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Informist, Thursday, Feb. 27, 2025

 

By Akshay V. Johnson

 

MUMBAI – Only three of the 10 oil and gas companies that are part of the Nifty 200 index, and for which consensus estimates are available, met analysts' expectations of a 2.1% net profit growth for the sector in the December quarter, while seven did not meet the Street view. The outperformers were Bharat Petroleum Corp. Ltd., Hindustan Petroleum Corp. Ltd., and Reliance Industries Ltd. There were no estimates available for Adani Total Gas Ltd., the eleventh Nifty 200 company in the sector.

 

On revenue, eight companies met or exceeded the consensus view for revenue growth for the sector in Oct-Dec, though only three of them reported growth in revenue. The outperformers on revenue growth were GAIL (INDIA) Ltd., Indraprastha Gas Ltd., and Reliance Industries. Mangalore Refinery and Petrochemical Ltd. and Petronet LNG Ltd. did not meet the Street's expectation on revenue growth. 

 

Of the 10 companies for which consensus estimates were available, only three companies' net profit for the December quarter beat the individual company estimates. Seven companies did not meet the consensus view at company level.

 

The net profit growth for the Nifty 200 oil and gas sector companies, excluding Adani Total Gas, missed the Street's estimate but the revenue growth for the sector beat expectations.

 

The net profit of companies in the sector fell nearly 10.6% on year, excluding Adani Total Gas, while analysts had estimated the sector to report a net profit growth of 2.1%. Even after including Adani Total Gas, the fall in the net profit for the sector was similar. This is the third consecutive quarter of fall in net profit for the sector. Including exceptional items, the sector's net profit fell only 3.7%. On aggregate, the sector had an exceptional gain of INR 31.20 billion, which accounted for 7.6% of the net profit.

 

Of the 11 companies in the sector, only four have reported an on-year rise in net profits. In terms of the net profit growth for the sector, Hindustan Petroleum had the highest contribution with an absolute net profit growth of INR 24.94 billion. This absolute change accounts for nearly 6% of the aggregate net profit for the sector.

 

The aggregate revenue for the sector rose slightly on year, beating analysts' estimates who expected the revenues to fall by more than 5%. The revenue growth for the companies in the sector, after including Adani Total Gas, was also up marginally on year.

 

This is the fourth consecutive quarter of revenue growth for the sector. However, of the 11 companies in the sector, only four have reported an on-year rise in revenue. Reliance Industries, which accounted for more than 31% of the aggregate revenue for the oil and gas sector, did bulk of the heavy lifting in terms of revenue growth. If Reliance's revenues were same as the year-ago quarter, the revenue for the oil and gas sector would have fallen nearly 2%.

 

Of the 10 companies in the sector for which estimates are available, seven companies' revenue have beaten the Streets' estimates at company level. On a sequential basis, the aggregate net profit for oil and gas companies rose 14%, and revenue rose 6.6%.

 

The aggregate net profit margin for the sector contracted to 5.71% from 5.94% in the year-ago quarter. However, this is the second consecutive quarter of sequential improvement in net profit margins. The net profit margin was 5.12% in the September quarter and 4.70% in the June quarter.

 

The total expenses for the oil and gas companies rose 0.6% on year. Cost of materials consumed and purchases of stock-in-trade, which together accounted for 80% of the total expenses, fell 5% and 3.5% respectively. The rise in total expenses for the sector was driven by a 17% rise in other expenses and a more than 6% rise in depreciation and amortisation. These together accounted for more than 14% of the total expenses. Sequentially, total expenses of the sector rose 5%.

 

As of Sept. 30, the total debt for the sector was INR 6.13 trillion, up more than 18% on year. Indian Oil Corp. and Reliance Industries were the major drivers for this, with an on-year rise of 43.6% and 13.8%, respectively. Indian Oil's total debt increased by INR 622 billion, while Reliance's total debt increased by INR 462 billion.

 

 

OIL MARKETING COMPANIES

The net profit growth for oil marketing companies that are a part of the Nifty 200 index was below analysts' expectations due to weak refining margins and a significant drop in net profit for Indian Oil Corp. The net profit for the downstream players fell 17.8% on year in the December quarter. Analysts had estimated the aggregate net profit for these downstream companies to rise more than 11% in the quarter. Indian Oil reported an exceptional gain of INR 6.80 billion. Including this exceptional gain, the sector's net profit fell only 12.3% as against the 17.8% drop expected after excluding exceptional items.

 

However, sequentially, profits of these companies rose more than seven-fold. This was largely because of a sequential improvement in gross refining margins, which were however still lower on an on-year basis.

 

A 17% on-year growth in other income played a huge part in limiting the slowdown in net profit growth. If the other income had been the same as the year-ago quarter, net profit for the sector would have fallen 21.6% against the expected 17.8?ll.

 

Bharat Petroleum Corp. and Hindustan Petroleum were the best performers among the oil marketing companies. Bharat Petroleum Corp.'s net profit grew 37% on year due to a fall in crude oil prices and lower finance costs, which led to a fall in its total expenses. Hindustan Petroleum's net profit increased more than five-fold due to a weak base and lower expenditure.

 

Despite the good performance of these two companies, the aggregate net profit for the oil marketing companies still fell on year, mainly due to a 64% on-year fall in net profit reported by Indian Oil Corp. This was largely on account of a higher base in the year-ago quarter. For the December quarter of 2023, Indian Oil Corp. had accounted for more than 65% of the total net profit of oil marketing companies. However, this share fell to 26% in the latest quarter.

 

On the revenue front, oil marketing companies performed better than the Street's estimates with revenue falling over 2% in the December quarter. Analysts had estimated the aggregated revenue to fall more than 10% on year. Sequentially, the revenue rose more than 9%.

 

All four oil marketing companies in the Nifty 200 index reported an on-year fall in revenue. Mangalore Refinery & Petrochemicals was the worst performer with an over 11% on-year decline in revenue.

 

The aggregate total expenses of oil marketing companies fell 1.7% on year. Cost of materials consumed and purchases of stock-in-trade, which together accounted for nearly 87% of the total expenses of the oil marketing companies, fell 6.6% and 8% respectively. Sequentially, the total expense grew nearly 7%.

 

UPSTREAM COMPANIES

The net profit growth of upstream oil companies that are a part of the Nifty 200 was below analysts' expectation due to lower realisations on account of a fall in crude oil prices. The net profit of these companies fell 2.6% on year in the December quarter. Sequentially, the aggregate net profit fell 7.8%.

 

Reliance Industries was the best performer among the upstream companies with a consolidated net profit growth of more than 7% on year. The company was able to beat the Street's estimate as its oil-to-chemicals and retail businesses performed slightly better than expected. RIL accounted for more than 66% of the aggregate net profit of the upstream companies.

 

However, the performance of Oil and Natural Gas Corp. and Oil India dragged down the aggregate net profit for upstream companies. ONGC's net profit for the December quarter fell nearly 17% on year due to a fall in realisations. Oil India's net profit for Oct-Dec fell nearly 23% on year.

 

The performance of both these companies was affected by an exceptional fall in other income. ONGC's other income saw a 47?ll, while Oil India saw a 63?ll in this metric. However, the revenue growth for the upstream companies was above estimates with more than 5% growth. Analysts had estimated the aggregate revenue for the sector to grow nearly 3%. Sequentially, the aggregate revenue grew 3%.

 

Reliance Industries was the best performer with a near 7% on-year consolidated revenue growth at INR 2.4 trillion. Revenue from oil-to-chemical, RIL's largest vertical, posted an on-year growth of 6% to INR 1.50 trillion. The growth in this segment was primarily on account of higher production as compared to the same period last year, which had planned maintenance and inspection shutdown of major units. Revenue from the company's oil and gas exploration business fell 5% on year to INR 63.70 billion. The fall in revenue in this segment was due to lower production from its KG-D6 block, which offset the positive impact of a slightly higher price of gas from this block.

 

The aggregate revenue for the upstream companies was pulled down by the lower-than-expected earnings of Oil India, which reported 1.6?ll in revenue. ONGC outperformed the Street's estimate with revenue declining just 3%.

 

The total expenses of upstream companies rose nearly 5% on year. This was driven by a 3% rise in purchases of stock-in-trade, an 11% rise in depreciation and amortisation costs, and a 17% rise in other expenses. These three expenses together constituted more than 50% of the total expenses of the upstream companies. Sequentially, the total expenses grew more than 2%.

 

GAS SECTOR

The aggregate net profit for gas stocks that are part of the Nifty 200 index fell 41% on year in Oct-Dec, which was more than the Street's estimates of 20?cline. GAIL (India) posted a one-time gain of INR 24.40 billion on account of settlement of litigation with one of its liquefied natural gas suppliers. Including this exceptional gain, the sector's net profit for the quarter rose 12.2% on year. 

 

GAIL was the worst performer among the gas companies, with net profit contracting 50% on year. However, including the exceptional gain, the company's net profit grew 36%. The company's operating performance was poor due to flat transmission volumes and moderation in its gas trading margins.

 

The net profit of all other companies in the sector fell during the quarter. Indraprastha Gas and Petronet LNG were the worst performers with more than 27?ll in net profit each. Petronet LNG's profits were hit by flat volumes and a loss of market share.

 

Indraprastha Gas' profits were hit due to a cut in the gas allocated to the company. In October and November, the government had cut supplies of low-priced natural gas produced from oil fields to city gas distributors by as much as 40% on the back of dwindling gas output. The fall in the company's net profit was curtailed because of more than doubling of other income. If the other income had been the same as the year-ago quarter, the company's net profit would have declined more than 46%.

 

On the revenue front, the gas companies performed better than the Street's estimates. The aggregate net revenue for gas companies fell just 2.8% on year. Excluding Adani Total Gas, the aggregate revenue fell more than 3%. Analysts had estimated the sector to report a 6% on-year fall in revenue.

 

The aggregate revenue for the gas companies was dragged down by the 17% on-year fall in revenue of Petronet LNG. All other Nifty 200 gas companies reported an on-year growth in revenue, with Adani Total Gas being the best performer with a 12% on-year growth in revenue. In absolute terms, GAIL was the best performer as its revenue grew by INR 7 billion.

 

The aggregate total expenses of the gas sector grew marginally on year. Purchases of stock in trade, which accounted for 63% of the total expenses, grew more than 12%, while cost of materials consumed fell more than 11% on year. Sequentially, the total expenses rose more than 5%.

 

The following table shows the performance of the 11 companies in the oil and gas sector vis-a-vis the consensus estimate for each company as well as against the consensus estimate for the oil and gas sector and the Nifty 200 index.

 

			Nifty 200 Q3 PAT growth 8.8%	Nifty 200 Q3 PAT growth consensus estimate 10%				Nifty 200 Q3 revenue growth 5.5%	Nifty 200 Q3 revenue growth consenus estimate 4%
Company	PAT beat analysts' estimate	Adjusted PAT growth %	Adjusted PAT growth estimate %	PAT beat sector estimate	PAT beat Nifty 200 estimate		Revenue beat analysts' estimate	Revenue growth %	Revenue	Revenue beat sector estimate	Revenue beat Nifty 200 estimate
									growth
									estimate %
Adani Total Gas Ltd.	NA	-19.4	NA	NA	NA		NA	11.96	NA	NA	NA
Bharat Petroleum Corp. Ltd.	No	36.85	45.1	Yes	Yes		Yes	-2.02	-9.83	Yes	No
GAIL (INDIA) Ltd.	No	-49.79	-15.66	No	No		Yes	2.05	-3.01	Yes	No
Hindustan Petroleum Corp. Ltd.	No	471.42	509.03	Yes	Yes		Yes	-0.72	-9.87	Yes	No
Indian Oil Corp. Ltd.	No	-72.79	-31.01	No	No		Yes	-2.61	-10.55	Yes	No
Indraprastha Gas Ltd.	Yes	-27.1	-43.17	No	No		Yes	5.7	2.91	Yes	Yes
Mangalore Refinery and Petrochemicals Ltd.	Yes	-21.41	-74.16	No	No		No	-11.34	-10.45	No	No
Oil and Natural Gas Corp. Ltd.	No	-16.7	-1.08	No	No		Yes	-3.08	-8.93	Yes	No
Oil India Ltd.	No	-22.88	-2.54	No	No		No	-1.58	0.28	Yes	No
Petronet LNG Ltd.	No	-27.18	-24.15	No	No		No	-17.09	-14.46	No	No
Reliance Industries Ltd.	Yes	7.38	3.27	Yes	No		Yes	6.62	4.54	Yes	Yes

 

The following table shows the profit margins of the 11 oil and gas companies that are a part of the Nifty 200.

 

	PAT Margin for Dec-24	PAT Margin for Dec-23	PAT Margin for Sept-24
Nifty 200	11.87%	11.51%	11.37%
Oil & Gas sector	5.71%	5.94%	5.12%
Company	PAT Margin for Dec-24	PAT Margin for Dec-23	PAT Margin for Sept-24
Adani Total Gas Ltd.	11.00%	15.28%	15.23%
Bharat Petroleum Corp. Ltd.	4.11%	2.94%	2.33%
GAIL (INDIA) Ltd.	11.07%	8.30%	8.12%
Hindustan Petroleum Corp. Ltd.	2.74%	0.48%	0.63%
Indian Oil Corp. Ltd.	1.48%	4.05%	0.10%
Indraprastha Gas Ltd.	7.60%	11.03%	11.66%
Mangalore Refinery and Petrochemicals Ltd.	1.39%	1.57%	-2.73%
Oil and Natural Gas Corp. Ltd.	24.44%	28.43%	35.37%
Oil India Ltd.	23.32%	29.76%	34.96%
Petronet LNG Ltd.	7.09%	8.07%	6.51%
Reliance Industries Ltd.	7.73%	7.67%	7.15%

 

End

 

Edited by Tanima Banerjee

 

 

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