Oil And Gas Sector Q1 Preview - Operationally Strong Results Likely: Prabhudas Lilladher

Prabhudas Lilladher Report

Indian oil sector’s operating profit is expected to increase by 17.7% QoQ to Rs 832 billion given oil marketing companies’ robust performance (Ebitda at ~Rs 383 billion) led by improving marketing margins (blended margin of Rs 9/litre versus Rs 3 in Q4) despite lower refining spreads.

Upstream companies like Oil and Natural Gas Corporation Ltd. and Oil India Ltd. India are expected to maintain production volumes and net crude realisation of ~$76-77 barrel of oil, but gas realisation will be lower at $6.5/metric million British thermal unit (Q4: $8.6).

Indraprastha Gas Ltd./Mahanagar Gas Ltd. will see QoQ earnings growth from lower input prices, while Gujarat Gas Ltd. may suffer due to competition from propane despite softening input prices.

We expect Reliance Industries Ltd.’s oil-to-chemical segment to report muted result due to lower refining, partly compensated by higher petchem margins.

We build in steady telecom performance (+2.9%QoQ revenue growth) as we build in 1.5%QoQ average revenue per user growth while retail revenue growth will be steady.

Hindustan Petroleum Corporation Ltd., Bharat Petroleum Corporation Ltd. remain are our preferred result pick.

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