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Total to strengthen in the portfolios

Analysts of Upline Securities remain optimistic about the value of Total Morocco, despite the many ups and downs experienced by the hydrocarbon sector. The target price is fixed at 1.225 dirhams, a potential upside of 23%.

The reshuffling of the hydrocarbons sector has had a significant impact on the Total Morocco title. Introduced a few months before the liberalization of hydrocarbon prices in 2015, Total Morocco had experienced a meteoric rise in its financial indicators and stock market prices. Indeed, this increase, according to many analysts of the place, was mainly due to the increase in volume sales, but especially to the improvement of oil margins following the decision of the government to liberalize prices hydrocarbons at the end of 2015. An increase that seems contained at the end of the first half of 2018.

Moreover, the group’s share of profitability declined by 6.2% at the end of June 2018 to 450.6 Million dirhams, impacted by the decline in margins despite the commercial dynamic. On the stock market, the price shows an annual performance of 43.09% at 1.030 MAD. In question, the boycott movement of the competitor Afriquia and the mea culpa of the government following the publication of the report of the parliamentary commission on hydrocarbons.

“The liberalization of the price of fuel had effects contrary to what the government was looking for. It has allowed some companies to reap more profits and double their profit margin”, said Lahcen Daoudi, Minister of General Affairs and Governance. The result is the decision to cap fuel prices. A decision that is still waiting, almost six months after the presentation of the findings of the parliamentary inquiry on this issue. Despite the risks surrounding the cap on margins, Total Maroc is continuing to expand its network of service stations and its innovation strategy to meet the rise in domestic fuel consumption, in line with the expansion of the national car fleet. This reinforces the Upline Securities analysts in their recommendation to strengthen the title in the portfolios. And this, “given the strategic positioning of the group on the Moroccan market and its financial strength, marked by a cash surplus of 314.7 Million dirhams at the end of June 2018,” they commented.

They set the target price at 1.255 MAD, representing a discount of 23%. Nevertheless, other risks remain to be considered, according to analysts. This is the social pressure that would prevent the distributor from systematically passing on the increase in the price of refined products to the local market, as well as from the sustained rise in fuel prices, which could lead to a decline in consumption, in the wake improvement of public transport in metropolitan areas. In addition, it should be noted that a drop in prices was announced for the following weeks. A variation that would reflect the cyclical decline in world oil prices since early October. This “theoretical” setback should normally be reflected by tankers on pump prices. This could relieve the WCR of distributors who, in addition to rising fuel prices, also had to comply with the new requirement to hold a minimum security stock of 2 months. “Already, in the first half of 2018, we note an increase of 18.3% of the stock of goods to 1.17 Billion dirhams (although also integrating a price effect) and an increase of 200 Million dirhams of claims on the compensation fund, increasing the claims to the state that were now tuking the billion dirhams”, explain Upline experts.

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