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pk
Securities (Pvt.) Ltd OIL MARKETING COMPANIES SCS RESEARCH

PSO profit margins and EPS may improve in FY24

• In FY24, we might see an improvement in gross profit margins as compared to WAJAHAT ULLAH SIDDIQUI
FY23 because of the IMF's demand to increase fuel tax.
Research Analyst
• In March 2024, PSO’s total share in the OMC market stood at 51.5%. info@scstrade.com
• In terms of investing activity, we see more cash used in 1HFY24 as compared to 021-111-111-721
the previous period. PSO is currently improving its infrastructure by making
various investments. Tuesday, 9 April 2024
• In conclusion, we see a rise in the sales volume of OMCs in the future,
attributed to a decline in the policy rate, improvements in LSM (large scale
manufacturing), an uptick from Kharif sowing season, and a rise in auto sales.
PSO, which has the largest share in the market, will be a huge beneficiary based
on these macroeconomic variables.

PSO’s improved gross margins: In FY24, we might see an improvement in gross profit margins Relative Index
as compared to FY23 because of the IMF's demand to increase fuel tax along with the rise in
100%
demand for fuel attributed to the increase in auto sales. We also see an improvement in LSM along
with a decline in inflation, followed by a rise in the policy rate. These macroeconomic 80%
developments will improve PSO’s revenues along with profit margins.
60%
Half-year results: We see improvements in earnings in the half-year report. The EPS of 1HFY24
is PKR 16.5/sh as compared to PKR -7.16 LPS in 1HFY23, mainly attributed to improvements in 40%
gross profits and operating profit. It shows that operating expenses and COGS have not risen at a
higher rate as compared to sales. The improvement in gross profit is also attributed to the hike in 20%
fuel prices. 0%

Apr-23

Jul-23

Apr-24
May-23
Jun-23

Dec-23
Aug-23

Oct-23

Jan-24
Nov-23
Sep-23
Mar-23

Mar-24
Feb-24
PSO’s product-wise market share: In March 2024, PSO’s total share in the OMC market
stood at 51.5%. Here, the share of furnace oil is 12.4%, high-speed diesel is 51.7%, and MOGAS is
49.7%. The sales of furnace oil have been declining, but high-speed diesel is improving on a YoY
Kse 100 PSO
and MoM basis, as reported by OCAC, which is a positive development for PSO.
Source: SCS Research
Improvement in cash flow statement: In 1HFY24 as well as 1HFY23, we see cash outflows in
operating activity. However, in 1HFY24, we see a decline in cash outflow in operating activity as
compared to 1HFY23 because of profitability in 1HFY24. Also, in financing activity, we see an
outflow of cash in 1HFY24 rather than a cash inflow in 1HFY23. In terms of investing activity, we
see more cash used in 1HFY24 as compared to the previous period. It is mainly because of PKR
2.7bn invested in CapEx and PKR 1.5bn in invested in subsidiaries. These factors show positive
development for PSO, as an increase in investment activity will be beneficial in the longer term.
Investment activity: PSO is currently improving its infrastructure by making various
investments, as seen in the cash flow statement. In 1HFY24, 91 KMT of new storage was
completed in Faqirabad, Faisalabad, and Mehmoodkot. Moreover, PSO has increased its retail
network by adding 21 new outlets. These investments will help PSO increase its market reach and
increase profits.
PSO Income Statement (PKR in bn)
FY22 FY23 %Change 1HFY23 1HFY24 % Change
Net Sales 2,452 3,391 38% 1,705 1,827 7%
COGS -2,291 -3,316 45% -1,694 -1,772 5%
Gross Profit 161 75 -54% 12 55 378%
Other income 25 14 -46% 10 11 16%
Op Expenses -34 -23 -33% -9 -15 68%
Op Profit 152 66 -57% 12 51 322%
Finance costs -5 -40 754% -12 -25 104%
Associate earn 0.7 -0.9 -224% 0.5 0.8 62%
PBT 148 24 -84% 0.13 27 20955%
Tax -62 -19 -70% -3 -19 439%
PAT 86 6 -93% -3 8 -331%
EPS 184 12 -93% -7 16.5 -331%
DPS 10 7.5 -25% 0 0 0%
Net Margins 4% 0.2% -3.4 ppt -0.2% 0.4% 0.6 ppt
Gross Margins 7% 2% -4.4 ppt 1% 3% 2.3 ppt
Source: SCS Research, Company Book
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Securities (Pvt.) Ltd OIL MARKETING COMPANIES SCS RESEARCH

Tons in ‘000’
Circular Debt: PSO faces some challenge related to circular debt. PSO’s receivable standing at Mar-24 Feb-24 Mar-23 MoM YoY
PKR 552bn as of December 2023. With interest rate of 22% we see 104% increase in finance cost FO 44 50 86 -11% -48%
in 1HFY24 as compared to previous period. However, programs with IMF will help solve circular
debt in future as per our hunch. HSD 463 446 397 4% 17%
MOGAS 573 544 558 5% 3%
Surge in overall OMCs sales volume: OMCs sales volume increased by 3.4% MoM and 4.3%
YoY – till Mar 2024. HOBC 10 9 5 18% 98%
JP 59 61 56 -4% 4%
PSO market share and performance: Out of all the companies, PSO holds the highest share
in the market, which is 51.8% (though it is still on a decreasing trend). It is the top volume handler, KERO 4 5 4 -14% 9%
whose MoM sales volume has surpassed the industry by 2%. Likewise, PSO YoY volume growth LDO 2 2 1 -7% 54%
surpasses industry volume handling by 7%, i.e., YoY industry growth of 4% and YoY PSO growth Total 1,154 1,116 1,107 3% 4%
of 11%.
Source: SCS Research, OCAC
High speed diesel volume growth: The improvement in sales volume of high-speed diesel is
attributed to improvements in economic activities, an increase in price, and a reduction in
smuggling from Iran. Moreover, the recovery in HSD can also be attributed to the purchase of Product wise market share March-24
HSD in advance by farmers for the Kharif sowing season. 5.1% 3.8%
FO
Decline in sales volume of furnace oil: Furnace oil can be seen in a declining trend on both a
MoM and YoY basis. It is attributed to low demand from the power sector and the availability of HSD
cheaper alternatives. 40.1% MOGAS
49.7%
MOGAS market share: MOGAS had the highest share of sales volume in the market out of JP
total sales volume in March 2024, followed by HSD.
Higher sales due to higher number of days: One thing to note is that higher sales volume in Source: SCS Research, OCAC
March is also attributed to a higher number of days in a month as compared to February.
Petroleum price and IMF demand: Moreover, we see an increase in petroleum prices, as
demanded by the IMF. The IMF has demanded the reintroduction of an 18% sales tax. In April, we Sales volume comparsion YoY wise
saw a rise in the price of motor spirit to PKR 9.6 per liter and a decline in the price of diesel by
100%
PKR 3.3 per liter.
80% 5 1
Geopolitical risks: Due to conflicts in the Middle East and Russia’s geopolitics, there are high 397 558 56 4 1107
86
chances of an increase in the price of crude oil in the future. 60%
Conclusion: In conclusion, we see a rise in the sales volume of OMCs in the future, attributed to 40%
a decline in the policy rate, improvements in LSM (large scale manufacturing), an uptick from 10 2
463 573 59 4 1154
Kharif sowing season, and a rise in auto sales. 20% 44
PSO, which has the largest share in the market, will be a huge beneficiary based on these 0%
FO

LDO

Total
JP

KERO
MOGAS
HSD

HOBC
macroeconomic variables.

Mar-24 Mar-23
Source: SCS Research, OCAC

2
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Securities (Pvt.) Ltd OIL MARKETING COMPANIES SCS RESEARCH

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