Karachi, September 23, 2022 (PPI-OT): OGDC: 4QFY22 Result Review

Oil and Gas Development Company Limited (OGDC) posted its earnings earlier today, wherein the company reported earnings of PkR133.8bn (EPS: PkR31.11) for FY22, lower than our estimates, however higher by 46.2%YoY. For the final quarter, the company posted earnings of PkR21.7bn (EPS: PkR5.05), lower by 49.6%QoQ and 13.4%YoY. Alongside the earnings, the company announced a higher-than-expected cash dividend of PkR2.50/sh (Full-year payout ratio 23%).

Net sales clocked in at PkR95.2bn for 4QFY22, higher by 6.8%QoQ and 59.9%YoY. Macros played in the company’s favour, with crude oil prices higher by 20%QoQ and the exchange rate having depreciated by 11% during the period.

Lower-than-expected earnings for the quarter can be attributed to higher operating expenses, which came in at PkR28.5bn for the quarter, higher by 70.7%QoQ and 40%YoY.

Further pressure to the bottom-line came in the form of higher-than-expected exploration expenses for the quarter, clocking in at PkR5.9bn, higher by 110.5%QoQ.

Effective Tax Rate for the quarter was largely in line with expectations, coming in at 65.3% for 4QFY22, compared to our estimate of 64.7%. The higher tax rate was due to the imposition of Super Tax on the full-year earnings.

We have a “Buy” rating on the stock, with a Jun’23 TP of PkR 122/sh on the stock, offering an upside of 65% from its last close. However, underlying market conditions may limit price discovery.