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Offline Farzooq

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NRL -- National Refinery
« Reply #-1 on: August 19, 2009, 10:26:13 AM »
All About national refinery
« Last Edit: January 25, 2012, 09:42:15 PM by M&M »
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NRL -- National Refinery
« Reply #-1 on: August 19, 2009, 10:26:13 AM »

Offline Farzooq

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Re: NRL -- National Refinery
« on: August 19, 2009, 10:26:23 AM »
NRL: FY09 earnings preview/‘Buy’ maintained
 

August 18, 2009 (JS Research)

 

(PDF report is also attached)

 

NRL board is expected to meet on August 19, 2009 to announce FY09 results. We expect a full year EPS of Rs22.7, down 70% YoY – however, 4QFY09 earnings would arrive at Rs12.1 per share. Moreover, we expect a final cash dividend of Rs17/share with the results. The scrip, since the beginning of 2009, has outperformed KSE 100 Index by 90%, posting a healthy return of 126%.

 

We maintain our ‘Buy’ stance on NRL which is currently available at FY10F and FY11F dividend yields of 9.3% and 10.7%, respectively versus historic 5-year average dividend yield of 6.0%. Moreover, the scrip is available at FY10F and FY11F PE of 4.5x and 4.1x compared to last 5-year’s (FY04-FY08) average PE of 5.3x (excluding year 2005). Besides attractive dividend yield, the stock is offering a healthy upside of 30% to our fair value of Rs280/share.

 

Fuel business to be an earnings dampener in FY09

Fuel business remained the earnings dampener for NRL throughout FY09. Out of the Rs22.7/share profit expected in FY09 (FY08 EPS Rs75.1), fuel business is likely to contribute a loss of Rs30/share (Rs38.3/share profit in FY08). However, lube business is expected to show robust earnings of Rs52.7/share (Rs36.8/share in earnings during FY08), thanks to better lube margins this year, which is likely to tone down dismal fuel segment performance.

 

Loss in fuel business is due to one offs like 1) huge exchange losses against crude oil purchases amid currency devaluation (per share impact estimated at Rs15.0 in FY09) and 2) huge inventory losses due to more than US$70/bbl decline in oil (estimated impact of Rs20-22/share in FY09).

 

Rs48/share earnings likely in FY10

Given its low risk to fluctuating oil prices compared to its peers and stable lube earnings, we expect NRL to post an EPS of Rs48 in FY10. Our base case earning is subject to US$59 per barrel average oil price and prevailing product spreads (difference between crude oil and product price). Currently, crude oil is trading at US$67 per barrel while furnace oil and diesel are trading at US$7 per barrel discount and US$9 barrel premium to crude oil price, respectively. In worst case (assuming average oil prices of US$59/bbl in FY10 and zero margin on fuel business), full year earnings would be Rs38-40 per share while in best case (assuming fuel margin averages US$4 per barrel in FY10) earnings would be Rs68-70/share.

 

Oil price risk is minimal

Relative to its peer (PRL), oil price risk is minimal for NRL. According to FY08 oil statistics, NRL has a designed crude oil storage capacity of 156k tons (16-17days). Moreover, the lube business of the company provides a hedge to any sharp decline in oil price. Since FO is a base material for lube manufacturing, decline in oil price reduces cost of production. Thus, NRL due to its pricing power in lube segment maintains healthy margins. This partially offsets the impact of inventory losses which was evident this year.
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Re: NRL -- National Refinery
« Reply #1 on: August 20, 2009, 11:33:53 AM »
NRL 125% D, 19.17 EPS

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Re: NRL -- National Refinery
« Reply #2 on: August 24, 2009, 11:44:08 AM »
NRL: Favorable risk-return profile
???? NRL posted 4QFY09 earnings of PRs8.5/sh, translating into FY09 earnings of
PRs19.2/sh. While cash payout of PRs12.5/sh is inline with market expectation,
earnings surprised negatively.
???? Confluence of weak GRMs and absence of inventory gains should expose weak
underlying core earnings for pure fuel refiners in 1QFY10. Given its advantage in
base oil, we expect GRMs for NRL to fare relatively better.
???? We think NRL offers an attractive risk-return profile at FY10E P/BV of 0.8x (ex
PRs12.5/sh cash dividend) and P/E of 5.4x.
???? We see 10-15% upside to FY10E earnings estimate from concurrent
implementation of deemed duty increase and processing cost. However timing for
implementation of both proposals remains uncertain
In line FY09 results, absence of bonus surprised
National Refinery Ltd posted FY09 earnings of PRs1,533mn or PRs19.2/sh, down 74% YoY. NRL
also paid cash dividend of PRs12.5/sh. While cash payout is inline with market expectations,
earnings (potentially due to lower timing gains) and absence of stock dividend surprised the market
negatively. Profitability reflects, in our opinion, relative robustness of NRL’s earnings driven by
base oil segment considering inventory losses, exchange losses and weak GRMs in FY09.
Key highlights
Lube oil advantage. While detailed accounts are not available, we believe NRL’s FY09 earnings
are totally driven by the lube segment. This also explains dividend payout of 65% in FY09 (income
from fuel segment has a dividend ceiling of PRs5/sh). In 9MFY09, after tax earnings of the lube
segment (PRs3.3bn) offset the PRs2.5bn losses of the fuel oil segment. At a time when GRMs are
undergoing a cyclical down-cycle, strong lube margins should enable NRL to fare relatively better
than its peers. We think the market has not fully appreciated the benefits of lube segment.
11-12% lower throughput. NRL throughput is believed to have dropped by 11-12% in FY09 due
to (1) working capital constraint stemming from inter-corporate debt and (2) weak fuel oil margins.
Financial charges. Unlike other peers, NRL has not booked financial cost on over-due payables.
FX losses of PRs2.36bn (PRs19/sh after tax booked in 9MFY09) contributed to financial charges.
NRL-FY09 results snapshot
PRsmn 1QFY09 2QFY09 3QFY09 4QFY09 FY09 FY08 % ?
Net Sales 43,415 23,765 20,260 22,139 109,578 129,386 -15%
Gross profit 1,942 (523) 2,742 1,113 5,273 10,681 -51%
Fin. charges 1,897 279 215 3 2,394 1,332 80%
Net profit (91) (704) 1,647 681 1,533 6,005 -74%
EPS -1.1 -8.8 20.6 8.5 19.2 75.1 -74%
DPS 12.5 20.0 -37%
GRMs* 5.43 -1.54 7.30 1.50 3.23 8.31 -61%
* includes processing cost and timing gains/losses Source; NRL,
10-15% earnings upside from deemed duty and processing cost
Reportedly, the sub-committee of the ECC has approved two key proposals on diesel pricing (1)
increase in deemed duty to 10% from 7.5%; (2) provision of PRs1.2/litre processing cost for diesel
de-sulfurization project. We think refiners would have a difficult time in concurrent implementation
of both proposals. We see 10-15% upside to FY10E earnings estimate should both proposals be
implemented simultaneously. Given findings of the judicial commission report on oil prices, media
scrutiny and appointment of new minister, we believe timing of implementation of proposals are still
uncertain. The next hearing of the SC bench on petroleum product prices is scheduled on 28th Sep.

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Re: NRL -- National Refinery
« Reply #3 on: September 12, 2009, 01:13:05 PM »

broke below support of 220 with volumes sell
next support 210

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Re: NRL -- National Refinery
« Reply #4 on: September 12, 2009, 01:44:24 PM »
Net refining margins (Gross Refinery Margins GRMsprocessing
cost) have turned positive to US$1 per
barrel thus far in 1QFY09 versus negative US$4 per
barrel in 4QFY09. Major improvement in margins
have been witnessed in diesel (HSD) and furnace oil
(FO) as average spread on HSD increased to US$9
per barrel compared to US$5 per barrel in the
preceding quarter (4QFY09). Likewise spread on FO
(a loss making product for the refineries) reduced to
negative US$10 per barrel versus US$14 per barrel
in 4QFY09.
We expect NRL would be the major beneficiary as it has the
highest share of HSD in its production profile. Our preliminary
1QFY10 earnings projection for NRL is Rs12-14 per share
followed by ATRL (Rs4-5 per share) and PRL (loss of Rs7-9
per share). Our preferred stock in the refinery sector is NRL
due to its low risk in oil price and stable lube earnings.
Trading at FY10 and FY11 PE of 4.8x and 4.4x with
respective dividend yield of 12.1% and 14.7%, we maintain
‘Buy’ stance at current levels.

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Re: NRL -- National Refinery
« Reply #5 on: October 07, 2009, 01:50:40 PM »
nrl bm 19th oct

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Re: NRL -- National Refinery
« Reply #6 on: October 09, 2009, 04:51:22 PM »
Fuel business: Earnings dampener in FY09
Fuel business remained the earnings dampener for NRL
throughout FY09.NRL reported loss of Rs33.8 per share in
fuel business compared to Rs53 per share profit realized in
lube business. As a result, NRL reported a meager profit of
Rs19.2 per share in FY09 versus Rs75.1 per share in FY08.
Loss in fuel business was due to one offs like 1) huge
exchange losses of Rs2.4bn against crude oil purchases
amid currency devaluation and 2) inventory losses due to
sharp decline in oil price (estimated at Rs1.5-1.7bn–after tax).

Base case FY10 EPS expected at Rs50
Our base case earnings estimate for FY10 is Rs50 per share,
which includes both lube and fuel earnings. We have
assumed fuel margins of US$3 per barrel in our financial
models. Further, due to our average oil price assumption of
US$60 per barrel in FY10, we expect NRL to incur inventory
losses as well. The stock is trading at FY10 dividend yield of
12.2%. We maintain our ‘Buy’ stance on NRL at current
levels.

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Re: NRL -- National Refinery
« Reply #7 on: October 17, 2009, 03:10:44 PM »
National Refinery Ltd              19.10.2009             10:00 am

Offline Farzooq

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Re: NRL -- National Refinery
« Reply #8 on: October 19, 2009, 09:49:38 AM »
NRL expected to post a PAT of Rs674mn (EPS Rs8.43)

NRL's is expected to register a growth of 842% YoY in its PAT to Rs674 (EPS: Rs8.43) despite an anticipated slump of 60% YoY in its topline to Rs17.3bn. Both the pricing as well as the volumetric factor contributed to the contraction of the as weighted avg. price of NRL product mix declined by significant 56% while throughput is anticipated to stand at 352k tons (42% of total capacity) showing a decline of 30% YoY.

This decline in company's topline was mirrored by company's gross profit which is expected to decrease by a massive 61% YoY to Rs752mn, whereas gross margin are expected to margining improve to 94% owing to company's pricing power in the lube segment However, the major support to the bottomline is expected to come from reduction in financial charges which ballooned to Rs1.8bn last year on account of escalating exchange loss. We expect, finance cost to revert back to normality to stand at Rs50mn as USD/PKR parity depicted a stable trend during the period under review. Overall, NRL is expected to post a PAT of Rs674mn (EPS Rs8.43) but we expect no dividend payout this quarter. 
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Re: NRL -- National Refinery
« Reply #9 on: October 19, 2009, 11:58:23 AM »
NRL: EPS of Rs12 expected in 1QFY10
We expect NRL to post net profit of Rs958mn (EPS Rs12) in
1QFY10 compared to loss of Rs91mn (loss per share of 1.1)
last year. As per our estimates, NRL’s average net fuel
refining margin is expected to be around US$2per barrel in
1QFY10 versus US$9 per barrel in 1QFY09 (JS estimates).
Last year we saw huge inventory and exchange losses which
eroded profitability of the company. However, this time we
expect slight inventory gains amid increase in oil prices.
Moreover, lube earnings are likely to contribute around Rs8-9
per share compared to Rs19 per share last year. Trading at
FY10E and FY11F PE of 4.3x and 3.9x, respectively we
maintain our ‘Buy’ stance on NRL at current levels.

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Re: NRL -- National Refinery
« Reply #10 on: October 19, 2009, 12:02:35 PM »
eps 8.47

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Re: NRL -- National Refinery
« Reply #11 on: October 19, 2009, 12:48:49 PM »
19-OCT-09 NRL National Refin.XD FINANCIAL RESULT FOR THE FIRST QUARTER ENDED 30/09/2009
19-OCT-09 NRL National Refin.XD PROFIT/LOSS BEFORE TAXATION RS. IN MILLION 1,034.288
19-OCT-09 NRL National Refin.XD PROFIT/LOSS AFTER TAXATION RS. IN MILLION 677.564
19-OCT-09 NRL National Refin.XD EPS = 8.47

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Re: NRL -- National Refinery
« Reply #12 on: October 21, 2009, 12:55:57 PM »
National Refinery Limited – Financial Results 1Q FY10

National Refinery Limited (NRL) recently announced its financial results for 1Q FY10. The company reported a PAT of PKR 678mn with an EPS of PKR 8.47 in 1Q FY10 compared to a LAT of PKR 91mn and an LPS of PKR 1.14 in the corresponding period last year. The previous year had remained volatile for refineries with earnings fluctuating in line with plummeting crude oil prices.

 

 

Outlook

Currently the stock is trading at PKR 210.98 per share with a trailing PE and PB of 7.33x and 0.94x respectively. The passing year remained volatile for refineries with a massive decline in ex-refinery prices, acute depreciation in the PKR and limited production in the wake of the energy circular debt issue. Moving forward, we expect stabilization on all three fronts. The PKR is expected to sustain against the USD while crude oil prices will continue to march upward inline with the recovering global economy. Positive initiatives by the Government to resolve the circular debt issue will also ease liquidity for NRL and boost volumes which will further strengthen the company’s performance.

IGI Research


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Re: NRL -- National Refinery
« Reply #13 on: October 27, 2009, 09:43:42 AM »
Refinery: NATIONAL REFINERY LIMITED - Analysis of Financial Statement Financial Year 2008 - Financial Year 2009
OVERVIEW (October 26 2009): National Refinery Limited (NRL) was incorporated on August 19, 1963 as a public limited company. Government of Pakistan took over the management of NRL under the Economic Reforms Order, 1972 under the Ministry of Production, which was exercising control through its shareholding in State Petroleum Refining and Petrochemical Corporation (PERAC).

Government had decided to place the National Refinery Limited under the administrative control of Ministry of Petroleum and Natural Resources in November 1998.

===================================================
COMPANY SNAPSHOT
===================================================
Name of Company           NATIONAL REFINERY LIMITED
---------------------------------------------------
Nature of Business      Oil Refinery & Distributors
Ticker                                          NRL
Share price (avg.)                                -
Market Capitalisation             Rs 17,319,166,228
===================================================
In June 2003, the government included NRL in its privatisation programme. The selling of 51% equity and transfer of management control to a strategic investor had been proposed accordingly, the due diligence process for the privatisation was initiated. After competitive bidding, the NRL was acquired by Attock Oil Group in July 2005.

The company has been privatised and the management handed over to the new owner on July 7, 2005.

The company's principal activity is to manufacture and supply fuel products, lubes, BTX asphalts and specialty products. It operates in two segments: fuel and lube. Fuel segment is a diverse supplier of fuel products and offers gasoline, diesel oils, kerosene and furnace oil. The lube segment provides different types of lube-based oils, asphalt and wax free oil for different sectors of the economy.

SECTOR OVERVIEW

There are 5 refineries currently existing in Pakistan which are:

1. PARCO; production 100,000 barrels per day equivalent to 4.5 million tonnes

2. NRL; production 65,000 barrels per day equivalent to 2.8 million tonnes

3. PRL; production 50,000 barrels per day equivalent to 2.2 million tonnes

4. ARL; production 40,000 barrels per day equivalent to 1.8 million tonnes

5. Bosicor; production barrels per day equivalent to 1.5 million tonnes

Current crude production of Pakistan is 65,000 to 67,000 barrels per day and total capacity of the refineries is 285,000 barrels per day or 12 million tons hence 22,0000 barrels per day are imported.

FINANCIAL OVERVIEW

FY09 proved to be full of challenges for the oil refineries and distributors sector. Declining crude oil prices and changing price structure of high-speed diesel and motor gasoline adversely affected the gross refining margin of fuel segment. The erosion of Pak rupee against the US dollar, further aggravated the scenario, resulting in huge losses.

The profit making ability of the company is closely linked to the international oil market. The economic recession of 2008 plummeting oil prices, with the Arabian light hitting a record all-time low of US $40 per barrel in November 2008. Asymmetric prices of company's product went drastically down as a result and eroded the profitability. The outgoing quarter NRL managed to book a recovery in terms of inventory gains as oil prices picked up a gradual climb. However, lower GRM masked this upside.

The situation was compounded by drastic exchange rate depreciation of Pak Rupee against US Dollar, resulting in a loss of Rs 2,385 million.

In addition to this, the government revised the pricing formula in August 2008 by cutting down deemed duty on HSD from 10% to 7.5% and also revised motor gasoline pricing mechanism that further lowered down refiners' margins. Circular debt in the power and oil sector not only slowed down economic activity, but also severely affected the refineries of Pakistan. Consequently overall banking and investments have reduced significantly.

A continuous and vigilant checking by the management ensured that the refinery was operated at its optimum throughput in order to curtail losses of fuel segment in periods of negative margins. However, due to adverse margins the profitability of the fuel segment ended at after tax loss of Rs 2,699 million in FY09 compared to profit after tax of Rs 3,064 million in FY08.

In lube segment, the demand remained depressed due to slower economic activity in the country and abroad. Declining price trend kept the customers away from routine buying. The company emerged with a profit after tax of Rs 1,533 million as compared to Rs 6,005 million in the last financial period.

PROFITABILITY

As mentioned earlier, the industry's profitability is directly related to the international oil prices since a major chunk of local demand is fulfilled through import of crude oil. During the past years demand and consumption pattern also witnessed a major change. While the demand of motor gasoline experienced a decline due to increase used of CNG and LPG, furnace oil demand remained depressed due to conversion to gas and coal based plants by sectors like cement.

In FY09, NRL's profitability declined considerably in the absence of windfall gains it had received in the previous years due to inflating crude oil prices. Gross profit margin declined by 49%. Exchange rate loss caused finance cost to jump up by 80%, and is the major contributor for the decline of net margin to 1.09% from 4.11%. Return to assets and common equity followed on similar lines, falling to 3.62 and 8.83 respectively. These ratios measure the company's ability to turn investor's money into income profitably. The decline from last year's returns is large and hence reflects a relative decline in profitability of the company.

As the company suffered a drastic fall of 290% in profit after tax in FY09, the loss in fuel segment of Rs 2,699 million was transferred to special reserve as per the pricing formula. This reserve was created under the directives of Ministry of Petroleum and Natural Resources with effect from July 1, 2002. Refineries were directed to transfer to a 'Special Reserve', from their profit after tax attributable to fuel segment, an amount in excess of 50% of paid-up capital, as on July 1, 2002 attributable to fuel segment, to offset against any future losses or to make investment for expansion or upgradation. An amount of Rs 4.232 million was therefore available for appropriation.

LIQUIDITY

Current assets underwent a structural change as the company liquidated 95% of its investments. (2008: Rs 3,615 million, 2009: Rs 197 million) At the same time receivable (9% increase) and trade debts (46% increase) went up, which doesn't bode well for the future liquidity of the company. The growth of current ratio must be interpreted with caution but an assessment of quick acid test ratio shows an increase from 1.06 to 1.26. This shows NRL's improved ability to pay off its liabilities on time and comfortably manage unforeseen costs. However prudent measures should be implemented to monitor the receivables and to increase investments in near future.

ASSET MANAGEMENT

Asset turnover and equity turnover are maintained at approximately the same level in FY09 as last year's, indicating NRL's consistent efficiency of utilising its equity and assets for its operations.

Inventory turnover declined only slightly (FY09: 33.88, FY08: 34.63), after several years of sustained increases. Day sales outstanding registered a growth to 38 days from 25 days last year. The inability of debtors to pay is not surprising given the liquidity crunch, shrinking incomes and peaking inflation in the economy. However, it is risky for the company to extend receivables and increases probabilities of default. Consequently operating cycle also expands to 72 days from 59 days. Operating cycle measures the time period it takes the company to convert its expenditure on raw materials into cash from sales. Longer cycles indicate poor policy implementation to collect receivables in a timely fashion. NRL can potentially lose out its improving liquidity this way.

DEBT MANAGEMENT

Long-term debt of NRL is near to the ground and constitutes retirement obligations fund only, which declined by 57% in FY09. Zero long-term loans keep the company at a low risk position especially in times of high interest rates and uncertain economic conditions. Major financing comes through short-term debt. NRL had a strong interest paying ability until FY08 where it drastically fell down to 7.07 and further down in FY09 to 1.69. This decline came on the back of huge exchange rate losses due to depreciation of Pak rupee, which ballooned finance cost for the company.

The Pakistan Credit Rating Agency (PACRA) has maintained long-term rating and short-term entity ratings of Packages limited at "AAA" (triple AAA) and "A1+" respectively. These ratings denote a very low expectation of credit risk emanating from a very strong capacity for timely payments of financial commitments. The ratings reflect the company's demonstrated efficiency in the refinery industry of Pakistan. Also, the company has been consistent in maintaining its strong debt and interest-paying ability as compared to its competitors.

MARKET VALUE

Earnings per share registered a fall in FY09 at the back of 74% drop in profit after tax. This was augmented by low investors' confidence witnessed by the crash of KSE in the second half of 2008, reflected in decline of NRL share price. Despite this, the company maintained its ability to pay shareholders' dividend. Book value per share is sustained at over FY09.

COURTESY: Economics and Finance Department, Institute of Business Administration, Karachi
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Re: NRL -- National Refinery
« Reply #14 on: November 05, 2009, 10:23:56 AM »
buy with stop at 180
current rate 184
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Re: NRL -- National Refinery
« Reply #15 on: November 05, 2009, 11:28:14 AM »
buy with stop at 180
current rate 184

hit 190

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Re: NRL -- National Refinery
« Reply #16 on: November 07, 2009, 01:37:56 PM »
National Refinery Limited (NRL)
NRL was the star performer within the sector depicting positive earnings during the quarter.
Company reported profit after tax of PKR678mn (EPS: PKR8.47) for 1QFY10 compared to the
loss after tax of PKR91mn (LPS: PKR1.14) in the corresponding period of last year. Positive
earnings during the quarter are primarily on the back of Lubes operations that posted earnings
of PKR10.43/share whereas, fuel section of the company incurred a loss of PKR1.96/share.

Going forward
Given the difficult times for the refinery sector, we believe any exposure to refineries should be
in favor of National Refinery Limited owing to its Lube business which is less sensitive to
refinery margins. Refinery margins have shown recovery since September 2009 due to which
we expect second quarter result to improve. Moreover, deemed duty issue is still pending and
any positive development in this regards can bring much respite for the refinery sector.

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Re: NRL -- National Refinery
« Reply #17 on: November 20, 2009, 02:43:33 PM »
buy nrl with stop at 181
currently at 188

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Re: NRL -- National Refinery
« Reply #18 on: November 22, 2009, 05:53:37 PM »
buy nrl with stop at 181
currently at 188
the largest refinery of pak located in karachi that recieve crude brought from port or through large tanks from exploration sites in interior sind.There r two plants working round the clock in a day to refine crude and provide more than 35 products of oil and lubricant.Nrl is enjoying monoplotic markt condition in production of jp1 and l series of oil for aircrafts and helicopters.Nrl carries a dead to supply products to apl in order of preference.Nrl is focusing n spending more in adminstrative head beside spending heavy amount in procurement of material and stuff required for security as it is locted in densly populated n over saturated industrial area of karachi.An exclusive research by baba jee for pakinvestorsguide
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