PSo saw a surge in gross margins amid inventory gains in 3QFY26

IMS Research has published a report on Pakistan State Oil (PSO) covering 3QFY26, which shows that inventory gains drove a surge in gross margins. Pakistan State Oil (PSO) posted 3QFY26 NPAT of PKR26bn (EPS: PKR55.37), up 6.4x YoY and 5.1x QoQ. The result came in below our expectations, as inventory gains were below estimates. This takes 9MFY26 NPAT to PKR38bn (EPS: PKR81.19), up 2.5x YoY.

Key result highlights for 3QFY26:

§ Net Revenue for the quarter was recorded at PKR742bn, flat YoY and QoQ, in line with our estimates. On a sequential basis, PSO’s volumes declined by 2%.

§ PSO reported exceptional gross margins of 11.7% up 9.4ppt YoY, mainly driven by a surge in oil prices (up 26% QoQ) leading to significant inventory gains for the quarter.

§ Finance costs were recorded at PKR5.9bn, down 23% YoY, mainly driven by a 20% YoY reduction in short-term borrowings and lower interest rates.

§ The company recorded an effective tax rate of 60% compared to 64% SPLY.

PSO has posted a strong result, albeit lower than expectations, mainly driven by one-off inventory gains. With oil prices remaining above US$100/bbl amid uncertainty over how ongoing US-Iran tensions will unfold, we expect most of the profits to be redeployed into working capital to maintain existing sales, which may lead to higher short-term borrowings and, consequently, higher finance costs. Furthermore, a 10.5% QoQ jump in trade debt also remains a risk worth flagging.