PACRA Maintains the Entity Ratings of Pakistan Oxygen Limited

The ratings reflect the eminent position of Pakistan Oxygen Limited ("the Company" or "POL") in the industrial & medical gases, welding, hardgoods, and Medical Engineering Services (MES) segments. The Company maintains a leading footprint and broad customer outreach within Pakistan's structured industrial and medical gases industry. In the electrodes segment, POL leads the Tier-I category while also maintaining a notable presence in the largely unorganized Tier-II and Tier-III markets. On the domestic front, total ASU production capacity stands around ~1,500 TPD, concentrated primarily between the sector's major players. The sector remains organized and concentrated, with Pakistan Oxygen Limited being one of the key players driving production capacity and market leadership. The demand for medical gases is intrinsically linked to improvements in healthcare infrastructure. This sector is currently benefiting from expanding hospital networks and a general increase in health awareness. The demand for industrial gases, on the other hand, is closely tied to the output of large-scale manufacturing (LSM), which grew by ~6.1% in FY26, its strongest performance in four years, with 16 of the sector's 22 sub-sectors posting positive growth, including food, textiles, wearing apparel, automobiles, beverages, and electrical equipment. Moderating policy rates, easing inflation, and improving macroeconomic conditions supported this broad-based industrial recovery through the year, though the sector remains exposed to rising energy costs. During CY25, the Company reported revenue of ~PKR 13.0bln, a growth of ~15% over ~PKR 11.3bln in CY24, driven by steady volumetric growth alongside an effective pricing strategy. Margins improved markedly, with gross margin rising to ~40.2% (CY24: ~27.0%), mainly on account of electricity cost declining to ~31% of total cost of goods sold (CY24: ~40%), following the commissioning of the Company's energy-efficient 270 TPD Air Separation Unit at Port Qasim. This growth momentum continued into the first quarter of CY26, with 3MCY26 revenue rising further to ~PKR 3.6bln and gross margin improving further to ~43.6%. The ratings reflect the sustained improvement in the Company's profitability profile and growth trajectory, which are expected to continue, as evidenced by POL's financial projections. POL benefits from a strong governance framework, recently reinforced through the reconstitution of its Board in January 2026, supported by a skilled and experienced management team. The Company's financial risk profile reflects a marked strengthening in coverage metrics, though the working capital cycle has shown some elongation more recently. The capital structure reflects continued deleveraging, with the Company's reliance on long-term borrowings, alongside short-term borrowings deployed for working capital management. Going forward, POL is investing in expanding its hydrogen production by establishing a new 500 Nm³ hydrogen electrolyzer facility at Port Qasim. The project builds on the Company's earlier hydrogen investment, which is backed by a 15-year supply agreement with a leading specialty chemicals customer, further strengthening POL's position in the hydrogen segment.
The ratings remain dependent on POL's ability to sustain its market share through effective utilization of its production capacity, particularly amid intensifying competitive pressure within the sector. Continuity of governance oversight following the Company's recent board transition, prudent management of the working capital cycle, and sustained improvement in the margin and profitability trajectory in line with the Company's projections will remain important.

About the Entity
Pakistan Oxygen Limited was incorporated in Pakistan in 1949 as a Public Limited Company and has been listed on the Pakistan Stock Exchange since 1958. The Company is involved in the manufacturing and marketing of industrial and medical gases, welding electrodes, and medical equipment, alongside the provision of Medical Engineering Services. Mr. Siraj Ahmed Dadabhoy is identified as the major beneficial shareholder. The Board comprises ten members, while Mr. Shahid Mehmood Umerani serving as the Chairman of the Board.