Mr. Harshad Katkar & Mr. Nilesh Ghuge, Institutional Research Analyst, HDFC Securities
- Revenue for our coverage universe is likely to decline by ~22% YoY owing to the lockdown and a sharp correction in crude oil and gas prices. This has resulted in a decline in sales for OMCs, GAIL and CGD entities and lower realisation for upstream companies. We expect EBITDA for oil and gas companies under our coverage to decline by ~26% YoY in 2Q owing to lower refining margins and per unit EBITDA margins for CGD companies.
- OMCs: We expect core GRM of USD 2.0/-1.5/1.1bbl for IOCL/HPCL/BPCL, down from USD 4.3/-0.9/1.9 owing to fall in spreads for gas oil, ATF, FO, LPG. The 1-11% QoQ jump in refining crude throughput and ~9% increase in marketing sales volumes will boost earnings for OMCs. However, a sequential fall in marketing margins could offset it. The average Brent price is up 36% QoQ to USD 42.7/bbl in the quarter. Marketing margins were down >30% QoQ owing to lower margins for diesel and petrol.
- RIL: We expect RIL's consolidated EBITDA to increase by 12% QoQ to INR 189bn. Refining business should be weak owing to lower volumes, offset by an increase in GRM. An increase in production will drive Petchem performance. We expect EBITDA of INR15.3bn from its retail segment. We have estimated 12.5mn subscriber addition in 2Q and ARPU of INR145, up 3.5% QoQ.
- Upstream players: We expect a 35% and 22% improvement in revenue of ONGC and OIL respectively owing to (1) 36% QoQ jump in crude oil prices and (2) prices of VAPs.
- CGD: Easing of lockdown in NCR and Mumbai has resulted in sharp recovery in CNG volumes in 2Q. We expect per unit margin expansion QoQ owing to (1) higher volumes resulting in operating leverage and (2) price hike. GGL's earnings could also jump sharply on account of a sharp recovery in industrial segment volumes to near pre-COVID levels. We expect our coverage universe to register a volume increase of ~73-118% QoQ in 2Q. We expect EBITDA per unit margin of INR 6.6/9.0/4.3/scm for IGL/MGL/GGL.
- PLNG/GAIL/GSPL: We expect PLNG's revenue to increase by 21% QoQ to INR59bn while expecting gross margin to swell by 11% QoQ to INR11.6bn, given 14% jump in total volumes to 217tbtu. We expect GAIL to report 2.4x jump in EBITDA sequentially, owing to the improvement in profitability of all segments. GSPL's average volume is expected to improve by 26% QoQ to 42mmscmd owing to strong demand. We estimate GSPL's EBITDA and PAT at INR4.5bn and INR3.3bn respectively.