· Pakistan’s two state-owned companies, SSGC and SNGP, are responsible for downstream gas distribution in the country’s regulated environment. Their profits are tied to rates of return on operating fixed assets (previously fixed ROA), and with the companies being prone to operational inefficiencies (UFG losses), which ultimately affect their bottom lines

· Management claimed that the latest increase in gas prices (effective 1st Jan’23) are woefully inadequate, with the gas circular debt surging to a staggering PkR1.6tn, emphasizing the urgent need for further action to ensure the long-term viability of the petroleum sector overall.

· The company is adamant on improving/growing its non-core operations, namely LPG imports, meter manufacturing and alternative energy operations.

· Overall, management expects WACC on net operating assets to move upwards to 20-21% (from present ~17%) post the FY24 budget unveiling due to sharp increase in benchmark rates, which is expected bode well for the company in the near term.

Courtesy- AKD Research