·         We expect Pakistan State Oil (PSO) to post PAT of PkR44bn (EPS: PkR94) in its 4QFY22 result, increasing by 290%YoY/30%QoQ on the back of astronomical inventory gains, subsequently keeping gross margins skywards.

·         On the topline front, company’s revenue is expected to clock in at PkR893bn, up 154%YoY/57%QoQ as retail prices increases coupled with risen dispatches (up 36% QoQ) allowed the company post its highest ever quarterly topline.

·         PSO has remained in limelight recently due to positive result expectations, rallying 11% since 1st June and outperforming KSE-100 index by 13% during the period, as oil prices alongside refinery margins continued to power through resulting in inventory gains for the sector. Another factor which contributed to the cause was IMF putting down stringent conditions to the government to take steps to curtail circular debt of power and gas sectors.

·         A bill rationalizing the gas tariffs has been proposed which is waiting the final nod from Federal cabinet. Once implemented, PSO’s working capital position will likely improve due to increased collections on LNG sales front. Furthermore, recent crude/finished product sell off may also provide respite on the cash flows due to falling costs of supply (risk of inventory losses in the near term). Therefore, we expect the scrip to remain in the limelight in short term due to the said developments.

Courtesy – AKD Research