Pakistan State Oil Corporation Limited is a public company that was founded in 1976 in Pakistan. Procurement, storage, and sale of petroleum and related products are the Company's main activities. It also blends and sells lubricating oils of various types.
PSO Company Limited is a petroleum and associated goods procurement, storage, distribution, and marketing company in Pakistan. Petroleum Products, Liquefied Natural Gas, Refining Operations, and Others are the company's segments. Motor gasoline, high-speed diesel, furnace oil, jet fuel, kerosene, compressed natural gas (CNG), and petrochemicals are among the products available, as well as an electric vehicle charger. It gives auto oils, including engine oils, heavy-duty diesel motor oils, bike oils, generator oils, gear oils, programmed transmission liquids, and brake liquids; ointments producing terminal; and modern greasing up oils, like water-driven, mechanical stuff, gas motor, marine, turbine, blower, warm, refrigeration, transformer, shaft, universally useful hardware, chamber, asphaltic, extinguishing, slideway, and interaction oils, just as metalworking liquids and lubes. The company also operates into-plane refueling facilities and non-fuel retail businesses, such as quick-serviceThe total restaurants, Pizza Huts, PSO Shop Stop & Uber Delivery, Pie In The Sky, Rehmat-e-Shereen, Dunkin Donuts, Yelo, and ATMs, among others.
It also works on the manufacturing of biodiesel and the testing of mixed biodiesel in diesel engines. It sells to retail customers, numerous industrial units, the government, power projects, aviation, and the marine industries. There are 3,754 retail outlets, 1,786 retail outlets, and 167 consumer outlets in the company's retail network. Pakistan State Oil Company Limited, located in Karachi, Pakistan, was established in 1974.
Company Snapshot:
Total market value of PSO at present share price is Rs. 100.7 Billion
Sales and Profits: -
The table shows the sale and the gross profit that the company has made in some previous years. All values are in thousands:
| 2020 | 2019 | 2018 | 2017 | 2016 | |
| Sales | 1,108,357,723 | 1,154,297,980 | 1,063,744,054 | 878,146,786 | 677,966,877 |
| Gross profit | 12,227,202 | 36,017,366 | 39,636,108 | 37,198,713 | 22,863,125 |
PSO’s Performance: -
PSO is a less volatile stock at this moment than most of the stocks in the Pakistan Stock exchange. Moreover, the stock price is very undervalued and there is a great scope that the current price will increase to reach or get closer to the fair value which means that it is a good stock for investment as it is deemed to give good returns to the investor.
Following factors may affect Company’s share price:
1. Sales Volume:The sales volume of a company is mostly determined by the country's GDP growth rate and overall economic conditions. The extent of commercial activity, smuggling, changes in the country's energy mix due to increased LNG availability, and price volatility are all major elements that will affect sales volume and, in turn, the company's share price.
2. International Oil Prices:The trend in international oil prices has an impact on your company's financial success and, as a result, its stock price. An upward trend in oil prices could help your company's financial success, and vice versa. However, when combined with stock and sales scenarios, the price trend has an impact on the Company's performance.
3. Margin Revisions:The Company's margins on its primary goods, except FO, are regulated by the government. Any choices regarding margin increases, decreases, or deregulation of margins may have an impact on the Company's stock price.
4. Circular Debt: The share price of your company is extremely susceptible to any developments in the country's cyclical debt crisis. The government's action on circular debt resolution has previously resulted in a rise in share price, whereas the accumulation of circular debt has had the opposite effect. As a result, the government's decisions in this regard are expected to have an impact on the Company's stock price.
5. Bank Borrowings & Finance Cost:Increased bank borrowings will result in greater financing costs, which will diminish the company's bottom line and have a negative influence on its stock price. PSO's share price is also vulnerable to any increase or fall in discount rates stated in the Government of Pakistan's monetary policy statement because of its considerable borrowings.
6. Rupee Devaluation:In the past, rupee depreciation had a detrimental impact on your company's business performance and, as a result, its stock price. The Government of Pakistan, on the other hand, has enabled the recovery of exchange losses in white oil pricing towards the conclusion of FY20.
7. Regulation and Government Policies:Any change in government policies and regulations, including taxation, affecting the oil marketing sector may have a positive or negative impact on the Company's stock price, depending on whether the policy is favorable or unfavorable to the business.
EPS in 2018, 2019, and 2020 was 39.52, 22.52, and (13.77) respectively. It is a good value as we see. The EPS can be seen increasing every year except for the final year in which the oil prices were reduced and different oil-related crises were experienced by Pakistan. Although the EPS of the trailing twelve-month time period is considered to be 18.67 which means that the company is bound to perform well and is back on track. Moreover, the circular debt that PSO has given to companies like SNGP, HASCOL, and other IPP’s has to be received meaning that the share price is bound to increase making it a good stock for investment.
The net and gross profit were good in 2018 and 2019 but the company experienced a loss in 2020 and it was mainly due to a crisis related to oil and corona. Moreover, Saudia-Russian oil price wars also lead to challenges which finally lead to loss. Drop-in international oil prices meant a decrease in oil price in Pakistan and the inventory already present had to be sold at lower rates meaning decreased profits and resulting in a loss.
Segment Wise Performance: -
Petroleum products, Liquefied Natural Gas (LNG), and Others are the three reportable segments in PSO's unconsolidated financial statements. The net sales are broken into the following categories:
In petroleum products, the company made a net loss of Rs. 6.02 billion in FY20, compared to a profit of Rs. 9.24 billion in FY19, owing to inventory losses recorded this year as a result of lower oil prices in the international market. In addition, the company reported a net loss of Rs. 2.43 billion in the LNG business in FY20, compared to a profit of Rs. 0.06 billion in FY19, owing to an increase in finance costs this year due to increased receivables from SNGPL.
Financial Health: -
(All values are in thousands):
| 2020 | 2019 | 2018 | 2017 | 2016 | |
| Assets | 341,718,126 | 417,079,525 | 402,562,332 | 392,442,964 | 342,318,730 |
| Liabilities | 228,657,125 | 297,898,838 | 292,109,857 | 289,593,362 | 250,737,405 |
| Equity | 113,061,001 | 119,180,687 | 110,452,475 | 102,849,602 | 91,581,925 |
Summary: -
The stock pays a dividend which is good for any sort of investor. The stock is below fair value making it more suitable for investment options. The circular debt is also good for companies like these as when the receivables are paid the revenue increases, hence the value of stock increases.
It is a highly recommended investment for investors that want dividend payouts as well as a good return on investment.
