Karachi, Pakistan State Oil (PSO) reported its 3QFY24 earnings, revealing a Profit after Tax (PAT) of PKR 5.65 billion (EPS: PKR 12.03), which was lower by 59% compared to the same period last year, but above expectations. The company's gross margins improved due to favorable market conditions, despite a decrease in offtake volumes.

According to AKD Securities Limited, the higher-than-expected results were mainly driven by taxation reversals during the quarter, with PSO reporting an effective tax rate of -4.6%, compared to 49% in the same quarter last year. Inventory gains were estimated at approximately PKR 1.1 billion (PKR 2.4 per share), reflecting the rise in ex-refinery prices for motor spirit, high-speed diesel, and furnace oil by 6.6% and 4.3%, respectively, since the end of the previous quarter. The company's gross margins reached 2.9%, up from -0.4% in the second quarter of FY24.

The company's topline revenue was PKR 843 billion, with a 7% decrease quarter-over-quarter, but a 4% increase year-over-year. This was supported by higher retail fuel prices, though total offtake volumes dropped by 6% and 1% respectively during the quarter. Finance costs remained largely flat quarter-over-quarter at PKR 15.04 billion, but increased by 19% year-over-year, driven by higher short-term borrowings and increased late payment surcharges.

Despite the fluctuations in quarterly earnings, PSO remains a leading pick in the Oil Marketing Company sector with a target price of PKR 290 per share by December 2024. The company's expected dividend yield for FY24E is 6% and for FY25F is 8%.