OMCs Poised For Another Strong Quarter Led By Robust Marketing Margins: Motilal Oswal

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy. .Motilal Oswal Report.Global Brent prices soared to a nine-year high of $96/barrel of oil in FY23 due to the onset of Russia-Ukraine war and active quota management of Organisation of the Petroleum Exporting Countries. However, oil marketing companies had kept retail prices unchanged since April 06, 2022 despite the rise in benchmark prices. As a result, their average marketing losses came in at Rs 0.68/Rs 10.1 per liter on petrol/diesel during nine months-FY23. However, Brent has since then moderated to ~$79/bbl in Q1 FY24 quarter-to-date since demand concerns have overshadowed the impact of production cuts by OPEC. Declining crude prices bode well for OMCs, as their marketing margins improve considerably to ~Rs 10.0/Rs 12.7 per liter on petrol/diesel in Q1 FY24. Considering this recent decline in Brent prices, we cut our crude price estimates to $84/bbl in FY24 from $90/bbl, while maintaining our FY25 estimates at $90/bbl as we expect supply to remain tight in FY25 owing to the recent revision in OPEC+ production targets for CY24.Subsequently, we cut our standalone revenue estimate for Oil India Ltd. by 6% for FY24, while keeping our Ebitda/profit after tax estimates unchanged. We note that our realization assumption – excluding windfall tax – remains unchanged at $70/bbl. We revise our consolidated revenue/Ebitda/profit after tax estimates for Oil and Natural Gas Ltd. by -4%/9%/15% for FY24 due to its investments in Hindustan Petroleum Corporation Ltd.HPCL should be the biggest beneficiary of strong marketing margins; however, it continues to suffer from rising debt and project execution risk..Click on the attachment to read the full report:.Indian Oil Firms Won't Cut Retail Fuel Prices In Next 2-3 Months, Says JPMorgan.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

OMCs Poised For Another Strong Quarter Led By Robust Marketing Margins: Motilal Oswal

HPCL should be the biggest beneficiary of strong marketing margins.

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