AKD Predicts PSO Could Double From Here
AKD Research has turned constructive on Pakistan State Oil (PSO), arguing that the stock could potentially double from current levels. This view is based on valuation gaps and cash flow dynamics highlighted in AKD’s research, rather than any assumption of extraordinary growth.
Below, we break down AKD Research’s reasoning in clear and simple terms.
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Why PSO Looks Deeply Undervalued
Valuation Does Not Reflect Business Reality
According to AKD Research, PSO is trading at valuation levels that fail to reflect its scale, earnings potential, and strategic importance in Pakistan’s energy supply chain.
The research points out that:
- PSO is trading at very low earnings multiples
- The share price assumes profits will remain structurally weak
- Market valuation overly discounts circular debt risks
This disconnect between market price and normalized earnings forms the foundation of the bullish view.
The Core Investment Case
Cash Flow, Not Demand, Is the Real Problem
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AKD Research emphasizes that PSO’s main challenge is delayed cash receipts, not weak fuel demand.
PSO continues to generate operating profits, but payments stuck in the energy chain distort reported earnings and investor confidence. AKD argues that even a modest improvement in receivables can have a powerful impact on financial performance.
Once cash flows normalize:
- Earnings visibility improves
- Balance sheet stress reduces
- Investor confidence returns
This is the key reason AKD sees significant upside from current levels.
Why Earnings Can Improve Sharply
Inventory Gains and Operating Leverage
AKD Research highlights that PSO benefits during periods of oil price movement through inventory gains. In addition, regulated margins provide stability that is often overlooked by the market.
Given PSO’s dominant market position:
- Volume stability remains strong
- Cost absorption improves at scale
- Operating leverage works in favor during recoveries
These factors support the view that current earnings understate PSO’s true earning power.
Key Catalysts Highlighted by AKD Research
Progress on Circular Debt
Any meaningful step toward clearing or managing circular debt can materially change PSO’s financial outlook. AKD notes that even partial resolution improves liquidity and reduces balance sheet risk.
Lower Interest Rates
Falling interest rates directly reduce finance costs, which is critical for a company with large working capital requirements. This alone can lift net profits without any increase in sales.
Re-Rating to Historical Valuation Levels
AKD’s upside case does not rely on aggressive assumptions. A return toward historical valuation multiples, once risks ease, is enough to justify a substantially higher share price.
Why the Market Remains Cautious
Policy Risk Still Exists
PSO’s performance remains closely tied to government policy and energy sector reforms. Delays or reversals continue to weigh on investor sentiment.
Long History of Underperformance
AKD Research acknowledges that PSO has stayed undervalued for long stretches in the past. This history explains why many investors remain skeptical despite improving fundamentals.
Why AKD Sees Potential for a Double
AKD Research’s view rests on three clear ideas:
- PSO is priced far below normalized earnings potential
- Cash flow issues are structural but manageable
- Even partial improvements can drive a strong re-rating
In simple terms, PSO does not need ideal conditions to perform strongly. It only needs incremental progress on issues that are already well understood.
What Are Analysts Saying About PSO Stock
According to the KSEStocks Database, PSO is covered by 15 analysts in Pakistan and they have an average price rating of PKR 652. This average price target suggests an upside of 32.5% from the last close of PKR 492.15.
According to EPS estimates from 18 different brokers, PSO has an average 2026 EPS expectation of 69.1. This suggests the stock is now trading at a forward PE of 7.3.
Why do we compile research firms’ forecasts? Broker research is fragmented across different houses. Compiling it in one place helps investors see consensus, identify divergence, and think independently rather than relying on a single view.
⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →
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