Margins expand as product price decline lagged the drop in raw materials prices: AMOC reported its 2Q2015/16 financial results showing earnings of EGP81 million (+7% Q-o-Q, -5% Y-o-Y). The company's reported sales were considerably weaker at EGP908 million (-30% Q-o-Q, -41% Y-o-Y) primarily on the back of lower volumes (-20% Q-o-Q) and a general decline in AMOC's product prices. Positively though, AMOC managed to benefit from plunging raw material prices and expanded its refining margins as the decline in material prices was steeper than that of its products. Gross margins came in at 12.7% in 2Q2015/16 versus 6.1% and 9.2% in 1Q2015/16 and 2Q2014/15 respectively.   Despite the drop in sales volumes, the company seems to have maintained its operating rates near full levels (2Q2015/16 utilisation rates reached c97% versus 112% in 1Q2015/16). With regards to margin expansion enjoyed in 2Q2015/16, we note that this theme is typically experienced across refineries in a weak oil price environment and has begun to materialise in AMOC's results. We note, however, that product yields remain skewed towards weak margin products such as fuel oil residue; hence, any yield improvement in higher margin products such as gas oil should drive further earnings growth, in our view.   2016 dividends could be cut; but yield would still be attractive: On dividends, annualising 1H2015/16 earnings would suggest full year results would come in at EGP314 million (-8% Y-o-Y) or an EPS of 3.6/share. We believe that the company is unlikely to maintain last year's DPS at EGP5 and could cut it closer to EGP3.0 (assuming c82% payout ratio on annualised earnings). At its current levels, even assuming the DPS, the stock would still offer a lucrative dividend yield of 12.9%.   AMOC trading in the middle of its historical trading range: On annualised earnings, we believe AMOC is trading at a 2015/16e PE of 6.4x, which is slightly below its average historical trading range of c7.0x trailing PE. Hence, while we see minimal upside on multiple expansion, we believe that the stock offers healthy exposure to foreign currency priced products and acts as a hedge against possible EGP devaluation. The balance sheet, in our view, also provides security to dividends as it remains unleveraged. (Company, Ahmed Hazem Maher)