Pakistan State Oil Company (PSO) is likely to be the major beneficiary of the expected margin hike, as PSO enjoys the higher market share of 56 percent and 48 percent in HSD and MS, respectively. This is in the context of media reports that the government is likely to increase margins on regulated products for Oil Marketing Companies (OMCs) by Rs 0.5 per litre.
This is likely to increase the OMC margins by 32-37 per cent on Kerosene Oil (SKO), High Speed Diesel (HSD) and Motor Spirit (MS). An increase in OMC margins by Rs0.5 per litre coupled with a healthy contribution in overall product mix, PSO is likely to have an annualised per share impact of Rs9.0 or 15 percent. Regulated products contribute around 44 percent in the gross profit of PSO.
Attock Petroleum Limited (APL) is likely to have an annualised per share impact of Rs 4.3 or eight percent due to the increase in OMC margins. This effect is subdued as compared to PSO as regulated products contribute around 38 percent in the gross profit of APL. Monopoly over Asphalt has always been the main play for APL, which contributes around 43 percent in the Company’s total gross profit, said Abid Ali at AHL.
It is to be noted that previously the government had fixed the margins for OMCs in absolute term on per litre basis in November 2010 from four percent of the sum of Ex-Refinery and IFEM prices. This led to a drop of 25 per cent and 22 per cent in the margins of SKO and MS, respectively, while margin on HSD remained unchanged. This margin fixation turned out to be a major negative factor for OMCs as it kept the benefits of rising oil prices from translating into higher margins.
