April 29, 2020 (PPI-OT)

PSO: Unconsolidated LPS for 3QFY20 stood at PkR7.30

Pakistan State Oil (PSO) posted results for 9MFY20 where company posted unconsolidated PAT of PkR3.0bn (EPS: PkR6.41), down 49.2%YoY. For 3QFY20, unconsolidated LAT stood at PkR3.4bn (LPS: PkR7.3) against our LAT expectation of PkR2.5bn (LPS: PkR5.41).

Inventory losses for 3QFY20 stood at ~PkR4.9bn against our expectation of PkR2.5bn after ex-refinery prices of MS/HSD declined by 26/19% on 25th Mar'20 against ex-refinery prices of Feb'20 in the aftermath of international oil prices crashing.

Finance cost for the quarter stood at PkR4.0bn, up by 35.9/1.7% YoY/QoQ, on the back of increasing short term borrowings as company continues to battle with circular debt while substitution of local borrowing in place of foreign borrowing is increasing the strain.

Operating costs for 3QFY20 decreased on sequential basis by 10.6% however increased by 32.5% on YoY basis. Company utilized deferred tax of PkR1.2bn against current tax of PkR1.1bn which provided some solace, resulting in negative effective tax rate of 0.5% for the quarter.

On consolidated basis, picture looks grimmer as LAT for 3QFY20 stood at PkR8.8bn (LPS: PkR13.55) after Pakistan Refinery Ltd. (PSO's subsidiary) posted LAT of PkR5bn for 3QFY20.

Stock faced severe pressure recently after international oil prices declined and lockdowns put in place to contain the spread of COVID-19 dented the demand while also increasing concerns about company's liquidity as issue of Sukuk-II gets delayed. However, we believe a recovery in oil prices cannot be ruled out post Jun'20 as global economy comes back online while rebound in demand will provide further support. We have a Buy stance on the stock with our TP (PkR203.5/sh) offering an upside of 40.4%.

© Pakistan Press International, source Asianet-Pakistan