As per news reports, a summary has been moved by OGRA to raise OMC margins by PkR1.35/liter (up by 17%) from present levels of PkR7.87/liter. To note, historically OMC margins were adjusted in line with core CPI (NFNE – urban), however past few revisions have deviated from this practice, due to rising retail fuel prices and broader inflationary pressures being the reason of the sharp increases from PkR3.68/liter since Jan’22. We presently incorporate a PkR0.71/liter increase in regulated margins by Dec’24 end. Hence, the higher-than-anticipated revision proposal of PkR1.35/liter raises our OMC universe earnings estimates by ~7%/12% for FY25/26E, respectively. Although we have not incorporated these changes into our estimates yet, we are awaiting formal implementation of the margin increase in fuel prices.

For PSO, an increase in rupee margins may provide impetus to the company’s cash profits, further enhancing prospects amidst the easing liquidity challenges given improved cash collection from gas revenues. In summary, we have a ‘BUY’ call for PSO and APL with Jun’25 TP of PkR290/500 per share and DY of 9.0%/9.5% for FY25E, respectively.

We estimate annualized sensitivity analysis of the said upward margin revisions on the companies in our universe, with scenario metrics pertaining to varying ranges of OMC margin revisions, coupled with YoY growth projecti