PSO’s Strong Q2FY25 Performance, Is It Time to Buy?

Key takeaways

• PSO posted a net profit of Rs7.2 billion (EPS: Rs15.4) in Q2FY25, compared to a loss of Rs14.1 billion (LPS: Rs30.1) in Q2FY24.
• Gross profit surged to Rs25 billion, reversing a gross loss of Rs3.2 billion last year, supported by higher regulated margins.
• Net sales dropped 8% YoY to Rs838 billion, impacted by lower fuel prices despite higher OMC sales (up 7% YoY to 2.1 million tons).
• Finance costs declined by 42% YoY to Rs8.8 billion, reaching the lowest level in eight quarters.
• Other income stood at Rs7.1 billion, down 9% YoY but up 118% QoQ, due to higher short-term investment returns.
• PSO has a ‘BUY’ rating with a Dec’25 target price of Rs729 per share, indicating 100% upside potential.

PSO’s financial turnaround: strong earnings growth in Q2FY25

Pakistan State Oil (PSO) reported a remarkable recovery in Q2FY25, posting a profit of Rs7.2 billion (EPS: Rs15.4) compared to a loss of Rs14.1 billion (LPS: Rs30.1) in the same quarter last year. This strong turnaround was primarily driven by higher margins, lower finance costs, and improved operational efficiencies.

For 1HFY25, PSO’s net profit stood at Rs11.2 billion (EPS: Rs23.8), up 44% YoY, signaling strong earnings momentum despite a decline in sales.

Sales decline due to lower fuel prices

PSO’s net sales for Q2FY25 stood at Rs838 billion, down 8% YoY, primarily due to lower fuel prices compared to the previous year. However, the company’s OMC sales volume increased by 7% YoY to 2.1 million tons, reflecting higher demand.

Despite the decline in revenues, gross profit surged to Rs25 billion, a significant improvement from a gross loss of Rs3.2 billion in Q2FY24. This turnaround was fueled by higher average regulated margins and the absence of inventory losses seen in the previous year.

Lower finance costs boost the bottom line

One of the most significant improvements in PSO’s financials was the sharp decline in finance costs, which dropped 42% YoY to Rs 8.8 billion, marking the lowest level in eight quarters. This reduction was attributed to lower short-term borrowings and declining interest rates.

Additionally, other income stood at Rs7.1 billion, down 9% YoY but up 118% QoQ, driven by higher returns on short-term investments and recognition of LPS receivables from past-due customer payments.

Dividend decision & investment outlook

Despite its strong performance, PSO did not announce a dividend, which came as a surprise to investors. However, analysts remain optimistic about the company’s earnings trajectory, citing:

• Higher OMC sales volume, which could continue supporting profitability.
• Lower finance costs, providing a cushion against market fluctuations.
• A stable regulatory environment allows better pricing control.

PSO currently holds a BUY rating with a Dec’25 target price of Rs729 per share, offering an upside potential of 100% from the last closing price.

PSO’s Q2FY25 results highlight a significant financial turnaround, with strong profitability driven by improved margins, lower finance costs, and higher sales volumes. While lower fuel prices impacted revenue, the company’s cost management strategies and increased demand helped sustain earnings growth.

With a positive earnings outlook and strong market positioning, PSO remains an attractive stock for investors looking for stability in Pakistan’s energy sector.

Source: AKD Securities, PSX

What are the analysts saying?

According to our database, PSO has an average analyst price target for Dec 2025 of Rs. 493 based on estimates of 10 different analysts. This includes the highest price target of Rs. 729 by AKD Securities and the lowest price target of Rs. 362 by AHL.

The average analyst price target of Rs. 493 implies an upside of 46.7% from here on. The company paid out a dividend of Rs. 10 in 2024. At current price levels, this corresponds to a dividend yield of 3% which is not very attractive for investors.

Here is how different research firms have set their target prices for Dec 2025: