Indian oil marketing companies are likely to report a muted Q2FY25 compared to last year owing to lower gross refining margins, as per analysts. However, the sequential earnings trend shows a marginal improvement.
“HPCL (Hindustan Petroleum Corp) is likely to be impacted by a potential $7.8per barrel drop YoY in GRMs ($5.9 per barrel drop in Singapore GRM YoY), which is a function of both lower product spreads as well as our assumption of inventory loss in Q2FY25, partly offset by strength in diesel and petrol retail margins,” ICICI Securities said in its preview.
The Singapore GRM in the first half of FY25 has averaged only $3.6 per barrel, reflecting the effects of a subdued oil demand environment, as per Motilal Oswal.
Indian Oil Corp may see similar trends, helped by a small improvement in its Petchem segment’s earnings.
“YoY performance remains sharply lower, owing to sharply lower GRMs and higher depreciation or interest costs,” the preview said. ICICI Securities estimate EBITDA or profit after tax for the two companies to increase 26% and 78% sequentially but decline 54% and 71% from the corresponding quarter of last year, respectively.
The country’s upstream companies are expected to witness marginal growth in their net crude realisations from the previous quarter due to a slight lag in windfall tax adjustments compared to changes in prices of Brent crude.
“Due to a slight lag in windfall tax adjustments in Q2FY25, relative to changes in Brent crude prices, net crude realisations are set to show nearly $2 per barrel improvement QoQ,” ICICI Securities said.
The firm sees limited change in effective gas realisations, with a cap of $6.5 per MMBtu. Oil India and Oil and Natural Gas Corp are expected to deliver a similar trend in oil & gas production, with both companies likely showing 1% each on-quarter improvement in their oil and gas output.
“Overall, EBITDA for both upstream companies may improve 1% QoQ and 1% YoY, while PAT (profit after tax) will likely improve by 4% on a QoQ basis with a decline of 12% YoY,” as per ICICI Securities.
City gas distribution companies on the other hand are likely to show mixed results. While Mahangar Gas’s volume may jump sequentially by 3% with an annual growth at a robust 11%, Indraprastha Gas is likely to report a muted growth in its volume sequentially with a healthy annual growth of 5% for the quarter.
“A sharp slowdown in Morbi volumes and seasonal factors drive a material 17% QoQ decline in volumes for Gujarat Gas, but EBITDA/PAT are supported by stronger margins, due to lower Spot LNG offtake and moderate LNG prices,” as per the brokerage.
As per analysts at ICICI Securities, there could be some improvement in the percentage of APM allocation in the second quarter which supports margins for all the three CGDs.
“While EBITDA trends for upstream (up 1% YoY) and gas utilities (up 10% YoY) are positive, PAT may decline 12% and 6%, respectively, due to lower other income and higher interest costs,” it said.
The three gas utilities – Petronet LNG, Gujarat State Petronet, and GAIL show a mixed set of earnings, with strong annual growth for GAIL and Petronet LNG but weak trends for GSPL.
“Higher transmission and trading volumes support GAIL’s earnings but we have conservatively factored in muted trading margins for the quarter,” the brokerage said. “Petchem segment could see the benefit of lower gas costs and LPG segment may see weaker realisations dragging earnings.”
Petronet LNG could see strong volume momentum and higher margins owing to soft LNG prices and GSPL may see sharply lower volume run-rate in Q2FY25E vs Q1FY25, it said.
From: financialexpress
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