Islamabad, Mari Petroleum Company Limited (MARI) has been spotlighted for substantial growth potential, with a target price of PkR3,100 per share by December 2024, marking a significant 36% upside from its recent close. This optimistic forecast is backed by promising dividend yields of 9% and 11% for fiscal years 2024 and 2025, respectively, warranting a strong buy recommendation from analysts.
According to AKD Securities Limited, the investment thesis for MARI hinges on several critical growth drivers, including a strong 2P reserve position with substantial recoverable reserve life, robust financial performance, and a relatively healthy balance sheet. Furthermore, the company's exposure to USD-denominated oil and gas prices provides a hedge against currency fluctuations, a unique advantage for investors. However, the report also outlines potential risks, including the concentration on a single field, potential currency strength against the USD, and the buildup of gas-based receivables.
Recent exploration and development successes have notably enhanced MARI's growth outlook, with gas production expected to surge by 47% compared to FY20, largely due to the full commissioning of the SGPC facility and major discoveries such as in the Waziristan Block. The aggressive expansion of exploration acreage, including the acquisition of 16 blocks in three years, underscores MARI's commitment to bolstering its production capabilities.
Despite concerns regarding circular debt in the gas sector, the analysis deems such worries as overblown for MARI, given its relatively smaller exposure compared to state-owned counterparts. With significant gas pricing reforms underway and the company's crucial role in supplying gas to the fertilizer sector, analysts anticipate that the government will ensure prioritized collections to support ongoing field development.
The imposition of an additional royalty charge post-FY25, following the expiration of the Mari D and P lease, is expected to negatively impact earnings estimates for FY25/26 by 6% and 16%, respectively. Nevertheless, the long-term outlook remains strong, buoyed by sustained production levels and the potential for pricing adjustments in line with fiscal reforms.
MARI emerges as the top pick in the sector, offering a compelling investment opportunity with substantial upside potential and attractive dividend yields. The detailed report by AKD Securities Limited emphasizes the company's strong fundamentals and growth trajectory, positioning it favorably for investors seeking robust returns in the energy sector.