Hi-Tech Lubricants Limited
Hi-Tech Lubricants Limited (PSX: HTL) is a public limited company and is one of the leading synthetic engine and machinery lubricant marketing company of Pakistan which boasts a sizeable market share in lubricants market. HTL product portfolio under brand name “ZIC” includes a wide range of specialty lubricants in automotive, industrial and marine segments, which are imported from S.K Lubricants, South Korea. SK Lubricants of South Korea owns of world’s largest petrochemical complex.
HTL’s salient feature has been to offer high-end synthetic products in price savvy market looking for quality. The firm has been able to gain competitive edge over other players in the market due to its availability of imported lubricants with a wide-spread channel.
Today, Hi-Tech Lubricants Ltd has been marketing lubricants in Pakistan for the last 21 years. HTL has outreach and availability at over 20,000 retail outlets, Wash Stations and Transporters. Sales and technical force comprises over 175 employees across the Pakistan in all 5 provinces as well as Azad Jammu & Kashmir. Over 300 distribution vans carry out door to door delivery for customers.
In 2017-18 HTL also launched its HTL Express, one-stop shop solution for the customer’ vehicle maintenance, and its HTL fuel stations will be rolled out soon offering quality fuel with a wide range of Non Fuel Retail (NFR).
Blending plant and expansions
The idea for a state of the art blending plant in was conceived by the group back in 2013. The rationale for setting up this plant in Pakistan was backward integration to reduce the cost of lubricants to end customer and create different avenues for marketing. Today, the firm owns state-of-the-art blending plant in Lahore. It is an integrated unit producing International Standard Specifications Lubricants in HDPE bottles, filling, capping & labeling of finished products on an automated high accuracy filling line.
HTL has also ventured in oil marketing sector under the brand name HTL fuel stations. Storage facilities are under construction in Punjab & Khyber Pakhtunkhwa (KPK).
Pattern of shareholding
In 2011, Hi-Tech Lubricants partnership (AOP) was bought over by Hi-Tech (PVT) Limited and converted into a public unlisted corporate. However, for forward integration, the firm needed funds, and decided go public in FY16.Today, it is a is a public limited company with sponsors that include Mr. Tahir Azam, Mr. Shaukat Hassan, Mr. Muhammad Basit Hassan (Late), Mr. Hassan Tahir, Mr. Muhammad Ali Hassan and Mrs. Uzra Tahir. Key shareholders are Mrs. Uzra Tahir and Mrs. Arifa Shaukat. A detail of the shareholding is shown in the illustration. HTL owns a 100 percent owned subsidiary, Hi-Tech Blending (Pvt.) Limited (HTBL)
Past financial performance
HTL’s net revenues improved by over 19 percent from FY10 to FY15, whereas net margins, came down from 11 percent in FY10 to 6 percent in FY15, due to relatively higher rise in operating costs - especially administrative and distribution costs. FY16 again saw increase in revenues, this time by 28 percent, year-on-year along with improvement in gross margins on the back of volumetric growth, reduction in custom duties on non-synthetic products along with freight charges The company’s flagship ZIC range registered sales growth of 23 percent during FY16.
The company performed well during FY17 with sales revenue increasing by 6.8 percent year-on-year and volumes grew by almost 5 percent, year-on-year despite the 15 percent rise in direct costs. During the year, finance cost increased staggeringly by 125 percent year-on-year owing to investment in stocks due to substantial discount offered on imported stocks. Unconsolidated earnings for the year saw an increase of 37 percent, year-on-year
Hi-Tech Blending Plant Ltd. (HTBL) that was established as a fully owned subsidiary company of HTL became fully operational in August 2016. As per the annual accounts, the plant was blending lubricants from 0.7 liter to 200 liters drums and all its products were being sold in local market. The company moved ahead with its strategy develop a retail network across Pakistan with multitude of unique services and technical support to prime users. It successfully opened one HTL Express Center in Lahore with plans for more in Lahore and Karachi
FY18 and beyond
In FY18, net sales for the company increased by 24 percent, year-on-year with over 16 percent increase in volumes. Increase of 8 percent in gross profits was witnessed. However, GP margins declined for the year due to factors affecting commodity prices and hence increase in the cost of sales. Despite challenging market and economic conditions, HTL maintained its growth, and stability in administrative expenses. On the other hand, distribution cost increased due to marketing spend on introducing new products. Overall, in FY18 the earnings decreased due to increase in distribution and marketing cost coupled with the depreciation of rupee. According to the annual report, the decrease in net profit came from the expansion and growth phase that increased marketing and other related cost
The company has initiated a two-phased expansion plan in 2016 after the IPO for HTL Express centers, HTL Stations, and HTL Mart. Recall that phase 1 of the expansion plan was the development of HTL state of the art retail outlets across Pakistan with multiple services and technical support. As per the latest progress in FY18 annual report, Phase-1 of the expansion plan is well underway, as out of five retail outlets in Lahore, four are operational and are contributing to revenues. 3 centers in Karachi are too on their way to operational. The company is now looking to replicate the model of Lahore and Karachi based HTL Express centers in other big cities of the country such as Rawalpindi/Islamabad.
Phase 2 was about setting up an OMC and a network of fuel stations in different parts of Pakistan. Under this expansion phase, a total of 360 fuel stations are expected to be laid out across the country in the coming years. Construction of fuel depots has been planned in multiple parts of the country to support the operations of HTL Stations of which one located in Punjab is fully complete and other under construction in KPK
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HI-TECH LUBRICANTS LIMITED
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FY13 FY14 FY15 FY16 FY17 FY18
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Profitability
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GP margin % 24.92 24.72 24.47 29.16 23.66 20.84
NP margin % 5.88 5.7 6.18 7.55 9.71 5.99
ROE % 40.4 33.16 27.28 15.9 19.41 14.24
ROA % 20.89 15.96 16.75 13.28 12.36 10.04
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Liquidity
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Current ratio times 1.81 1.46 1.35 3.96 1.75 1.84
Quick ratio times 0.66 0.63 0.66 2.92 1.02 1.2
Cash to Current Liabilities times 0.15 0.34 0.12 0.29 0.04 0.31
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Market
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Earning per Share Rs/share 3.1 3.46 3.88 5.43 6.27 4.78
Dividend payout % 93.41 26.04 34.74 27.65 43.09 73.23
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Capital Structure
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Financial leverage ratio times 0.03 0.05 0.03 0.01 0.21 0.16
Debt to Equity (As per BV) % 6.39 9.71 4.18 1.13 24.90 18.14
Interest coverage % 15.51 18.15 21.5 55.13 29.78 11.62
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Activity/Turnover
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Total Assets Turnover times 3.56 2.8 2.71 1.76 1.27 1.68
Fixed Assets Turnover times 22.42 22.01 24.63 20.88 7.9 6.66
No. of Days in Inventory days 72.3 71.97 44.95 48.71 96.11 7.89
No. of Days in Receivables days 8.64 11.73 15.88 7.9 8.74 9.35
No. of Days in Payables days 44.54 66.61 60.58 42.86 51.4 30.81
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Source: Company accounts
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HTLL Shareholding pattern (As on June 30, 2018)
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Shareholder Percentage
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Directors and their spouse (s) and minor children 65.45
of which
Uzra Tahir 24.64
Arifa Shaukat 21.41
Hassan Tahir 6.47
Muhammad Ali Hassan 6.47
Muhammad Basit Hassan 6.47
Associated Companies, undertakings and related parties 0
Public Sector Companies and Corporations 0.15
Banks, DFIs, NBFC, Insurance, modarabas, pension funds 6.1
Mutual Funds 4.90
General Public
a. Local 20.47
b. Foreign Investor 0.93
Others 1.99
Total 100.00
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Source: Company accounts
