Pakistan State Oil (PSO)

PSO 978x600 1

Dear Clients,

Recent undertakings focusing on streamlining the OMC industry are expected to bear fruits in the coming months. Major developments include:

1) A shift in the pricing mechanism to insulate the industry against exchange rate and oil price volatility

2) The expansion of the retail network potentially being dependent on the national storage capacity instead of the prevalent provincial capacity

3) Circular debt control a top priority with major steps being taken to contain its proliferation

4) An established mechanism for timely revision of OMC margins

Other key developments within the OMC industry with the potential for supporting the industry’s growth and profitability are:

a)  A sharp recovery in economic activity expected to boost industry sales

b) The federal government’s resolve in curbing smuggled petroleum from regional countries

c) Rising global oil prices opening room for considerable inventory gains

All these factors have compelled us to revisit our investment case for PSO and incorporate these recent developments. Consequently, we have revised up our price target to PKR 291/sh, with PSO offering an upside of 27%. The stock is presently trading at an FY22 PE of 6.2x.

KASB Research

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