Sitara Petroleum Service (SPSL) is an integrated downstream operator running 61 retail fuel sites and 320 oil tankers. As GO Petroleum’s largest dealer, it handles 21% of GO’s volumes despite operating just 5% of its retail sites. Post-Aramco’s 40% stake in GO’s, per-pump sales recovered to 8.7 million litres per annum alongside network expansion from 35 to 61 sites. IPO proceeds will fund further expansion and an OMC license.
Pakistan’s leading brokerage house Intermarket Securities has recommended subscribing to the IPO given its attractive P/E, superior ROE, and strong EBITDA margins versus the industry average.
Integrated downstream operator
SPSL is a leading dealer of petroleum products, operating 61 retail fuel sites and a fleet of 320 oil tankers, giving it an integrated presence across both retail and logistics segments. The company’s scale is reflected in its position as GO’s largest dealer, despite operating only 5% of GO’s retail sites, SPSL handles 21% of its total volumes. Revenue is predominantly driven by fuel (95%), with logistics contributing the remaining 5%. However, the logistics segment punches above its weight, contributing 15% to the bottom line owing to its higher profitability. Further diversification is provided through a 40/60 split between corporate and retail customers.
Volume recovery meets network expansion
Historically, SPSL’s volumetric sales per pump fell sharply from 7.3 million litres in FY21 to 2.7 million in FY24 due to supply chain disruptions, before recovering to 8.7 million litres following Aramco’s acquisition of a 40% stake in GO Pakistan. The dual impact of higher per-pump volumes and an expansion in retail sites from 35 to 61 drove revenue growth in FY25. This level of growth may be difficult to replicate given that the supply chain relief was largely a one-off and underlying industry volume growth has been considerably more muted at around 6% (5-year CAGR). That said, SPSL’s planned network expansion from 61 to 108 stations by FY27, supported by increased storage capacity and a longer-term push to obtain an OMC license to diversify supply, should ensure growth remains healthy.
IPO to fund strategic expansion
SPSL intends to offer 10% of post paid-up capital in its IPO at a floor and ceiling price of PKR13.5/ share and PKR18.9/ share, targeting proceeds of PKR2.27 billion to PKR3.18 billion. Combined with PKR1.66 billion raised in Pre-IPO proceeds (6.66% of post paid-up capital), total IPO and Pre-IPO proceeds are expected to fund 41-51% of the total investment outlay, with the remainder financed through internal cash generation.
Funds will be deployed across three areas: 1) construction of a 30,000-ton storage terminal at a total project cost of PKR 5.07 billion; 2) construction of 47 new fuel stations at PKR3.18 billion, expanding retail presence to 108 sites; and 3) purchase of 50 additional oil carriage tankers at PKR1.26 billion.
Attractive price with a superior return
At its floor and ceiling price, SPSL is being offered at an attractive discount of 58% to 41% to peers. While the stock appears relatively more expensive on a price-to-book basis at versus the sector average, this premium is justified given SPSL’s ROE of 42% as of CY25, significantly above the peer group average of 11%.
On the risk side, total debt of PKR9.8 billion warrants monitoring in a rising interest rate environment. However, the company’s strong growth trajectory and superior EBITDA margin of 4.4% versus the industry average of 3.0% suggest it is adequately positioned to absorb cyclical macroeconomic pressures.
OMC Sector at a glance
Another leading brokerage house, Taurus Securities has released report on its OMCs universe projecting earnings of PKR28.6 billion for 3QFY26, representing a substantial QoQ increase. This growth is attributable to significant inventory gains (windfall profits) arising from the ongoing US-Israel war on Iran.
Notwithstanding this earnings surge, overall sales are expected to decline marginally, primarily due to a 9%QoQ decrease in HSD sales. To recall, the war has driven a sharp hike in crude prices and created global supply constraints following closure of the Strait of Hormuz. However, Pakistan is unlikely to face a near-term fuel shortage, as the country has sufficient reserves to meet demand with supply ensured through partners in the region.
Sales of Pakistan’s largest oil marketing company, PSO are expected to rise to PKR755 billion, up 6%YoY and gross margin is expected to increase by to 7.2%, primarily due to substantial inventory gains supported by strong RNLG sales recoveries. Further, PSO is expected to report a profit after tax of PKR24 billion and post EPS of PKR51.2 for 3QFY26.
For 9MFY26, net sales of PSO are expected to arrive at PKR2,253 billion, down 4%YoY, mainly due to loss in market share. Moreover, net profit is estimated around PKR36 billion and EPS at PKR77.1.
APL is expected to post net sales around PKR118 billion, up 3%YoY and gross margin is expected to increase to 6%, primarily due to substantial inventory gains. Further, APL is expected to report a profit after tax of PKR4.5 billion, up 73%QoQ. Lastly, APL’s EPS is expected to arrive at PKR 36.3 in 3QFY26.
For 9MFY26, APL’s net sales are expected to rise to PKR359 billion, up 4%YoY. Similarly, net profit is expected to skyrocket to PKR11 billion, up 42%YoY alongside, cumulative EPS of PKR87.9 and DPS at PKR20.