Pakistan Petroleum Ltd (PPL) has reported a 2QFY25 consolidated NPAT of PKR27.2bn (EPS: PKR10.02), reflecting a 20% QoQ increase but a 32% YoY decline. The result significantly exceeded our estimated EPS of PKR6.32, primarily due to lower-than-expected tax rate and higher other income, which stood at PKR8.7bn. Along with the result, the company announced a DPS of PKR2.0, surpassing our expectation of PKR1.5.

Key Highlights for 2QFY25:

§  Net sales came in at PKR61.3bn, down 8% QoQ and 16% YoY – in line with our estimates. Sequentially lower net sales are primarily due to a decline in oil prices (Brent down 7%) and lower production. We estimated oil and gas production of 10,000bpd and 485mmcfd, respectively.

§  Exploration expenses doubled QoQ mainly due to one dry well, Durug X-1 in Baska block, during the quarter. We had estimated exploration expenses at PKR6.1bn.

§  Despite declining interest rates, PPL’s other income surged by 34% QoQ to PKR8.7bn, significantly exceeding our expectation of PKR4.6bn. The increase is likely attributed to the receipt of insurance claims related to a fire incident in Tal block. However, we await detailed financials for further clarity.

§  The company booked an effective tax rate of 26% vs. our expectations of 39%.

PPL has delivered strong earnings, driven primarily by higher other income. However, we anticipate earnings to decline going forward as other income normalizes and production levels remain low. Recoveries were slightly below 100% during the quarter, likely due to seasonal factors amid RLNG diversion to domestic consumers. However, we expect recoveries to normalize back to 100% post-3QFY25. We maintain our Buy rating on PPL with a TP of PKR200/sh.

Courtesy – IMS Research