As per news reports, a summary has been moved in the ECC to raise OMC margins to PkR 1.05-1.63/litre (up by 14-21%) from the present level of PkR 7.87/litre, under three CPI band scenarios. Historically, OMC margins were adjusted in line with the core CPI (NFNE–urban); however, revisions have been pending for the past two years, according to a report by AKD Research.

A likely increase of PkR1.63/litre amounts to an annualised EPS impact of ~PkR12.8/13.1 per share for PSO and APL, respectively. In contrast, a lower-band adjustment of PkR1.05/litre would have an incremental earnings impact of only PkR8.3/8.4 per share, relative to current OMC margin levels.

Our base case incorporates an increase of PkR1.18/liter 15% increase in regulated margins, effective Jan’26, where we have not incorporated these changes into our estimates yet, awaiting formal implementation of the margin increase in fuel prices.

For PSO, increase in rupee margins would provide impetus to company’s cash profits, further enhancing prospects amidst the easing liquidity from improved cash collection from the gas revenues. In summary, we have a ‘BUY’ call for PSO and APL with Jun’26 TP of PkR760/750 per share, with DY of 3.3%/4.6% for FY26E, 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 for FY26-FY28E.

https://research.akdsl.com/639008780911256053.pdf

AKD Research