{"id":7637,"date":"2025-02-14T17:07:09","date_gmt":"2025-02-14T12:07:09","guid":{"rendered":"https:\/\/ksestocks.com\/blog\/?p=7637"},"modified":"2025-02-14T17:23:46","modified_gmt":"2025-02-14T12:23:46","slug":"psos-strong-q2fy25-performance-is-it-time-to-buy","status":"publish","type":"post","link":"https:\/\/ksestocks.com\/blog\/psos-strong-q2fy25-performance-is-it-time-to-buy\/","title":{"rendered":"PSO\u2019s Strong Q2FY25 Performance, Is It Time to Buy?"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\">Key takeaways<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>PSO posted a net profit of <strong>Rs7.2 billion<\/strong> (EPS: <strong>Rs15.4<\/strong>) in Q2FY25, compared to a loss of <strong>Rs14.1 billion<\/strong> (LPS: <strong>Rs30.1<\/strong>) in Q2FY24.<\/li>\n\n\n\n<li>Gross profit surged to <strong>Rs25 billion<\/strong>, reversing a gross loss of <strong>Rs3.2 billion<\/strong> last year, supported by higher regulated margins.<\/li>\n\n\n\n<li>Net sales dropped <strong>8% YoY<\/strong> to <strong>Rs838 billion<\/strong>, impacted by lower fuel prices despite higher OMC sales (up <strong>7% YoY<\/strong> to <strong>2.1 million tons<\/strong>).<\/li>\n\n\n\n<li>Finance costs declined by <strong>42% YoY<\/strong> to <strong>Rs8.8 billion<\/strong>, reaching the lowest level in eight quarters.<\/li>\n\n\n\n<li>Other income stood at <strong>Rs7.1 billion<\/strong>, down <strong>9% YoY<\/strong> but up <strong>118% QoQ<\/strong>, due to higher short-term investment returns.<\/li>\n\n\n\n<li>PSO has a \u2018BUY\u2019 rating with a <strong>Dec\u201925 target price of Rs729 per share<\/strong>, indicating <strong>100% upside potential<\/strong>.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">PSO\u2019s financial turnaround: strong earnings growth in Q2FY25<\/h2>\n\n\n\n<p>Pakistan State Oil (<strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/pso\/\" target=\"_blank\" rel=\"noopener\" title=\"PSO\">PSO<\/a><\/strong>) reported a remarkable recovery in Q2FY25, posting a profit of <strong>Rs7.2 billion<\/strong> (EPS: <strong>Rs15.4<\/strong>) compared to a loss of <strong>Rs14.1 billion<\/strong> (LPS: <strong>Rs30.1<\/strong>) in the same quarter last year. This strong turnaround was primarily driven by higher margins, lower finance costs, and improved operational efficiencies.<\/p>\n\n\n\n<figure class=\"wp-block-pullquote\"><blockquote><p>Notably, the company&#8217;s cash flow from operations grew substantially. This shows that the government measures to curtail circular debt expansion are working!<\/p><\/blockquote><\/figure>\n\n\n\n<p>For <strong>1HFY25<\/strong>, PSO\u2019s net profit stood at <strong>Rs11.2 billion<\/strong> (EPS: <strong>Rs23.8<\/strong>), up <strong>44% YoY<\/strong>, signaling strong earnings momentum despite a decline in sales.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Sales decline due to lower fuel prices<\/h2>\n\n\n\n<p>PSO\u2019s net sales for Q2FY25 stood at <strong>Rs838 billion<\/strong>, down <strong>8% YoY<\/strong>, primarily due to lower fuel prices compared to the previous year. However, the company\u2019s OMC sales volume increased by <strong>7% YoY<\/strong> to <strong>2.1 million tons<\/strong>, reflecting higher demand.<\/p>\n\n\n\n<p>Despite the decline in revenues, gross profit surged to <strong>Rs25 billion<\/strong>, a significant improvement from a gross loss of <strong>Rs3.2 billion<\/strong> in Q2FY24. This turnaround was fueled by higher average regulated margins and the absence of inventory losses seen in the previous year.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Lower finance costs boost the bottom line<\/h2>\n\n\n\n<p>One of the most significant improvements in PSO\u2019s financials was the sharp decline in finance costs, which dropped <strong>42% YoY<\/strong> to <strong>Rs 8.8 billion<\/strong>, marking the lowest level in eight quarters. This reduction was attributed to lower short-term borrowings and declining interest rates.<\/p>\n\n\n\n<p>Additionally, other income stood at <strong>Rs7.1 billion<\/strong>, down <strong>9% YoY<\/strong> but up <strong>118% QoQ<\/strong>, driven by higher returns on short-term investments and recognition of LPS receivables from past-due customer payments.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Dividend decision &amp; investment outlook<\/h2>\n\n\n\n<p>Despite its strong performance, PSO did not announce a dividend, which came as a surprise to investors. However, analysts remain optimistic about the company\u2019s earnings trajectory, citing:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Higher OMC sales volume, which could continue supporting profitability.<\/li>\n\n\n\n<li>Lower finance costs, providing a cushion against market fluctuations.<\/li>\n\n\n\n<li>A stable regulatory environment allows better pricing control.<\/li>\n<\/ul>\n\n\n\n<p>PSO currently holds a <strong>BUY rating<\/strong> with a <strong>Dec\u201925 target price of Rs729 per share<\/strong>, offering an upside potential of <strong>100%<\/strong> from the last closing price.<\/p>\n\n\n\n<p>PSO\u2019s <strong>Q2FY25 results highlight a significant financial turnaround<\/strong>, with strong profitability driven by improved margins, lower finance costs, and higher sales volumes. While lower fuel prices impacted revenue, the company\u2019s cost management strategies and increased demand helped sustain earnings growth.<\/p>\n\n\n\n<p>With a positive earnings outlook and strong market positioning, PSO remains an attractive stock for investors looking for stability in Pakistan\u2019s energy sector.<\/p>\n\n\n\n<p><strong>Source: AKD Securities, PSX<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What are the analysts saying?<\/h2>\n\n\n\n<p>According to our database,<strong> PSO <\/strong>has an average analyst price target for Dec 2025 of <strong>Rs. 493 <\/strong>based on estimates of 10 different analysts. This includes the highest price target of <strong>Rs. 729 <\/strong>by AKD Securities and the lowest price target of <strong>Rs. 362 <\/strong>by AHL. <\/p>\n\n\n\n<p>The average analyst price target of <strong>Rs. 493 <\/strong> implies an upside of<strong> 46.7%<\/strong> 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. <\/p>\n\n\n\n<p>Here is how different research firms have set their target prices for Dec 2025:<\/p>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table class=\"has-fixed-layout\"><thead><tr><th>Research Firm<\/th><th>PSO Dec 25 target price (Rs.)<\/th><\/tr><\/thead><tbody><tr><td>AKD Securities<\/td><td>729<\/td><\/tr><tr><td>AHL<\/td><td>362<\/td><\/tr><tr><td>IGI<\/td><td>448<\/td><\/tr><tr><td>JS Global<\/td><td>675<\/td><\/tr><tr><td>Inter Market Securities<\/td><td>400<\/td><\/tr><tr><td>Taurus Securities<\/td><td>410<\/td><\/tr><tr><td>Foundation Securities<\/td><td>417<\/td><\/tr><tr><td>Insight Securities<\/td><td>403<\/td><\/tr><tr><td>Al Habib Capital Markets<\/td><td>550<\/td><\/tr><tr><td>Pearl Securities<\/td><td>540<\/td><\/tr><\/tbody><\/table><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>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.<\/p>\n","protected":false},"author":9252,"featured_media":6984,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[154,138],"tags":[166],"class_list":["post-7637","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis","category-financials","tag-pso"],"featured_image_src":{"landsacpe":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/PSO-STOCK-PSX-1140x445.png",1140,445,true],"list":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/PSO-STOCK-PSX-463x348.png",463,348,true],"medium":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/PSO-STOCK-PSX-300x188.png",300,188,true],"full":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/PSO-STOCK-PSX.png",1920,1200,false]},"_links":{"self":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/7637","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/users\/9252"}],"replies":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/comments?post=7637"}],"version-history":[{"count":0,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/7637\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media\/6984"}],"wp:attachment":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media?parent=7637"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/categories?post=7637"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/tags?post=7637"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}