Karachi: A significant proposal by the Oil and Gas Regulatory Authority (OGRA) aims to increase the margins for Oil Marketing Companies (OMCs) by 17%, a move that could notably enhance the financial outlook for the sector in the upcoming fiscal years.

According to AKD Securities Limited, the regulatory proposal suggests raising OMC margins to PKR 1.35 per liter from the current PKR 7.87 per liter. This adjustment marks a deviation from the historical practice of aligning OMC margins with the core Consumer Price Index (CPI) for non-food, non-energy urban areas. Instead, recent revisions have responded more directly to the broader economic context, including sharp increases in retail fuel prices and general inflationary pressures, which have escalated the margin from PKR 3.68 per liter since January 2022.

The proposed margin increase is expected to raise earnings estimates for the OMC sector by approximately 7% for fiscal year 2025 and 12% for fiscal year 2026. These figures have not yet been factored into AKD’s formal estimates, pending the official implementation of the margin changes.

For Pakistan State Oil (PSO), the anticipated increase in rupee margins is likely to bolster the company’s cash profits significantly, improving its financial prospects amid easing liquidity challenges and better cash collection from gas revenues. AKD Securities maintains a ‘BUY’ recommendation for PSO and Attock Petroleum Limited (APL) with a June 2025 target price of PKR 290 and PKR 500 per share, respectively, and dividend yields of 9.0% and 9.5% for the fiscal year 2025.

Additionally, AKD has conducted an annualized sensitivity analysis to evaluate the impact of these margin revisions on companies within its coverage universe, considering various scenarios and year-on-year growth projections.