PSO Likely To Post Higher Profits in 1QFY26
Pakistan State Oil (PSO) is likely to post robust growth in earnings during 1QFY26, primarily due to reduction in finance cost and decent inventory gains.
Board meeting of Pakistan State Oil (PSO) is scheduled on October 28 to announce 1QFY26 results.
Analysts expect PSO to post net earnings of Rs27.5 per share during 1QFY26 versus profit of Rs8.5 per share during same period last year.
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Robust growth in earnings is likely due to reduction in finance cost and decent inventory gains during 1QFY26.
Sherman analysts maintain ‘Buy’ stance on PSO. The company is available at lowest PE of 4.5x in energy chain and thus remains our top pick for 2026.
Net sales to decline by 13%YoY PSO is expected to record net revenue of Rs687bn during 1QFY26 compared to topline of Rs788bn last year, down 13%YoY.
Major reason behind decline in topline is reduction in LNG sales due to both volume and price variance.
Moreover, despite retail volumes (HSD & MS) remaining almost flat compared to last year, decline in international prices also affected revenue from petroleum products.
Company’s retail sale recorded at 1.4mn tons during 1QFY26 compared to 1.38mn tons, last year. Thus, PSO’s market share in retail market fell from 42% to 40% during the quarter under review. Gross margin to improve to 4.7%.
We expect PSO to record gross margin of 4.7% during 1QFY26 compared to gross margin of 3.3%,” Sherman analysts said.
Higher gross margin is due to expected inventory gains during 1QFY26 versus inventory loss during same period last year. Just to recall, last year international oil prices fell which led to inventory losses whereas this time we believe PSO to book pre-tax inventory gains of around Rs5.2bn as international oil prices after peaking in July 2025 ended the quarter with a rise of average 7%QoQ.
Thus, analysts expect inventory gains to contribute Rs6.5 per share in bottom-line during 1QFY26. However, actual inventory gains may vary depending upon inventory levels since most of OMCs placed advanced orders amid Iran-Israel war.
Higher other income & lower finance cost to support bottom-line Historically, company’s major concern remained circular debt which led PSO to rely on higher borrowings, affecting it bottom-line amid higher finance cost. Interestingly, during 1QFY26, analysts have also expected PSO’s average borrowing to reduce to Rs340bn versus Rs397bn during same period last year – thanks to better recovery on LNG and lower liquidity requirement for inventory due to weak international oil prices.
Thus, they expect finance cost of the company to sharply fall by 40%YoY to Rs6.3bn. Moreover, due to recovery of circular debt related dues, PSO is expected to realize income of Rs5.1bn which mainly include return on excess cash available of Rs100bn which has been placed in government securities. Last year, the company recorded other income of Rs3.2bn.
