Oil, Gas Q4 Results Preview - Reliance Industries, Gas Utilities, CGDs Are Major Drivers: Dolat Capital

Dolat Capital Report

In Q4 our oil and gas coverage universe showed strong growth YoY, with Ebitda likely to be up by +9% QoQ/+8% YoY to Rs 786 billion and profit after tax up +14% QoQ (down 5% YoY) to Rs 392 billion.

Key factors contributing to growth-

1. Reliance Industries Ltd.'s oil-to-chemical to post jumbo profits on higher gross refining margin with very minimal impact of SAED (more than $0.1/barrel of oil), higher refining throughput, and better Petrochemical spread;

2. gas utilities to benefit from peak gas demand in India with GAIL India Ltd. most likely to post bumper gas trading margins and Petronet LNG Ltd.'s Dahej/Kochi terminal asset utilisation to touch 98%/28%;

3. City gas distributions volume growth and Gujarat Gas Ltd. margin improvement (QoQ) to be major earning drivers; and

4. sequential improvement in GRM with inventory gain to support oil marketing companies earnings.

Our Top Picks are Indraprastha Gas Ltd., Mahanagar Gas Ltd., and GAIL.

Positive Surprise: Gujarat Gas may post better than expected unit Ebitda on softer spot LNG prices and GAIL may surprise on gas trading margins.

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