Pakistan State Oil Company Limited (PSO) announced its financial result for 1QFY22 whereby the company declared a profit after tax (PAT) of PKR 11,994mn (EPS: PKR 25.55) compared to profit of PKR 5,144mn (EPS: PKR 10.96) in 1QFY21 and profit of PKR 10,897 (EPS: PKR 23.21) in 4QFY21, respectively. Despite 87% QoQ decline in other income of the company, the jump in earnings is attributable to 34% YoY growth in volumes and company recording inventory gains of PKR ~7bn in 1QFY22 compared to inventory gains of PKR ~1.5bn in 1QFY21, we view.

Result Highlights

· Topline of the company settled at PKR 459bn for 1QFY22, up by 64% YoY. The jump in sales is due to surge in prices of petroleum products along with massive growth in overall sales volumes by 34% YoY (MS, HSD and FO volumes increased by 21%, 26% and 67% YoY) to 3.03mn tons in 4QFY21.

· The company posted a gross profit of PKR 22.1bn with gross margins set at 4.80% in 1QFY22 compared to gross profit of PKR 11.5bn (4.09% gross margins) in the prior year. We view noteworthy changes in ex-refinery prices that resulted in inventory gains of PKR ~7bn in 1QFY22 compared to inventory gains of PKR ~1.5bn in same period last year.

· Other operating income decreased by 87% QoQ to PKR 1,786mn in 1QFY22. We believe, absence of Late Payment Surcharge (LPS) resulted in decline in other income.

· Meanwhile, finance costs nosedived by 92% QoQ and 27% YoY to PKR 626mn which is owing to lower reliance on short term borrowings and lower interest rates, we view.

· The company recorded effective taxation at 32.6% in 1QFY22 compared to 33.0% in 1QFY21.

Recommendation

Currently, we have a ‘BUY’ call on the stock with our target price of 306/share.

Courtesy – AHL Research