Recovery in offtakes was imminent as compared to the
severely dampened fuel demand (floods/price hikes) during 1QFY23, resulting in
total offtakes rising by 26%QoQ during 2QFY23.
The company’s revenue is expected to rise to PKR880.6 billion,
changing by 2.1%QoQ/69%YoY, mainly on the back of the rise in fuel prices as
compared to the last year (2QFY22: PKR140/124 per liter for MS/HSD).
The company is anticipated to record inventory losses of PKR12.2
billion (PKR26/share) for 2QFY23, as ex-refinery prices for MS/HSD fell by
18%/11% during the period as compared to the previous quarter.
Subsequently resulting in gross margins for the quarter to
end at 0.7% as compared to 0.2% 1QFY23.
The effective tax is expected to rise to 56% for the period
(vs 1QFY23: 70% ET), as minimum turnover tax (0.5% on gross POL sales) hampers
the already beat-down bottom-line.
At a normalized tax rate of 33%, the earnings per share
would have clocked in at PKR7.76/share.
Finally, analysts expect the topline from LNG segment to
clock in at PKR232 billion, majorly on the back of rising LNG prices globally
(energy crunch in Europe/ Asia) coupled with increased volumes (new LNG deal
with Qatar @ 10.2% slope, signed last year).
To note, PSO’s average DES price for the quarter stood at
US$11.39/mmbtu as against US$13.43/mmbtu in the previous quarter.
The liking for PSO is due to: 1) gas & power tariff
adjustments may prove to be cash-positive, 2) modernization plans in refinery
subsidiary (PRL) to enhance productivity, and 3) phasing out of RFO coupled
with increasing share of retail fuels, resulting in stable margins to drive
unhampered future cash flow.
For this reason, our December 2023 price of PKR215/share
provides a total return of 53%, with forward dividend yields of 7% for FY23 and
/10%for FY24.
