Informist, Friday, Jul 26, 2024

By Sayantan Sarkar

NEW DELHI – Indian Oil Corp Ltd, the country's largest crude oil refiner and fuel retailer, is expected to report a sharp decline in net profit for Apr-Jun owing to lower refining margins and higher crude oil prices, analysts said. The net profit of the public-sector undertaking for the quarter is expected to decline as much as 82% on year to 24.50 bln rupees during the quarter, according to the average of estimates by 10 brokerages.

The refiner's net profit is also expected to dip nearly 50% sequentially. Among the estimates, the highest and lowest projections for net profit are 35.21 bln rupees and 13.46 bln rupees, respectively.

The performance of oil-marketing companies in the June quarter has been affected by lower diesel and petrol margins. The average gross refining margins are also expected to have fallen to $6.8 per barrel in Apr-Jun from $9.3 per bbl in the same quarter last year, according to Elara Securities.

Nuvama Wealth Management said the benchmark Singapore gross refining margins fell 16% on year due to a fall in global product cracks in Apr-Jun. Gross refining margin is the difference between the price of crude oil and the total value of petroleum products produced by a refinery on a per-barrel basis. It is a key indicator of a refinery's efficiency and profitability.

Indian Oil Corp's top line for the June quarter is expected to rise marginally by 1.2% on year to 2.00 trln rupees. The estimates for the company's revenue range from 1.56 trln rupees to 2.56 trln rupees.

Cash profit from operations, or earnings before interest, taxes, depreciation, and amortisation, is estimated at 82.63 bln rupees for the June quarter, according to the average of projections by nine brokerages. The company is expected to announce its results for Apr-Jun on Tuesday.

According to Nirmal Bang Institutional Equities, the gross refining margin of the state-owned refiner during the June quarter is seen at $7.0 per bbl, down from $8.3 per bbl in the same quarter last year. Refining throughput is also likely to have fallen to 18.0 mln tn in Apr-Jun from 18.8 mln tn in the year-ago period, the brokerage said in a report.

YES Securities expects the refiner's gross refining margin to fall to $6.0 per bbl, while blended gross marketing margin is estimated at 4.7 rupees per ltr during Apr-Jun. Gross refining margin is expected to be $6.5 per bbl, according to Motilal Oswal Financial Services.

A rise in global crude oil prices also dented the refiner's profits in the June quarter. Oil marketing companies tend to make losses when crude oil prices rise as these companies import the commodity, which pushes up their input cost for producing petroleum products. Brent crude prices rose to $85 per bbl in the June quarter from $77.5 a bbl a year ago. Oil prices rose as the Organization of the Petroleum Exporting Countries extended its voluntary production cuts till the end of September, while geopolitical tensions in West Asia continued to threaten supplies from the region. West Asia sits on more than half of the world's known oil reserves.

According to Nuvama, retail margins of Indian Oil Corp are expected to fall sharply during the June quarter. "We estimate diesel margins at 4 rupees/ltr (down 60% year-on-year, flat quarter-on-quarter)," it said in a report. The brokerage also expects a 4% rise on year in domestic retail sales during the reporting quarter.

Since the company announced its Jan-Mar earnings, its shares on the National Stock Exchange have risen 4.6%. Today, the shares ended 0.2% lower at 176.55 rupees.

Following are the Apr-Jun earnings estimates for Indian Oil Corp, in mln rupees, based on 10 brokerage reports:

End

US$1 = 83.73 rupees

Edited by Rajeev Pai

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