Karachi, August 24, 2021 (PPI-OT): PSO: Unconsolidated EPS clocked in at PkR23.2 for 4QFY21 – Above expectation

Pakistan State Oil (PSO) reported result for FY21 where company posted unconsolidated PAT of PkR29.1bn (EPS: PkR62.1) against loss after tax of PkR6.5bn (LPS: PkR13.8) for FY20. For 4QFY21, unconsolidated PAT stood at PkR10.9bn (EPS: PkR23.2), up 25%QoQ. The result was significantly better than our expectations. Company also announced a final dividend of PkR10/sh.

Major deviation from our estimates arose due to inventory gains of ~PkR5.7bn against our expectation of PkR1.5bn while company also recorded other income of PkR13.7bn for 4QFY21 which was likely on the back of late payment surcharge recorded on payment from IPPs.

Topline of the company increased by 59/23% YoY/QoQ as overall market share for 4QFY21 increased to 46.3% against 44.5% for 4QFY20 where major increase was witnessed in furnace oil with PSO’s market share standing at 50% against 15.4% for 4QFY20 while an increase in retail fuel volume of 15.4%YoY against 19%YoY of the industry resulted in retail fuel market share declining to 45% for 4QFY21 against 47% for 4QFY20.

Company’s finance cost also increased by 165/628% YoY/QoQ to PkR7.7bn for 4QFY21 where we believe increased sales of furnace oil to power plants has resulted in increased need for short term borrowing.

PSO (TP: PkR305.6/sh, 35% upside) is our top pick where near term developments include clearance of circular debt and shift in profile of cash flows due to increased share of retail fuels while focus on improving storage infrastructure will result in company sustaining the recently gained market share, moving forward.