KazTransOil significantly improved 3Q2017 production performance

Altynay IbraimovaOctober 12, 2017

Yesterday, KazTransOil reported 9M2017 production results, showing positive dynamics of key indicators.

Separately, KazTransOil has seen an increase in transportation volumes of 2% qoq and 5% yoy. The largest volume of transported oil observed in 3Q2017 and amounted to 11,790 ths tons.

The consolidated volume of oil transportation made 43,706 ths tons, which 3% higher than similar indicator for 9M2016.

Fig 1. Operational results

Name

units

9М2016

9М2017

yoy

2Q2017

3Q2017

qoq

Volume – cons

ths tons

42 405

43 706

3%

14 661

14 782

1%

Volume – non-cons

ths tons

32 817

34 522

5%

11 562

11 790

2%

Turnover – cons

ton*кm

32 479

35 639

10%

11 712

12 541

7%

Turnover – non-cons

ton*кm

26 802

29 306

9%

9 555

10 348

8%

Source: Company data, HF estimates

At the same time oil turnover shows a stronger increase: in 3Q2017 consolidated and separate volume of oil turnover exceeded the 2Q2017 indicator by 7% and 8%, respectively.

For 9M2017, the Company managed to increase oil turnover by 10% and 9%, respectively.

Our view

We view the operational results as positive. The actual average transportation distance was 880 km instead of the expected 850 km, as a result of which the volume of oil turnover in 3Q2017 slightly exceeded our expectations. Thus, we note a noticeable increase in freight turnover in 3Q2017 (+ 10%), in connection with which our expectations for revenue increase remain. Our 12M target price for KTO shares assumes a growth potential of current levels of 22%, and we maintain our "Buy" recommendation.