Indian Oil Corp Q3 Results Preview: Net Profit, Ebitda Could Fall On Refining, Marketing Struggles

Indian Oil Corp. might post weak third-quarter earnings due to a potential impact on its marketing segment, as diesel marketing margins went into negative territory during the quarter. The 15.07% decline in Brent crude prices could also result in significant inventory loss for the company.

Net profit of the public sector undertaking is expected to fall 54.4% quarter-on-quarter to Rs 5,950.10 crore in the October–December period, according to Bloomberg consensus estimates. Ebitda margin is estimated to decline 590 basis points.

• Revenue may rise 18% to Rs 2.12 lakh crore.

• Ebitda may fall 35.02% to Rs 15,097.40 crore.

• Margin may fall to 7.1% vs 13%.

• Net profit may fall 54.40% to Rs 5,950.10 crore.

Brokerages expect lower earnings for Indian Oil Corporation on a sequential basis. Emkay Global Financial Services Ltd. expects OMC earnings to decline due to lower gross refining margins, weak marketing segment margins and high inventory loss.

Brent prices fell 15.07% to an average price of $84 per barrel in Q3 FY24, the brokerage noted.

H1 FY24 saw oil marketing companies experience multi-year high refining margins. However, during Q3, benchmark gross refining margins fell by a $4.1-5.5 per barrel range, according to Jefferies.

This decline was mainly on the back of a fall in gasoline, diesel and aviation turbine fuel spreads, CLSA said.

Diesel spreads dropped 21% quarter-on-quarter, Jefferies noted, attributing it to the resurgence of Russian exports following the temporary lift of the ban in October. Despite this, diesel demand remained subdued due to a decline in industrial activities.

Brent price averaged at $84 per barrel in Q3, down 3% QoQ, closing $19 per barrel lower at $78 per barrel between the two quarter ends. Due to this drop in crude price, Emkay expects refining inventory loss of $2.5-3 per barrel for Indian oil marketing companies.

Brokerages expect Indian Oil's profitability to be affected this quarter as they expect its marketing margins to take a hit.

Despite the quarter end cool-off in crude prices, the average marketing margins on diesel did move into negative territory during the quarter. According to Jefferies, diesel marketing margins fell to negative Rs 1.4 per litre. This would more than offset the 20% improvement in petrol marketing margins to Rs 6.9 per liter, according to Emkay.

Kotak Securities Ltd. expects a marginal 1% rise in Indian Oil's Q3 revenue. Net profit is expected to fall 77% sequentially, while Ebitda is also estimated decline 63%, it said.

Jefferies also expects a 76% and 92% drop in Ebitda and net profit respectively, in Q3 FY24.