Pakistan State Oil profit likely to grow by 82 percent

Pakistan State Oil (PSO) is schedule to hold its Board of Directors meeting on 3rd September to declare FY14 financial results. The company is expected to post net profit after tax of PKR22.8 billion (EPS: PKR83.9) for FY14 as compared to PKR12.6 billion (EPS: PKR46.2) last year.

The notable surge in earnings for FY14 can be attributed to 1) up to 10%YoY higher volumetric sales of FO and MOGAS coupled with better product margins, 2) sizeable increase in other income and 3) a 58% decline in exchange losses. However, a 31%YoY uptick in finance cost on hefty borrowings will contain the growth in earnings during FY14.

During 4QFY14, earnings are expected to decline by 6%QoQ to PKR12.5/share, concluding FY14 on a lower note. The downtick in earnings can be attributed to 1) heavy inventory losses offsetting incremental earnings from 61%QoQ recovery in HSD sales and 2) a 17% uptick in finance cost due to higher borrowings. At current levels, some analysts maintain ‘BUY’ stance on PSO with a TP of PKR482/share translating into a total return of 36%.

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