Karachi, August 16, 2022 (PPI-OT): Pakistan OMCs: Margin revision: Much needed breather!!

ECC is expected to meet before the next petrol price revision, with an agenda pertaining to increasing OMC margins to uniform PkR5–6/liter for both MS and HSD, up 63% from current levels of PkR3.68/liter.

The recent increase in margins is expected to result in an incremental rise in gross margins for retail fuels to stand at 2.6%/2.4% (assuming current POL prices) from 1.6%/1.4% on MS/HSD, respectively.

If we incorporate revised margins and CPI indexation moving forward, PSO’s EPS estimates for FY23/24 increase by PkR19/21/sh to PkR83/92. For APL, estimates for FY23/24 increase by PkR18/21 to PkR95/99/sh for FY23/24, respectively.

Recent positives for the sector have kept stocks under our coverage (PSO and APL) under the limelight, such as: i) downward turnover tax revision; ii) massive inventory gains; iii) gas tariff increases; and iv) OMC margin revision and deregulation.