and 3.3% q/q decline in sales volume highlights potential consumer resistance to higher ex-pump prices and suggests that GOIL’s pricing strategy may be weighing on demand. This is a critical concern as lower sales volumes could hinder revenue growth, especially if ex-pump prices continue to moderate amidst the strengthening local currency, limiting the pricing power of GOIL.

• GOIL’s market share declined by 3.2% y/y to 10.4%, indicating potential market share loss to competitors who may have maintained or reduced prices. A persistent decline in market share could weaken GOIL’s pricing power and market influence. We expect GOIL to recapture market share through its wide distribution networks and competitive pricing strategies

• We expect GOIL to reduce borrowing amid the high-interest rate environment as this will be crucial in improving net profit margin and mitigating finance cost pressures

Valuation: Under Review 

• We are in the process of re-initiating coverage on GOIL and have therefore placed our recommendation under review
• GOIL is currently trading at a TTM P/E of 6.7x and EV/EBIT of 13.3x