Earnings Outlook
High base to drag down IOC's Oct-Dec PAT, revenue on year
This story was originally published at 14:04 IST on 24 January 2025
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By Narayana Krishna
HYDERABAD - Higher base related to inventory gains is likely to drag down Indian Oil Corp. Ltd.'s December quarter earnings on a year-on-year basis, according to analysts. The country's largest state-owned crude oil refining and retail fuel marketing company is expected to report a 31% on-year fall in its net profit to INR 55.6 billion, according to the average of estimates from 13 brokerages. The revenue for the quarter is seen falling 11% on year to INR 1.78 trillion, the average of estimates showed.
Sequentially, Indian Oil Corp. is expected to report robust growth in net profit due to lower base and improved refining and marketing margins, analysts said. The global crude prices were relatively softer in Oct-Dec, compared to the previous quarter, leading to likely improvement in profitability of oil refining and marketing companies. While the net profit is seen rising oer 30 times sequentially, the revenue is seen up 2%.
There are huge variations in analysts' estimates for Indian Oil Corp.'s net profit for the latest quarter. The net profit ranges from INR 34.5 billion, the lowest, by Elara Securities (India) Pvt Ltd., to INR 94.4 billion, the highest, by ICICI Securities Ltd. The revenue estimates range from INR 1.34 trillion, the lowest by ShareKhan Ltd., to INR 2.44 trillion, the highest by Motilal Oswal Financial Services Ltd. Indian Oil Corp. will declare its Oct-Dec earnings on Monday.
During the December quarter of 2023, Indian Oil Corp. reported an exceptional inventory gain of $3.6 per barrel, taking the gross refining margin to $13.5 per barrel, boosting its net profit to INR 80.6 billion and a higher base. For the previous quarter (Jul-Sept), the company's net profit was significantly low at INR 1.8 billion due to weak refining and marketing margins and continued losses in its liquid petroleum gas business.
Most analysts expect Indian Oil Corp.'s sequential performance to be better on stronger refining and marketing margins, while the on-year performance is seen impacted by a higher base.
ICICI Securities said that oil marketing companies are likely to see quarter-on-quarter improvement in the December quarter, led by stronger refining and marketing margins. The impact of inventory losses and weaker gross refining margins seen in Jul-Sept is expected to ease in the current quarter, ICICI Securities said.
Kotak Institutional Equities expects Indian Oil Corp.'s reported earnings before interest, tax, depreciation and amortisation, or EBITDA, to decline 19% on year, attributed to a higher base from adventitious gains in the previous year. However, EBITDA is likely to triple sequentially due to higher auto fuel marketing margins and improved refining performance, partially offset by higher losses on domestic liquified petroleum gas, the brokerage said.
According to Nuvama, the oil major's EBITDA is expected to decline 9% on year but jump fourfold sequentially due to better refining margins and robust marketing margins. Retail margins for diesel and petrol are estimated at INR 9 per litre and INR 13 per litre, respectively. Motilal Oswal said that marketing margins for motor spirit and high-speed diesel improved 30% and 32%, respectively, on a sequential basis.
According to an average of estimates from 11 brokerages, Indian Oil Corp.'s EBITDA for the quarter is seen at INR 204.2 billion.
At 1351 IST, shares of the company traded 0.6% lower at INR 129.10 on the National Stock Exchange.
Following are the Oct-Dec earnings estimates for Indian Oil Corp. Ltd. based on reports from 13 brokerage firms in the descending order by the estimate of net profit:
Brokerage name | Net Sales | Net Profit | EBITDA |
-------(In INR million)------- | |||
ICICI Securities Ltd | 18,20,500.00 | 94,400.00 | 1,73,500.00 |
Dolat Capital Market Pvt Ltd | 19,17,500.00 | 72,200.00 | 1,38,700.00 |
Nuvama Wealth Management Ltd | 16,54,507.00 | 66,488.00 | 1,43,154.00 |
Sharekhan Ltd | 13,36,720.00 | 61,140.00 | -- |
YES Securities (India) Ltd | 13,36,722.00 | 61,140.00 | -- |
Kotak Institutional Equities | 17,76,889.00 | 58,905.00 | 1,24,769.00 |
Nomura Equity Research | 18,64,600.00 | 53,700.00 | 1,21,500.00 |
JM Financial Institutional Securities Pvt Ltd | 19,15,632.00 | 48,216.00 | 1,13,860.00 |
Emkay Global Financial Services Ltd | 18,02,657.00 | 47,566.00 | 1,21,317.00 |
Nirmal Bang Equities Pvt Ltd | 17,91,709.00 | 46,077.00 | 1,07,898.00 |
Motilal Oswal Financial Services Ltd | 24,42,535.00 | 42,667.00 | 1,02,806.00 |
Prabhudas Lilladher Pvt Ltd | 16,84,400.00 | 36,100.00 | 9,61,000.00 |
Elara Securities (India) Pvt Ltd | 18,08,961.00 | 34,535.00 | 1,37,627.00 |
ICICI Securities Ltd | 18,20,500.00 | 94,400.00 | 1,73,500.00 |
Average | 17,81,025.54 | 55,625.69 | 2,04,193.73 |
End
US$1 = INR 86.19
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Tanima Banerjee
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