Oil & Gas Q4 Preview— Weak Results With Rising LPG Under-Recover, Projects Dolat Capital; HPCL Among Top Picks

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Dolat Capital Report

In Q4, our Oil and Gas coverage experienced a sharp decline, with Ebitda likely down by 15% YoY/12% QoQ to Rs 762 billion and PAT down by 32% YoY/24% QoQ to Rs 319 billion. Key factors impacting growth include-

1. A weak GRM of $3.1/barrel of oil (Singapore.), coupled with moderation of super normal Gross marketing margins on Auto fuel to Rs 8.2/litres and rising burden of LPG under-recovery (Rs 15.6/kg versus Rs 13.2/kg in Q3) that may drag OMCs earnings;

2. Reliance’s consolidated Ebitda expected to decline on the back of weak O2C, while the rebound in retail and telecom to support earnings;

3. Despite a partial restoration of APM allocation for CNG, overall gas cost for city gas distributions stands pressurized mainly due to 3% Rs depreciation, sharp jump of 74% QoQ in HH gas price and elevated spot LNG price, thereby leading to expected declines in Ebitda/PAT of 21%/25% YoY for CGDs (however, sequentially, there may be an improvement in earnings mainly due to price hikes).

Furthermore, in Q4 FY25, India's LNG imports declined 9% YoY, and Petronet LNG Ltd.'s re-gasification volume growth slowed primarily due to a loss in market share. Petronet LNG witnessed a 7% decline in market share over the past year due to competition from other LNG terminals.

Our Top Picks are HPCL and Reliance Industries, while we also see potential for a positive surprise from GAIL, particularly on gas trading margins.

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