FSA Project

Student Name: Sheeba Ashraf

Registration ID: BBA-2020-04

Submitted to: Mam. Zunera

Namal University Mianwali

 Acknowledgement
As a Muslim, I would like to begin this report by expressing my gratitude to Allah for granting
me the knowledge, resources, and opportunities to undertake this comprehensive analysis of
Mari Petroleum Company Limited (MPCL). I am also thankful to my mentor Mam. Zunera has
supported, guided, and encouraged me throughout this project.

Objective of the Analysis Report

This research report's goal is to give a fair and complete evaluation of Mari Petroleum Company
Limited's financial performance and creditworthiness during the last eight years. The purpose of
the report is to comprehend MPCL's stability and financial health. Growth rate analysis,
comparative and ratio analysis of the balance sheets, income statements, and cash flows are some
of the approaches used in the study. Analysis of credit risk, review of credit ratings, and
evaluations of reporting quality and earning quality are also included. My earnest goal is to aid in
the financial comprehension of MPCL while maintaining fairness, openness, and ethical
behavior throughout the study procedure. May Allah guide and favor my efforts, making this
report a useful tool for people looking for information about Mari Petroleum Company Limited's
financial performance.

Introduction
Mari Petroleum Company Limited (MPCL) is a leading exploration and production company
operating in the energy sector. Established in 1984, MPCL has emerged as a prominent player in
the oil and gas industry in Pakistan. With a focus on the exploration, development, and
production of hydrocarbon resources, MPCL has made significant contributions to the country's
energy sector. Notably, there is a substantial increase in cash generation in 2016, 2018, and 2019,
indicating successful operational endeavors. In 2019, MPCL got the Appreciation Award for the
best Financial Report.
 1. Income Statement’s Analysis
1 Growth Rate Analysis of Income Statements of MPCL

All values are in PKR

Note: Millions.

2015 2016 2017 2018 2019 2020 2021 2022

Sales/Revenue 19,376 21,712 28,175 42,270 61,291 72,306 73,133 95,134
Growth rate of
sales/Revenue 30% 12% 30% 50% 45% 18% 1% 30%

Growth rate of sales/Revenue

Growth rate of sales/Revenue

50%
45%

30% 30% 30%

18%
12%
1%
2015 2016 2017 2018 2019 2020 2021 2022

Sales/Revenue
Sales/Revenue

95,134
72,306 73,133
61,291
42,270
28,175
19,376 21,712

2015 2016 2017 2018 2019 2020 2021 2022

The growth rate analysis of Mari Petroleum Company Limited's sales/revenue over the eight-
year period from 2015 to 2022 reveals a fluctuating but overall positive trend. Starting with
revenue of 19,376 in 2015, the company experienced a steady growth rate of 30% in 2016,
reaching 21,712 in sales. The subsequent year, 2017, witnessed a significant increase of 30% in
revenue, amounting to 28,175. This positive momentum continued in 2018, with a remarkable
growth rate of 50%, resulting in sales of 42,270.

The following year, 2019, demonstrated consistent growth with a 45% increase in revenue,
totaling 61,291. Despite global challenges, the company managed to maintain an 18% growth
rate in 2020, achieving sales of 72,306. In 2021, the growth rate decreased to 1%, reflecting
relatively stable revenue of 73,133. However, Mari Petroleum Company rebounded strongly in
2022, experiencing a growth rate of 30% and achieving its highest recorded sales figure of
95,134.

The growth rate analysis indicates that Mari Petroleum Company Limited has shown
commendable growth in its sales/revenue over the eight-year period. The company witnessed
substantial growth rates over multiple years, demonstrating its ability to adapt to market
conditions and capitalize on opportunities. The consistent upward trajectory indicates a positive
trend, showcasing the company's financial strength and resilience in the industry.

2015 2016 2017 2018 2019 2020 2021 2022

Gross Sales 88,239 94,997 96,775 100,042 117,542 81,603 82,692 108,969
Growth rate of Gross
Sales 25% 8% 2% 3% 17% -31% 1% 32%
 Growth rate of Gross Sales
Growth rate of Gross Sales

32%
25%
17%
8%
2% 3% 1%

2015 2016 2017 2018 2019 2020 2021 2022

-31%

Gross Sales
Gross Sales

117,542
108,969
94,997 96,775 100,042
88,239 82,692
81,603

2015 2016 2017 2018 2019 2020 2021 2022

The analysis of Mari Petroleum Company Limited's gross sales growth rate over the period of
2015 to 2022 reveals a mixed pattern. Starting with gross sales of 88,239 in 2015, the company
experienced a growth rate of 25% in 2016, reaching 94,997 in sales. The subsequent year, 2017,
witnessed a modest growth rate of 8%, resulting in gross sales of 96,775. In 2018, the growth
rate further slowed down to 2%, amounting to gross sales of 100,042. However, the following
year, 2019, showed a significant increase with a growth rate of 17%, bringing the gross sales to
117,542.
The year 2020 faced a challenging scenario as the company experienced a sharp decline in gross
sales with a negative growth rate of -31%, resulting in sales of 81,603. However, in 2021, the
growth rate recovered slightly, increasing by 1% and reaching gross sales of 82,692. The
company's performance rebounded strongly in 2022, witnessing a growth rate of 32% and
achieving the highest recorded gross sales figure of 108,969.

The analysis indicates fluctuations in the growth rate of Mari Petroleum Company Limited's
gross sales over the eight-year period. While some years experienced robust growth, others faced
challenges, such as the significant decline in 2020. The positive growth rate in 2022 showcases
the company's ability to recover and adapt to market conditions.

2015 2016 2017 2018 2019 2020 2021 2022

Finance Income 517 340 233 765 1,767 4,556 3,940 4,483
Growth rate of finance
income -41% -34% -31% 228% 131% 158% -14% 14%

Finance Income
5000
4,556 4,483
4000 3,940
3000
2000 1,767 Finance Income
1000 765
517 340 233
0
2015 2016 2017 2018 2019 2020 2021 2022

300%
Growth rate of finance income
200%

100%

0%
2015 2016 2017 2018 2019 2020 2021 2022
-100%
Growth rate of finance income
The analysis of Mari Petroleum Company Limited's finance income growth rate from 2015 to
2022 reveals a mixed performance with significant fluctuations. In 2015, the finance income was
recorded at 517. However, the subsequent years witnessed negative growth rates, with a decline
of 41% in 2016, followed by a further decrease of 34% in 2017, resulting in finance incomes of
340 and 233, respectively. This downward trend continued in 2018 with a negative growth rate
of 31%, amounting to 765 in finance income.

However, the company experienced a remarkable turnaround in 2019, with a substantial growth
rate of 228%, reaching 1,767 in finance income. The positive momentum continued in 2020,
with a growth rate of 131%, resulting in a finance income of 4,556. In 2021, the growth rate
further increased by 158%, amounting to 3,940. However, in 2022, there was a decline in the
growth rate by -14%, with a finance income of 4,483.

The analysis raises some potential warning signs in the reporting or earning quality of Mari
Petroleum Company Limited. The significant fluctuations in finance income growth rates,
particularly the consecutive negative growth rates from 2016 to 2018, indicate a potential
instability or volatility in the company's financial earnings.
 Reference: Annual Report 2022 of MPCL___Page#148

Net Sales, Net Profit, EPS and Dividend Graphical Representation of

the MPCL Data
 2 Comparative Analysis of Income Statement

1- Common-Size Analysis of Income Statements for 8-Years of MPCL

 Reference: Annual Report 2022 of MPCL____Page# 140-141
Reference: Annual Report 2017 of MPCL____Page# 80-81
2-
Reference: Annual Report 2022 of MPCL____Page# 136-137
Reference: Annual Report 2017 of MPCL____Page# 78-79
 3 Ratio Analysis of Income Statement of MPCL for 8-Years

Net Profit to Net EBITDA Margin to Operating Leverage

Year Sales (%) Net Sales (%) (Times)
2021-22 34.75 56.34 0.58
2020-21 43.06 67.76 7.81
2019-20 42.09 63.87 0.5
2018-19 40.92 64.83 1.46
2017-18 37.75 60.03 1.63
2016-17 32.35 49.65 2.43
2015-16 6.37 39.83 -1.89
2014-15 6.4 49.75 2.32

1. Net Profit to Net sales (%) Ratio

50
45
40
35
30
25
Net Profit to Net Sales (%)
20
15
10
5
0
2021-222020-212019-202018-192017-182016-172015-162014-15

Net Profit to Net Sales (%): This ratio indicates the profitability of the company by measuring
the net profit generated as a percentage of net sales. From 2014-15 to 2021-22, MPCL's net
profit to net sales ratio shows a generally positive trend, with fluctuations in certain years. The
ratio increased from 6.4% in 2014-15 to a peak of 43.06% in 2020-21 before declining to
34.75% in 2021-22. This suggests that the company has generally been able to generate a
reasonable level of profit relative to its net sales. However, the decline in the most recent year
warrants attention and further investigation into the factors contributing to this decrease.

2. EBITDA Margin to Net Sales (%) Ratio

EBITDA Margin to Net Sales (%)

80
70 67.76
60 63.87 64.83
56.34 60.03
50 49.65 49.75
40 39.83
30 EBITDA Margin to Net Sales
20 (%)
10
0

EBITDA Margin to Net Sales (%): This ratio measures the company's operating profitability
by examining the earnings before interest, taxes, depreciation, and amortization (EBITDA) as
a percentage of net sales. MPCL's EBITDA margin to net sales ratio demonstrates a
consistent upward trend from 2014-15 to 2021-22. The ratio increased from 49.75% in 2014-
15 to 67.76% in 2020-21, indicating improving operational efficiency and cost management.
However, it slightly declined to 56.34% in 2021-22. This decline could be indicative of
potential challenges in maintaining the previous level of operating profitability.

3. Operating Leverage ratio

Operating Leverage (Times): This ratio reflects the extent to which changes in sales affect the
company's operating profit. MPCL's operating leverage ratio fluctuates over the years, indicating
variations in the company's ability to control costs and expenses as sales volume changes. The
negative value of -1.89 in 2015-16 suggests that a decline in sales led to a more significant
reduction in operating profit. However, in subsequent years, the company improved its operating
leverage, with positive ratios ranging from 0.5 to 7.81. Higher operating leverage ratios indicate
a higher degree of cost control and efficiency.

Operating Leverage (Times)

Operating Leverage (Times)

7.81

2.43 2.32
1.46 1.63
0.58 0.5
2021-22 2020-21 2019-20 2018-19 2017-18 2016-17 2015-16 2014-15
-1.89

2. Balance Sheet’s Analysis

Assets

Note: All values are in PKR Thousands.

2014 2015 2016 2017 2018

Current Assets 40,628,932 41,868,075 32,727,282 65,303,768 114,405,530
Growth rate 75% 3% -22% 100% 75%
Non-Current Assets 18,834,095 23,785,743 26,832,365 28,291,199 29,760,170
Growth rate 5% 26% 13% 5% 5%
Total Assets 59,463,027 65,653,818 59,559,647 93,594,967 144,165,700
Growth rate 54% 10% -9% 57% 54%
 2019 2020 2021 2022
Current Assets 183,654,952 83,979,544 85,462,500 85,950,046
Growth rate 61% -54% 2% 1%
Non-Current Assets 36,407,254 42,165,189 64,923,633 99,125,189
Growth rate 22% 16% 54% 53%
Total Assets 220,062,206 126,144,733 150,386,133 185,075,235
Growth rate 53% -43% 19% 23%

Graphical Representation of the Growth rate of Current, Non-

Current and Total Assets

2015 2016 2017 2018 2019 2020 2021 2022

Growth rate C.A 3% -22% 100% 75% 61% -54% 2% 1%
Growth rate
N.C.A 26% 13% 5% 5% 22% 16% 54% 53%
Growth rate T.A 10% -9% 57% 54% 53% -43% 19% 23%

Growth Rate Analysis (Assets)

120%
100%
80%
60%
40%
20%
0%
-20% 2015 2016 2017 2018 2019 2020 2021 2022
-40%
-60%
-80%
Growth rate C.A Growth rate N.C.A Growth rate T.A
The growth rates of current assets,
non-current assets, and total assets
from 2015 to 2022 reveal distinct
trends. The growth rate of current
assets experienced fluctuations
over the years, with notable
increases in 2017, 2018, and 2019,
followed by a significant decline in
2020. The growth rate of non-
current assets showed a more
consistent upward trend, with
moderate growth throughout most
years. The growth rate of total
assets followed a similar pattern to
non-current assets, displaying
consistent growth with a few
exceptional years of decline.
Overall, while current assets
exhibited more volatility, non-
current assets and total assets
demonstrated a general trend of
growth over the analyzed period.

Reference: Annual Report 2022 of MPCL Page# 144

 Liabilities
Note: All values are in PKR Thousands.

2014 2015 2016 2017 2018

Current Liabilities 37,593,693 39,398,626 35,017,149 56,400,758 96,021,626
Growth Rate 5% -11% 61% 70%
Non-Current Liabilities 5,047,103 14,758,974 7,576,575 11,656,539 7,952,336
Growth Rate 192% -49% 54% -32%
Total Liabilities 42,640,796 54,157,600 42,593,724 68,057,297 103,973,962
Growth Rate 27% -21% 60% 53%

2019 2020 2021 2022

Current Liabilities 146,397,515 22,653,488 23,680,845 38,012,839
Growth Rate 52% -85% 5% 61%
Non-Current Liabilities 10,057,962 10,342,139 11,171,723 16,268,419
Growth Rate 26% 3% 8% 46%
Total Liabilities 156,455,477 32,995,627 34,852,568 54,281,258
Growth Rate 50% -79% 6% 56%

Graphical Representation of the Growth rate of Current, Non-

Current and Total Liabilities

2015 2016 2017 2018 2019 2020 2021 2022

Growth Rate C.L 5% -11% 61% 70% 52% -85% 5% 61%

Growth Rate
N.C.L 192% -49% 54% -32% 26% 3% 8% 46%
Growth Rate T.L 27% -21% 60% 53% 50% -79% 6% 56%

The growth rate of current liabilities: It experienced fluctuations with significant increases in 2017, 2018, and 2019, followed by a substantial decline in 2020. Overall, there
was a gradual upward trend. Growth rate of non-current liabilities: It displayed mixed trends, with notable fluctuations. There were decreases in 2016 and 2018, while other
years saw increases, including a significant jump in 2017. The trend shows a general upward trajectory. The growth rate of total liabilities: It exhibited a similar pattern to non-
current liabilities, with fluctuations and occasional declines. However, the overall trend indicates a gradual increase in total liabilities over the analyzed period. The trends
suggest that both current and non-current liabilities experienced growth over the years, with some variations in the pace of increase and occasional declines. The growth rates
of total liabilities followed a similar pattern, indicating a general upward trend.
 Growth Rate Analysis (Liabilities)
250%
200%
150%
100%
50%
0%
2015 2016 2017 2018 2019 2020 2021 2022
-50%
-100%
Growth rate of Current Liabilities Growth rate of Non-Current Liabilities
Growth rate of Total Liabilities

Owner's Equity

Note: All values are in PKR Thousands.

2014 2015 2016 2017 2018

Equity 16,822,231 11,496,218 16,965,923 25,537,670 40,191,738
Growth Rate of Equity 57% -32% 48% 51% 57%

2019 2020 2021 2022

Equity 63,606,729 93,149,106 115,533,565 130,858,767
Growth rate of equity 58% 46% 24% 13%
 Growth rate of Total Liabilities Growth Rate of
Equity
Growth rate of Total Liabilities Growth Rate of Equity

57% 58%
48% 51% 46%
24%
13%

2015 2016 2017 2018 2019 2020 2021 2022

-32%

The equity values from 2014 to 2022 demonstrate an upward trend with some fluctuations. In 2015, there was a significant
decline of -32% in equity compared to the previous year. However, starting from 2016, there was a consistent growth in equity,
with notable increases of 48%, 51%, 57%, and 58% in the subsequent years. This growth trend continued in 2019 with a 46%
increase in equity. In 2020 and 2021, the growth rate slightly slowed down but remained positive at 24% and 13% respectively.
By 2022, the equity had reached 130,858,767, representing a total growth of 678% compared to the initial value in 2014.
Overall, the trend in equity demonstrates a substantial growth trajectory, indicating the accumulation of retained earnings and
the injection of additional capital into the company over the analyzed period.

2 Comparative Analysis of Financial Position Statement

1- Common-Size Analysis of Balance Sheet for 8-Years of MPCL

Reference: Annual Report 2022 of MPCL Page # 138-139
Reference: Annual Report 2017 of MPCL Page # 76-77
 Reference: Annual Report 2022 of MPCL Page # 134-135

Reference: Annual Report 2017 of MPCL Page # 74-75

3 Ratio Analysis of Balance Sheet of MPCL for 8-Years

Liquidity Ratios
2022- 2021- 2020- 2019- 2018- 2017- 2016- 2015-
21 20 19 18 17 16 15 14
Current Ratio 2.26 3.61 3.71 2.98 2.77 1.92 0.93 1.06
Quick Ratio 2.13 3.36 3.15 2.6 2.56 1.75 0.87 1.02
Cash to Current liabilities 1.09 2.05 2.22 1.45 1.51 0.72 0.02 0.12

The company's financial ratios, including the current ratio, quick ratio, and cash to current liabilities, reveal its business trend over the
years. The current ratio measures the company's ability to cover its short-term obligations with its current assets. From 2015 to 2022,
the current ratio consistently remained above 1, indicating that the company had sufficient current assets to meet its current liabilities.
The trend shows an overall improvement, with a significant increase from 2015 to 2016 and a subsequent steady increase in the
following years, reaching a peak of 3.71 in 2020. Similarly, the quick ratio, which measures the company's ability to cover immediate
obligations without relying on inventory, displays a consistent improvement over the analyzed period. The cash to current liabilities ratio,
which indicates the company's ability to pay off its current liabilities using cash, also exhibits a positive trend with steady growth. These
trends collectively suggest that the company's liquidity position has improved over the years, reflecting a stronger ability to meet short-
term obligations and indicating a positive business trend.
 4
3.5
3
Ratios

2.5
2 Current Ratio
1.5 Quick Ratio
1
Cash to Current liabilities
0.5
0
2022-21 2021-20 2020-19 2019-18 2018-17 2017-16 2016-15 2015-14
Financial Years

Solvency Ratios
2022 2021 2020 2019 2018 2017 2016 2015
Financial Leverage 1.2089 1.3003 1.3537 1.208 1.08 0.2 0.2 0.07
Debt to Equity Ratio 0.4149 0.3017 0.3648 2.459732 0.354224 0.301666 0.455086 0.824896
Total Debt ratio 0.2938 0.2318 0.2696 0.71096 0.721212 0.727147 0.715144 0.231754
Long-term debt to equity
ratio 0.1243 0.0966 0.111 0.158127 0.111028 0.096697 0.446576 0.456445

The business trend of the company can be observed by analyzing the financial leverage, debt to equity ratio, total debt ratio, and long-term
debt to equity ratio over the years. The financial leverage ratio measures the proportion of debt in the company's capital structure. From
2015 to 2022, the financial leverage ratio shows an increasing trend, indicating that the company has been relying more on debt to finance
its operations and investments. The debt to equity ratio, which compares the company's total debt to its equity, displays a fluctuating trend
with a significant spike in 2019. This suggests that the company had a relatively high level of debt compared to its equity that year. The total
debt ratio, which assesses the proportion of total debt to total assets, shows a similar pattern to the debt to equity ratio, with fluctuations
and a peak in 2019. The long-term debt to equity ratio, focusing on the proportion of long-term debt to equity, exhibits variations but
remains relatively stable over the analyzed period. Overall, the trends in these ratios suggest that the company has experienced fluctuations
in its debt levels and financial leverage, with a notable increase in debt in 2019. It is important for the company to carefully manage its debt
and monitor its leverage ratios to maintain a healthy financial position and ensure sustainable growth.
 3

2.5

2
Financial Leverage

1.5 Debt to Equity Ratio

Total Debt ratio
1 Long-term debt to equity ratio

0.5

0
2022 2021 2020 2019 2018 2017 2016 2015
MPCL business goes down at some stages which are predictable through ratios; here is the
description:

Reference: Annual Report 2022 of MPCL Page#145-146

3. Cashflow Statement’s Analysis

Growth Rate Analysis of Cashflow Statements of MPCL for 8-

1 Years

Note: All values are in PKR Thousands.

2014 2015 2016 2017
Net Cash generated from Operating Activities 6,096,578 6,609,010 12,638,329 7,120,289
- - -
Net cash used in investing activities 5,918,203 5,393,894 -5,287,579 4,081,586
- - -
Net cash generated from / (used in) financing activities 1,379,671 1,621,744 11,625,231 3,262,935
 2018 2019 2020 2021 2022
Net Cash generated from Operating
Activities 20,225,239 20,436,053 31,613,046 30,137,247 49,400,044
Net Cash generated from Investing - -
Activities -5,543,564 -8,051,536 -7,818,319 22,864,804 41,012,153
Net Cash generated from Financing -
Activities -5,903,205 -754,961 -796,141 -9,001,466 17,145,990

2015 2016 2017 2018 2019 2020 2021 2022

Growth Rate
Operating 8% 91% -44% 184% 1% 55% -5% 64%
Growth Rate Investing -9% -2% -23% 36% 45% -3% 192% 79%
Growth Rate
Financing 18% 617% -128% -281% -87% 5% 1031% 90%

The company consistently

Cashflow Growth Rate Analysis generated positive net cash
from operating activities
1200%
from 2014 to 2022, with a
1000%
significant increase in cash
800%
generation over time.
600%
However, the company
400%
experienced fluctuations in
200%
cash used in investing
0%
activities and cash generated
-200% 2015 2016 2017 2018 2019 2020 2021 2022
from financing activities,
-400%
indicating varying levels of
investment and financing
Growth rate of cash generated from Operating Activities
activities throughout the
Growth rate of cash generated from Investing Activities years.
Growth rate of cash generated from Financing Activities

MPCL's operating cash flow exhibited a mixed trend over the past eight years, with consistent growth in 2015 and 2016, follow ed by a significant
decline in 2017. However, the company experienced a strong rebound in 2018 and 2019 with remarkable growth rates of 184% and sustained
positive growth. There was a slight dip in 2020 and a negative growth rate in 2021, but a substantial recovery was observed i n 2022 with a growth
rate of 64%, indicating an overall positive trend. In investing activities, MPCL's cash flow growth rate fluctuated with consecutive declines in 2015 and
2016, followed by a turnaround in 2018 and 2019 with growth rates of 36% and 45%. Although a slight dip occurred in 2020, sig nificant growth was
observed in 2021 with a growth rate of 192%, which further improved to 79% in 2022. These fluctuations suggest varying levels of investment by the
company. MPCL's financing activities displayed a volatile trend, with positive and relatively stable growth rates in 2015 and 2016. However, the
company faced challenges in securing financing, resulting in substantial declines in 2017 and 2018. There was a significant i mprovement in 2019,
followed by slight growth in 2020. MPCL experienced a remarkable turnaround in 2021 with a growth rate of 1031%, which further increased to 90%
in 2022. These fluctuations reflect the company's efforts to address financing issues and the impact of strategic financial d ecisions.
Source: Annual Report 2022 of MPCL_____Page No# 132
Reference: Annual Report 2017 Page# 70
 2 Comparative Analysis of Cashflow Statements
MPCL CashFlow 2022 Common-Size Analysis
Common Size Analysis with Net Revenue (100%) as the Base:
Net sales: 95,134,477 / 95,134,477 * 100 = 100.00%
Cash flows from operating activities:
Cash receipts from customers:
Cash paid to the Government for Government levies:
Cash paid to suppliers, employees, and others:
Income tax paid:
Cash generated from operating activities:
Cash flows from investing activities:
Property, plant, and equipment:
Development and production assets:
Exploration and evaluation assets:
Proceeds from disposal of property, plant, and equipment:15,248 / 95,134,477 * 100 = 0.02%
Investment in associate:
Investment in Term Finance Certificates:
Dividend from mutual funds:
Interest received:
Cash utilized in investing activities:
Note: It was not given in the Cash Flow Statement of MPCL 2022
Cash flows from financing activities:
Proceeds from long-term financing:
Redemption of preference shares:
Finance cost paid:
Dividend paid:
Cash utilized in financing activities:
Decrease in cash and cash equivalents:
Cash and cash equivalents at beginning of year:
Effect of exchange rate changes:
Cash and cash equivalents at end of year:
Note: It was not given in the Cash Flow Statement of MPCL 2022
136,602,088 / 95,134,477 * 100 = 143.61%
(62,501,082) / 95,134,477 * 100 = -65.74%
(12,906,173) / 95,134,477 * 100 = -13.58%
(11,794,789) / 95,134,477 * 100 = -12.39%
49,400,044 / 95,134,477 * 100 = 51.93%
(24,772,074) / 95,134,477 * 100 = -26.02%
(1,986,030) / 95,134,477 * 100 = -2.09%
(12,699,851) / 95,134,477 * 100 = -13.35%
(4,180,000) / 95,134,477 * 100 = -4.39%
- / 95,134,477 * 100 = 0.00%
498,468 / 95,134,477 * 100 = 0.52%
2,112,086 / 95,134,477 * 100 = 2.22%
(41,012,153) / 95,134,477 * 100 = -43.04%
1,000,000 / 95,134,477 * 100 = 1.05%
- / 95,134,477 * 100 = 0.00%
(16,964) / 95,134,477 * 100 = -0.02%
(18,129,026) / 95,134,477 * 100 = -19.04%
(17,145,990) / 95,134,477 * 100 = -18.01%
(8,758,099) / 95,134,477 * 100 = -9.21%
48,605,381 / 95,134,477 * 100 = 51.03%
1,643,843 / 95,134,477 * 100 = 1.73%
41,491,125 / 95,134,477 * 100 = 43.59%
MPCL CashFlow 2021 Common-Size Analysis
Net revenue/sales of MPCL in 2021
73,018,271/73,018,271*100= 100.00%
Cash flows from operating activities:
Cash receipts from customers:
Cash paid to the Government for Government levies:
Cash paid to suppliers, employees, and others:
Income tax paid:
Cash generated from operating activities:
Cash flows from investing activities:
Property, plant and equipment:
Development and production assets:
Exploration and evaluation assets:
Proceeds from disposal of PPE
Investment in associate:
Investment in Term Finance Certificates:
Dividend received:
Interest received:
Cash utilized in investing activities:
Cash flows from financing activities:
Redemption of preference shares:
Finance cost paid:
Dividends paid:
Cash utilized in financing activities:
(Decrease) / increase in cash and cash equivalents:
Cash and cash equivalents at the beginning of the year:
Cash and cash equivalents at the end of the year:
143.4% (104,653,433 / 73,018,271 * 100)
64.3% (46,949,087 / 73,018,271 * 100)
17.2% (12,589,985 / 73,018,271 * 100)
20.5% (14,977,114 / 73,018,271 * 100)
41.3% (30,137,247 / 73,018,271 * 100)
24.4% (17,842,585 / 73,018,271 * 100)
7.8% (5,694,829 / 73,018,271 * 100)
3.6% (2,657,742 / 73,018,271 * 100)
1.0% (702,813 / 73,018,271 * 100)
0.3% (209,000 / 73,018,271 * 100)
1.4% (1,000,000 / 73,018,271 * 100)
0.2% (169,889 / 73,018,271 * 100)
5.0% (3,666,650 / 73,018,271 * 100)
31.3% (22,864,804 / 73,018,271 * 100)
0.0% (3,490 / 73,018,271 * 100)
0.0% (1,455 / 73,018,271 * 100)
12.3% (8,996,521 / 73,018,271 * 100)
12.3% (9,001,466 / 73,018,271 * 100)
-2.4% (-1,729,023 / 73,018,271 * 100)
69.0% (50,334,404 / 73,018,271 * 100)
66.6% (48,605,381 / 73,018,271 * 100)
MPCL CashFlow 2020 Common-Size Analysis
Net revenue/sales of MPCL in 2020
72,014,896/72,014,896*100= 100.00%
Cash flows from operating activities:
Cash receipts from customers: 133.8% (96,586,916 / 72,014,896 * 100)
Cash paid to the Government for Government levies:
51.0% (36,716,810 / 72,014,896 * 100)
Cash paid to suppliers, employees, and others: 25.6% (18,424,174 / 72,014,896 * 100)
Income tax paid: 13.7% (9,832,886 / 72,014,896 * 100)
Cash provided by operating activities: 43.9% (31,613,046 / 72,014,896 * 100)
Cash flows from investing activities:
Property, plant and equipment: 11.7% (8,439,549 / 72,014,896 * 100)
Development and production assets: 1.3% (963,139 / 72,014,896 * 100)
Exploration and evaluation assets: 4.4% (3,191,295 / 72,014,896 * 100)
Proceeds from disposal of property, plant and equipment:
0.0% (17,417 / 72,014,896 * 100)
Dividend received: 0.1% (36,573 / 72,014,896 * 100)
Interest received: 6.5% (4,721,674 / 72,014,896 * 100)
Cash used in investing activities: 10.9% (7,818,319 / 72,014,896 * 100)
Cash flows from financing activities:
Redemption of preference shares: 0.608% (4,382 / 72,014,896 * 100)
Finance cost paid: 0.9% (6,178 / 72,014,896 * 100)
Dividends paid: 1.1% (785,581 / 72,014,896 * 100)
Cash used in financing activities: 1.1% (796,141 / 72,014,896 * 100)
Increase in cash and cash equivalents: 31.9% (22,998,586 / 72,014,896 * 100)
Cash and cash equivalents at the beginning 37.9% (27,335,818 / 72,014,896 * 100)
Cash and cash equivalents at end of year: 69.9% (50,334,404 / 72,014,896 * 100)
MPCL CashFlow 2019 Common-Size Analysis
Net revenue/sales of MPCL in 2019
59,448,007/59,448,007*100= 100%
Cash flows from operating activities:
Cash receipts from customers: 108.9% (64,734,687 / 59,448,007 * 100)
Cash paid to the Government for Government levies:
42.7% (25,346,338 / 59,448,007 * 100)
Cash paid to suppliers, employees, and others: 23.2% (13,764,354 / 59,448,007 * 100)
Income tax paid: 8.7% (5,187,942 / 59,448,007 * 100)
Cash provided by operating activities: 34.4% (20,436,053 / 59,448,007 * 100)
Cash flows from investing activities:
Property, plant and equipment: 5.3% (3,119,481 / 59,448,007 * 100)
Development and production assets: 4.1% (2,413,957 / 59,448,007 * 100)
Exploration and evaluation assets: 7.3% (4,325,361 / 59,448,007 * 100)
Proceeds from disposal of property, plant and equipment:
0.028% (171/59,448,007 *100)
Interest received: 3.0% (1,807,092 / 59,448,007 * 100)
Cash used in investing activities: 13.5% (8,051,536 / 59,448,007 * 100)
Cash flows from financing activities:
Redemption of preference shares and repayment 0.57%
of long-term
(3,390 / 59,448,007
loans: * 100)
Finance cost paid: 0.01% (68 / 59,448,007 * 100)
Dividends paid: 1.3% (751,503 / 59,448,007 * 100)
Cash used in financing activities: 1.3% (754,961 / 59,448,007 * 100)
Increase in cash and cash equivalents: 19.6% (11,629,556 / 59,448,007 * 100)
Cash and cash equivalents at the beginning of the26.4%
year:(15,706,262 / 59,448,007 * 100)
Cash and cash equivalents at end of year: 45.9% (27,335,818 / 59,448,007 * 100)
 Note
(Rupees in Amount Common- MPCL Cashflow 2018 Common-
thousands) (Rupees) Size %
Size Analysis
Cash flows
from
operating
activities 20,225,239 49.79%

Cash flows
from
investing
activities -5,543,564 -13.63%

Cash flows Note: The negative sign for cash flows from
from investing and financing activities indicates cash
financing outflows in those categories. The common-size
activities -5,903,205 -14.54% analysis expresses each item as a percentage of
the base (Net Revenue) and helps in
Increase in understanding the relative proportion of
cash and different items in the financial statement. In this
cash case, we can see that cash flows from operating
equivalents 8,778,470 21.60% activities constitute the largest portion (49.79%)
Cash and of the net revenue, followed by cash and cash
cash equivalents at end of the year (38.64%). The
equivalents other items are represented accordingly in
at beginning relation to the base.
of year 6,927,792 17.03%
Cash and
cash
equivalents
at end of
year 15,706,262 38.64%
MPCL Cashflow 2017 Common-Size Analysis

Note (Rupees in
thousands) Amount (Rupees) Common-Size %

Cash flows from

operating activities 7,120,289 25.31%

Cash flows from

investing activities -4,081,586 -14.48%

Cash flows from

financing activities 3,262,935 11.57%
Increase /
(decrease) in cash
and cash
equivalents 6,301,638 22.37%
Cash and cash
equivalents at
beginning of year 626,154 2.22%
Cash and cash
equivalents at end
of year 6,927,792 24.56%

Note: The negative sign for cash flows from investing activities indicates cash outflows in that
category. The common-size analysis expresses each item as a percentage of the base (Net Revenue)
and helps in understanding the relative proportion of different items in the financial statement. In
this case, we can see that cash flows from operating activities constitute the largest portion
(25.31%) of the net revenue, followed by cash and cash equivalents at end of the year (24.56%). The
other items are represented accordingly in relation to the base.
MPCL Cashflow 2016 Common-Size
Analysis

Note (Rupees Amount Common- Note: The negative sign for

in thousands) (Rupees) Size % cash flows from investing and

Cash flows financing activities indicates

from cash outflows in those
operating categories. The common-size
activities 12,638,329 58.15%
analysis expresses each item as
a percentage of the base (Net
Cash flows
Revenue) and helps in
from investing
activities -5,287,579 -24.37% understanding the relative
proportion of different items in
Cash flows the financial statement. In this
from
case, we can see that cash
financing
activities -11,625,231 -53.68% flows from operating activities
constitute the largest portion
(58.15%) of the net revenue,
Decrease in
cash and cash followed by cash and cash
equivalents -4,274,481 -19.70% equivalents at the beginning of
the year (22.59%). The other
Cash and cash
items are represented
equivalents at
beginning of accordingly in relation to the
year 4,900,635 22.59% base.

Cash and cash

equivalents at
end of year 626,154 2.89%
MPCL Cashflow 2015 Common-Size Analysis

Note (Rupees in
thousands) Amount (Rupees) Common-Size %

Cash flows from operating

activities 6,609,010 34.11%

Cash flows from investing

activities -5,393,894 -27.81%

Cash flows from financing

activities -1,621,744 -8.36%

Decrease in cash and cash

equivalents -406,628 -2.10%

Cash and cash equivalents

at beginning of year 5,307,263 27.37%

Cash and cash equivalents

at end of year 4,900,635 25.31%

Note: The negative sign for cash flows from investing and financing activities indicates cash
outflows in those categories. The common-size analysis expresses each item as a percentage of
the base (Net Revenue) and helps in understanding the relative proportion of different items in
the financial statement. In this case, we can see that cash flows from operating activities
constitute the largest portion (34.11%) of the net revenue, followed by cash and cash equivalents
at the beginning of the year (27.37%). The other items are represented accordingly in relation to
the base.
 3 Ratio Analysis of Cashflow Statements

Performance Ratios

Cash Flow to Revenue

1 Ratio
2015 2016 2017 2018 2019 2020 2021 2022
0.30 0.45 0.17 0.33 0.34 0.44 0.41 0.52

The cash flow to revenue ratio measures the

Cash Flow to Revenue Ratio proportion of a company's revenue that is
Cash Flow to Revenue Ratio converted into cash flow from operating activities.
MPCL's cash flow to revenue ratio fluctuated over
the past eight years, ranging from 0.17 to 0.52. In
0.52
2015, the ratio was 0.30, indicating that 30% of
0.45 0.44
0.41 the company's revenue was converted into cash
0.33 0.34 flow. The ratio increased in 2016 and 2018 to 0.45
0.30
and 0.33, respectively, but experienced a slight dip
0.17 in 2017. MPCL witnessed a steady improvement in
the ratio from 2019 to 2022, reaching 0.52,
indicating that 52% of the company's revenue was
2015 2016 2017 2018 2019 2020 2021 2022 converted into cash flow in 2022.

2 Cashflow to Income Ratio

2015 2016 2017 2018 2019 2020 2021 2022
1.17 2.09 0.78 1.31 0.61 0.85 0.64 0.91

The cashflow to income ratio evaluates the

ability of a company to convert its net income
Cas flow to Income Ratio into cash flow from operating activities. MPCL's
cash flow to income ratio exhibited a fluctuating
trend over the past eight years. In 2015, the
Cas flow to Income Ratio
ratio was 1.17, indicating that the company
generated 1.17 times the amount of cash flow
compared to its net income. The ratio
experienced significant growth in 2016 and
2.09
2018, reaching 2.09 and 1.31, respectively,
1.17 1.31 demonstrating a strong ability to convert net
0.78 0.85 0.91 income into cash flow. However, there was a
0.61 0.64
decline in the ratio in 2017 and 2019, suggesting
a reduced efficiency in converting net income
2015 2016 2017 2018 2019 2020 2021 2022 into cash flow. The trend continued with slight
fluctuations from 2020 to 2022, ranging from
0.64 to 0.91, indicating variations in MPCL's
ability to convert net income into cash flow over
the years.
 3 Cash return on Equity
2015 2016 2017 2018 2019 2020 2021 2022
0.58 0.74 0.28 0.50 0.39 0.40 0.29 0.40

Cash return on Equity

Cash return on Equity

0.74
0.58
0.50
0.39 0.40 0.40
0.28 0.29

2015 2016 2017 2018 2019 2020 2021 2022

The cash return on equity (ROE) is a financial metric that measures the profitability of a company's equity investment.
MPCL's cash ROE exhibited a fluctuating trend over the past eight years. In 2015, the cash ROE stood at 0.58, indicating
that the company generated a return of 58% on its equity investment. The ratio experienced growth in 2016 and 2018,
reaching 0.74 and 0.50, respectively, and suggesting improved profitability. However, there was a decline in 2017 and
2019, with cash ROE dropping to 0.28 and 0.39, respectively, indicating reduced profitability on equity investment. The
trend continued with slight fluctuations from 2020 to 2022, ranging from 0.29 to 0.40, reflecting variations in the
company's ability to generate returns on equity. Overall, the fluctuating trend of cash ROE indicates that MPCL's
profitability and efficiency in utilizing its equity investment have varied over the years, emphasizing the need for
continued evaluation and improvement in the company's financial performance.

Coverage Ratios

1. Debt Coverage Ratio

2015 2016 2017 2018 2019 2020 2021 2022

0.144 0.159 0.172 0.194 0.131 0.167 0.86 0.911
2. Investing and Financing Ratio

2015 2016 2017 2018 2019 2020 2021 2022

0.9413 0.7452 0.968 1.7702 2.318 3.668 0.94 0.851
 Debt Coverage Ratio The Debt Coverage Ratio
measures the company's ability to
Debt Coverage Ratio
cover its debt obligations. MPCL's
0.911 Debt Coverage Ratio showed a
0.86 fluctuating trend over the eight-
year period. The ratio started at
0.144 in 2015 and gradually
increased until 2018, reaching
0.194, indicating an improvement
in the company's ability to cover
its debt. However, there was a
0.159 0.172 0.194 0.167 decline in 2019 to 0.131,
0.144 0.131
suggesting a potential challenge
in meeting debt obligations. The
ratio then increased in 2020 and
2015 2016 2017 2018 2019 2020 2021 2022 2021, reaching 0.167 and 0.86,
respectively. In 2022, the ratio
notably improved to 0.911,
indicating a stronger ability to
Investing and Financing Ratio cover debt obligations.
Investing and Financing Ratio The Investing and Financing Ratio
analyzes the company's
investment and financing
3.6675 activities. MPCL's investing and
Financing Ratio also exhibited a
fluctuating trend over the eight-
year period. The ratio started at
2.318 0.9413 in 2015 and decreased in
1.7702 2016 and 2017 to 0.7452 and
0.968, respectively. However,
there was a significant increase in
0.9413 0.968 0.9399 0.8506 2018 to 1.7702, suggesting higher
0.7452
investment and financing
activities. The ratio further rose in
2019 and 2020, reaching 2.318
and 3.6675, indicating increased
2015 2016 2017 2018 2019 2020 2021 2022
investment and financing
activities during these years. In
2021, the ratio declined to 0.9399,
followed by a slight decrease to
0.8506 in 2022, suggesting a
relatively lower level of
investment and financing
activities compared to the
previous years.
 2022 2021 2020 2019 2018 2017

2016 2015

Performance Indicators

Performance
Indicators 2022 2021 2020 2019 2018 2017 2016 2015
PROFITABILITY
RATIOS
Net profit to
net sales % 34.75 43.06 42.09 40.92 37.75 32.35 9.44 6.37
EBITDA margin
to net sales % 56.34 67.76 63.87 64.83 60.03 49.65 49.77 39.83

Operating
leverage Times 0.58 7.81 0.5 1.46 1.63 2.43 36.03 -1.89
Return on
equity /
shareholders'
funds % 26.84 30.14 38.68 46.87 46.78 42.99 35.78 35.67
Return on
capital
employed % 26.76 30.14 38.68 46.87 44.06 39.15 38.19 36.78
Equity /
Shareholders'
funds Rs in
billion 130.86 115.53 93.15 63.61 40.19 25.54
 Profitability Ratios
140
Net profit to net sales %
120
100 EBITDA margin to net sales %
80
Operating leverage Times
60
40
Return on equity / shareholders'
20 funds %

0 Return on capital employed %

2022 2021 2020 2019 2018 2017 2016 2015
-20

LIQUIDITY
RATIOS 2022 2021 2020 2019 2018 2017 2016 2015
Current ratio
Times 2.26 3.61 3.71 2.98 2.77 1.92 1.16 0.93
Quick / acid
test ratio Times 2.13 3.36 3.15 2.6 2.56 1.75 1.14 0.87
Cash to current
liabilities Times 1.09 2.05 2.22 1.45 1.51 0.72 0.12 0.02
Cash flow from
operations to
net sales Times 0.52 0.41 0.44 0.34 0.49 0.25 0.07 0.13
Cash flow from
operations to
capital
expenditures
Times 1.25 1.14 2.5 2.05 3.21 1.66 _ _
Cash flow
coverage ratio
Times 68.22 _ _ _ _ _ _ _
 Liquidity Ratios
80
Current ratio Times
70

60 Quick / acid test ratio Times

50
Cash to current liabilities Times
40
Cash flow from operations to net
30
sales Times
20 Cash flow from operations to
capital expenditures Times
10
Cash flow coverage ratio Times
0
2022 2021 2020 2019 2018 2017 2016 2015

Activity Turnover Ratios

Debtor No. of Days in Total Assets Fixed Assets

Year Turnover Receivables Turnover Turnover

2022 3.61 101 0.57 1.24

2021 3.22 113 0.53 1.44

2020 3.65 100 0.66 1.91

2019 4.37 83 0.79 1.88

2018 5.44 67 0.77 1.51

2017 5.78 63 0.68 1.13

2016 2.38 153 1.03 3.71

2015 3.21 114 1.6 3.94

2014 2.78 131 1.34 4.13

 Activity Turnover Ratios
200

150

100

50

0
2022 2021 2020 2019 2018 2017 2016 2015 2014

Debtor Turnover No. of Days in Receivables Total Assets Turnover Fixed Assets Turnover

4. Credit Risk
Financial Risks_ External l Risk of unfavorable fluctuations in reference crude prices compared
to planning assumptions. Credit risk/ slow-recovery of receivables due to systematic inter-
corporate circular debt issue resulting in challenges in liquidity and working capital management
for the Company.

Mitigating Strategies:

MPCL follows these strategies to enhance its financial resilience and to deal the credit risk.

 Actions aimed at improving the financial resilience, flexibility (in terms of investment
decisions) and efficiency (capital discipline and action on structural costs) of the
company to deal with lower than expected oil price scenario or low oil price over an
extended period of time scenario.
 Active scanning of diversification opportunities in related business for portfolio
optimization in order to hedge low oil price shock risk.
 Active follow-ups at appropriate levels are kept to ensure timely payments of government
related dues and company’s receivables.
 Credit risk of financial assets of MPCL for 2020 and 2019 is given in the following table;

The Company’s credit risk exposures are categorized under the following headings: Counter parties The Company conducts transactions
with the following major types of counterparties: Trade Debts Trade debts are essentially due from fertilizer companies, power
generation companies, distribution companies and refineries and the Company does not expect these companies to fail to meet their
obligations. The sale of gas to the Company’s customers is made under gas purchase and sale agreements signed between the Company
and its customers with the prior approval of Oil and Gas Regulatory Authority (OGRA), the Government of Pakistan. As of June 30, 2018,
trade debts of Rs. 85,804 million (2017: Rs. 49,658 million), were past due but not impaired. The ageing analysis of past due trade debts
is as follows:

Cash and investments: The Company

limits its exposure to credit risk by
investing in liquid securities and
maintaining bank accounts only with
counterparties that have a credit rating of
at least A. Given these high credit ratings,
management does not expect any
counterparty to fail to meet its obligations.

Annual Report 2018 of MPCL

Note:38.3.1; Financial Risk Analysis_Page#196
The Company conducts transactions with the following major types of counterparties: Trade
Debts Trade debts are essentially due from fertilizer, power generation and distribution
companies and the Company do not expect these companies to fail to meet their obligations. The
sales to the Company’s customers are made under gas purchase and sale agreements signed
between the Company and its customers with the prior approval of Oil and Gas Regulatory
Authority (OGRA), the Government of Pakistan. As of June 30, 2016, trade debts of Rs 20,020
million (2015: Rs 25,211 million), withheld by customers, were past due but not impaired. The
ageing analysis of past due trade debts is as follows:

Cash and investments:

The Company limits its exposure to credit risk
by investing in liquid securities and maintaining
bank accounts only with counterparties that
have a credit rating of at least A2. Given these
high credit ratings, management does not
expect any counterparty to fail to meet its
obligations.

Annual Report 2016 of MPCL

Note: 38.3.1 Credit quality of financial assets Page# 160-161

For the better analysis of Credit risk; we should focus on the following Credit
risk ratios of MPCL over the Past 8-years;

1) Current Ratio:

Year 2015 2016 2017 2018 2019 2020 2021 2022

Current 1.06 0.94 1.16 1.19 1.25 3.71 3.61 2.26
Ratio
 Current Ratio
3.71 3.61

2.26

1.06 1.16 1.19 1.25

0.94

2015 2016 2017 2018 2019 2020 2021 2022

Current Ratio

The Current Ratio measures a company's ability to meet its short-term liabilities using its short-term assets. A higher Current
Ratio generally indicates a better ability to cover short-term obligations and suggests lower credit risk. Conversely, a lower
Current Ratio may indicate a higher risk of liquidity issues and difficulty in meeting short-term obligations.

In the given table, we observe the following trends in the company's credit risk based on the Current Ratio: From 2015 to 2017,
the Current Ratio shows a slight improvement, indicating a relatively stable condition with a moderate ability to meet short-term
liabilities.

In 2018 and 2019, the Current Ratio continues to increase, suggesting an enhanced ability to cover short-term obligations and
lower credit risk.

A significant increase in the Current Ratio is observed in 2020 and 2021. This indicates a substantial improvement in the
company's liquidity position and lower credit risk. The Current Ratio values of 3.71 and 3.61 in these years indicate a strong
ability to meet short-term obligations.

However, in 2022, there is a decrease in the Current Ratio to 2.26. While still above 1, suggesting a positive ability to cover short-
term liabilities, this decrease may indicate a relatively higher credit risk compared to the previous two years.

Overall, the company's credit risk condition based on the Current Ratio shows a generally favorable trend from 2015 to 2021,
with improvements in liquidity and reduced credit risk. However, it is important to monitor the decrease in the Current Ratio in
2022, as it indicates a potential increase in credit risk and a need for further analysis and evaluation.

2) Debt to Equity Ratio:

Year 2015 2016 2017 2018 2019 2020 2021 2022

Debt 4.71 2.51 2.66 2.59 2.46 0.35 0.30 0.41
to
Equity
Ratio
 Debt to Equity Ratio
Debt to Equity Ratio

4.71

2.51 2.66 2.59 2.46

0.35 0.3 0.41

2015 2016 2017 2018 2019 2020 2021 2022


The debt-to-equity ratio is a crucial ratio for credit risk analysis as it helps evaluate a company's
financial risk and its ability to meet its debt obligations. For MPCL, the debt-to-equity ratio varied from
4.71 in 2015 to 0.30 in 2021. From 2015 to 2019, the ratio remained relatively stable, ranging between
2.46 and 4.71, indicating moderate to high financial leverage and credit risk. However, starting in 2020,
MPCL experienced a significant decrease in the debt-to-equity ratio, dropping to 0.35 in 2020 and
further declining to 0.30 in 2021. This indicates a lower reliance on debt financing and a reduced level of
financial risk. The decreasing trend in the debt-to-equity ratio suggests that MPCL has taken steps to
strengthen its financial position and reduce credit risk. By decreasing its debt relative to equity, MPCL
has improved its ability to cover its obligations and potentially reduced its vulnerability to economic
downturns or interest rate fluctuations. Overall, the declining debt-to-equity ratio from 2015 to 2021
indicates an improving credit risk profile for MPCL. However, it is essential to note that in 2022, the
ratio increased to 0.41, suggesting a slight increase in debt relative to equity.


 Du Pont Analysis of MPCL for 8-Years
ROE measures the return a company generates on its equity capital.
To understand what drives a company’s ROE, a useful technique is to decompose ROE into components.
(Decomposition of ROE is sometimes referred to as DuPont analysis
because it was developed originally at that company.)

Reference: Annual Report 2022 of MPCL Page# 133

Reference: Annual Report 2021 of MPCL
Reference: Annual Report 2019 of MPCL Page# 107
DU Pont Analysis of 2017 of MPCL

Reference: Annual Report 2017 of MPCL Page# 69

Reference: Annual Report 2016 of MPCL Page# 60
 MPCL Equity Analysis’s Overview

Current P/E and P/S ratio of MPCL

2023
Simplywall.stock.pk

This data shows the MPCL Price to Earnings ratio

with the comparison of its peers. On Y-axis
Earning growth and on x-axis P/E is given. It
shows remarkable progress of MPCL.

This data shows the Industry Avg.

which is 8.2x of P/E and 4.5x for
MPCL. Estimated growth for
industry is -1.0% and for MPCL is
18.4%.

Forecasting of Annual Earnings and Revenue

Growth of MPCL and the Industry. It shows
Company will grow more from 18.4% to
18.8% and Industry will also grow.
 MPCL Equity Analysis’s Overview

This is the Trend of Revenue and the Earnings of MPCL from 2013 to 2023.

(A Ten Years Glance)

MPCL is growing continuously and especially after starting new Oil&Gas Projects on International Level make it
to grow even in the bad economic condition of Pakistan by properly allocating its resources. The Curve in blue
for Revenue and in light color for Earnings are growing continuously especially high trend in 2023
MPCL has shown consistent growth in its book value up to the third quarter of 2023. The book
value has increased from Rs. 1142.44 to Rs. 1304.25 during this period. The expected book value
growth rate is 14.16% based on the projection up to the third quarter of 2023.

The price-to-book value ratio, which indicates the market's perception of the company's value
relative to its book value, is 1.35x. This suggests that the market values the company's assets at a
higher price than their book value.

Return on equity (ROE) measures the company's profitability in relation to the shareholders'
equity. The company had an ROE of 27.22% up to the fourth quarter of 2021, and the expected
ROE up to the third quarter of 2023 is projected to be 30.88%. These figures indicate that the
company has been generating significant returns for its shareholders.

The retention ratio, which indicates the proportion of earnings retained by the company for
reinvestment rather than being distributed as dividends, was 40.18% up to the fourth quarter of
2021, and the expected retention ratio up to the third quarter of 2023 remains the same. This
suggests that the company is reinvesting a significant portion of its earnings to support its
growth.

The equity-to-assets ratio, which reflects the proportion of assets financed by shareholders'
equity, was 76.82% up to the fourth quarter of 2021. This indicates that a large portion of the
company's assets is funded by shareholders.

Return on assets (ROA) measures the company's profitability in relation to its total assets. Up to
the fourth quarter of 2021, the ROA for the company was 20.91%, indicating its ability to
generate profits from its assets.

Lastly, the return on capital employed (ROCE) is a measure of profitability that considers the
company's total capital employed, including both equity and debt. The ROCE for the company
up to the fourth quarter of 2021 was 19.48%. This indicates the company's ability to generate
returns from the total capital invested.

Overall, MPCL has demonstrated consistent growth in book value and profitability, with a
favorable return on equity and return on assets ratios. The company has maintained a high
equity-to-assets ratio, suggesting a strong financial position. Additionally, the retention ratio
indicates a focus on reinvestment for future growth. These indicators point towards a positive
performance and financial strength for MPCL.
5. Warnings
(Evaluation of MPCL Reporting and Earning Quality)
Earning Quality:

Finance Low: Indicates warning signs in

Gross Sales Income terms of Earning Quality. The
Sales/Revenue Growth Growth Earning negative growth rates in Finance
Year Growth Rate Rate Rate Quality Income (-41%, -34%, -31%) suggest
potential concerns regarding
profitability and the ability to
generate income.
2015 30% 25% -41% Low - Moderate: Implies a moderate
level of Earning Quality, with stable
or slightly fluctuating growth rates
in Finance Income (14% in 2022).
While not indicating major
2016 12% 8% -34% Low -
warnings, there may be room for
improvement.

High: Reflects a favorable Earning

Quality, with positive growth rates
2017 30% 2% -31% Low -
in Finance Income (228%, 131%,
and 158%) indicating strong
profitability and income
generation.
2018 50% 3% 228% High -

2019 45% 17% 131% High -

2020 18% -31% 158% High -

2021 1% 1% -14% Moderate -

 Finance
Gross Sales Income
Sales/Revenue Growth Growth Earning
Year Growth Rate Rate Rate Quality

2022 30% 32% 14% Moderate -

Year 2022 2021 2020 2019 2018 2017 2016 2015

M- -1.79 -1.81 -1.73 -2.08 -1.92 -1.83 -1.723 -1.65
Score

MPCL restated its 2020 report and due to pandemic; due to disruption in supply
chain it don’t earn revenue up to the level from operations and show the highest
capital expenditures with proper mentioning in the report about where it
capitalized. To compete with peers during and after a year to show high revenue
but don’t get proper receivables and attract customers especially in 2015 and
2016 but just in Covid due to more sales of local Cement and gas plant’___MPCL
got a designated place and received an Award of Appreciation in 2019

✔ means there is no warning (No) and ❌ there is warning (Yes).

Warnings 2015 2016 2017 2018 2019 2020 2021 2022 Due to
Capitalized ✔ ❌ ❌ ✔ ✔ ✔ ✔ ✔ strong
expenditures (Warning) (No investment
in investing Warning) support from
shareholders
activities and banks
Increases in ❌ ✔ ✔ ✔ ✔ ✔ ✔ ✔ like Meezan,
bank Allied etc, I
don’t
overdrafts
observe any
Use of special ✔ ❌ ❌ ✔ ✔ ✔ ✔ ✔ bank
purpose overdraft but
vehicles just in 2015
for buying
the plants.
Inconsistency ❌ ✔ ✔ ✔ ✔ ✔ ❌ ✔
in model (Warning) (No
Warning)
inputs when
measuring
fair value of
assets
compared
with that of
liabilities
Typical ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
current (No
Warning)
assets, such
as accounts
receivable
and
inventory,
included in
non-current
assets
Aggressive ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
accounting (NO
Warning)
assumptions,
such as long,
depreciable
lives
Large ❌ ❌ ✔ ✔ ✔ ✔ ✔ ✔
proportion of
revenue in
final quarter
of year for a
non-seasonal
business

I did the research, analyze the reports and some MPCL related data on WSJ (Walls Street
Journal), JSTOR and official website of CFA for evaluation of reporting quality but as
compared to the competitors, MPCL is performing well but there is not point of fake data but just
due to some mistakes and changes some changing in material 2020 was restated. Otherwise no
such false data is observed and it is predicted that in coming year; MPCL will be able to get the
best reward due to its marvelous projects which are in progressing stage in the country and some
out of the country. The company faced some errors in 2015 and 2017 due to some problems like
overused vehicles/rig for gas and oil station.
 Conclusion and Recommendations
Based on the comprehensive and critical analysis of Mari Petroleum Company Limited (MPCL),
it is evident that the company has exhibited strong growth in sales/revenue, although with
varying rates over the past eight years. To ensure continued success and sustainable growth,
MPCL should consider implementing the following recommendations:

 Diversification of Revenue Sources: MPCL should explore opportunities to diversify its

revenue streams beyond the oil and gas sector. This can be achieved through investments
 in renewable energy projects, expansion into downstream activities, or exploring related
sectors that align with the company's expertise.
 Strengthened Cash Flow Management: MPCL should focus on enhancing its cash flow
management practices to ensure sufficient liquidity and financial stability. This includes
optimizing working capital cycles, improving cash conversion cycles, and maintaining a
healthy balance between cash flow from operations and capital expenditures.
 Profitability and Efficiency Enhancement: MPCL should strive to improve profitability
and operational efficiency. This can be achieved through the implementation of cost
optimization measures, streamlining operations, and leveraging advanced technologies to
enhance productivity and reduce expenses.
 Optimal Capital Structure: MPCL should carefully evaluate its capital structure to
maintain an optimal mix of debt and equity. Balancing the debt-to-equity ratio will help
optimize the cost of capital, improve financial flexibility, and mitigate the risk of
financial distress.
 Effective Asset Management: MPCL should focus on optimizing asset utilization and
implementing efficient maintenance strategies for fixed assets. This will maximize
returns on investments and minimize wastage, ultimately enhancing overall asset
management efficiency.
 Embrace Sustainability Initiatives: In line with global trends and stakeholder
expectations, MPCL should further prioritize sustainability initiatives. This includes
adopting environmentally friendly practices, investing in renewable energy projects, and
actively contributing to the social and economic development of the communities in
which it operates.
 Foster Strategic Partnerships: MPCL should actively seek strategic partnerships with
industry leaders, technology providers, and financial institutions. Collaborations can
provide access to expertise, technology, and capital, enabling MPCL to pursue growth
opportunities more effectively and efficiently.
 Talent Development and Succession Planning: MPCL should prioritize talent
development and succession planning to ensure a skilled workforce and continuity in
leadership. This will enable MPCL to nurture innovation, adapt to industry changes, and
drive sustained growth.
These recommendations, tailored to the specific circumstances of MPCL, aim to guide the
company towards a better future. It is crucial for MPCL to conduct further detailed analysis, seek
professional advice, and develop comprehensive action plans based on these recommendations.
By implementing these strategies, MPCL can strengthen its position in the market, improve
financial performance, and achieve long-term sustainable growth.