Pakistan State Oil (PSO) Fundamental Analysis

Pakistan State Oil (PSO), a leading player in Pakistan’s OMC sector, presents a compelling investment case based on JS Global’s recent research report dated June 13, 2025. Here’s a breakdown of PSO’s fundamentals:Financial Performance (9MFY25):PSO reported earnings of Rs15.3bn, with an EPS of Rs32.52 for 9MFY25, reflecting a 14% YoY PAT growth.

Sales declined 13% YoY to Rs2,336.6bn, but gross margins held steady at 3%, indicating operational resilience.

P/E ratio stands at 8.64x, suggesting reasonable valuation compared to historical levels (FY24: 4.62x, FY23: 11.66x).

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Circular debt resolution – a game changer:

PSO’s management highlighted ongoing efforts to resolve circular debt, with Rs323bn in principal receivables from SNGPL and Rs200bn in late payment surcharges (LPS). Since Feb-2024, no new receivables have accumulated from SNGPL, ensuring timely payments.

Any recovery could significantly reduce PSO’s debt burden and unlock funds for investments, improving liquidity and balance sheet strength.

Market share & expansion plans:

PSO maintains a dominant market share of ~40% in Motor Spirit (MS) and ~44% in High-Speed Diesel (HSD).

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The company commissioned 67 new retail outlets in FY25 and added storage capacity (25,000MT at Faqirabad, 5,300MT rehabilitated at other depots). Further expansions in high-potential locations are planned, targeting 3-5% YoY volumetric growth in FY26.

PSO’s digital payment share (12-13% of sales) outperforms the industry average (9-10%), reflecting operational modernization.

EV charging infrastructure – future growth driver:

PSO is actively expanding its EV charging network, signing an MoU with HUBC for 25 sites and planning more stations at retail outlets.

With margins of 15-20% in the pilot phase, this segment could diversify revenue streams as EV adoption grows in Pakistan.

Key risks:

Sales tax exemptions on petroleum products remain a concern, leading to higher receivables and liquidity challenges. Temporary relief via per-litre adjustments is in place, but a long-term resolution is needed.

Competitive pressures from players offering discounts and stagnant dealer margins amid rising oil prices could impact profitability.

Valuation & outlook:

At Rs374.67/share, PSO’s market cap is Rs176bn (~US$623mn), with a 45% free float. The stock has outperformed the KSE100 index recently, reflecting investor confidence.

Circular debt resolution and EV infrastructure expansion are key catalysts, while stable margins and market share underscore operational strength. However, sales tax issues and competitive pressures warrant caution.

Verdict: PSO is well-positioned for growth with easing cashflow pressures and strategic expansions. Investors should monitor circular debt developments and sales tax resolutions for potential upside. A “Buy” rating seems justified for long-term investors seeking exposure to Pakistan’s energy sector.

⚠️ 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 →