SNGP posts 80% profit growth, should investors take notice?

Sui Northern Gas Pipelines Ltd (SNGP) is once again drawing attention from Pakistan’s investor community. Following a strong financial performance in FY24, the company appears poised for a new growth phase, driven by operational efficiency, network expansion, and favorable policy tailwinds. But is the stock worth your money today?

Let’s take a closer look.

Profits surge by 80% in FY24

SNGP reported PKR 19 billion in net profit for FY24, up 80% year-on-year, translating to EPS of PKR 29.9. This impressive growth was supported by:

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• Higher gas volumes sold (up 1% YoY to 1,683 mmcfd)
• Increased prescribed prices over the year
• Better operational control, with UFG (Unaccounted-for Gas) dropping to 4.93%, an 18-year low

Such profitability momentum gives investors a reason to take note.

Revenue crosses PKR 1.5 trillion

SNGP posted revenues of PKR 1.53 trillion, including Tariff Differential Subsidy (TDS), reflecting a 12% YoY increase. With higher sales volumes and favorable pricing, the company has built a strong foundation for future revenue consistency.

Dividend outlook: calculating the yield

Assuming a 40% payout ratio (conservative for a utility), the estimated dividend per share for FY24 could be ~PKR 12. With the stock trading around PKR 100, that would translate to a dividend yield of approximately 12%, well above market averages.

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Future growth plans signal upside

SNGP is not just sitting on profits. The company is investing ~PKR 30 billion annually in capital expenditure. Ongoing and upcoming projects include:

• Kot Palak Pipeline (45 mmcfd capacity)
• Pipeline upgrades in Islamabad and Rawalpindi
• Expansion into EPC services, having completed projects for SSGC and Parco Gunvor

The focus on infrastructure enhancement and service diversification adds strength to the long-term investment thesis.

Positive policy and regulatory developments

The government has appointed KPMG to resolve gas circular debt, and price hikes are slowing down its accumulation. Recoveries from power plants using RLNG have improved, helping to stabilize SNGP’s cash flows.

These macro-level tailwinds reduce investor risk and boost long-term visibility.

Is SNGP worth buying?

Yes, if you’re looking for a mix of income and stability. Here’s why:

• Strong earnings growth and improving margins
• Attractive dividend yield (~12%)
• Ongoing network expansion and EPC diversification
• Policy support for circular debt resolution and gas price stabilization

Risks to watch include regulatory delays and reduced demand from captive power users due to levy uncertainties. However, SNGP’s proactive management and solid fundamentals help mitigate those concerns.

Conclusion

SNGP has entered FY25 on solid footing. Its profitability, dividend strength, and clear growth trajectory make it one of the more promising utilities on the PSX. For long-term investors seeking consistent returns with modest risk, SNGP deserves a closer look.

Source: AKD Securities

⚠️ 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 →