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Oil and Gas - Q2FY22 Results Preview Report - HDFC Securities

Posted On: 2021-10-23 09:01:03 (Time Zone: IST)


Mr. Harshad Katkar, Institutional Research Analyst, HDFC Securities and Mr. Nilesh Ghuge, Institutional Research Analyst, HDFC Securities

  • Revenue for the companies in our coverage universe is estimated to increase by ~14% QoQ and ~53% YoY, owing to improvement in demand with unlock post the second wave of COVID-19, improvement in GRMs and oil and gas realisation. We expect higher marketing sales volumes for OMCs, higher gas volumes (YoY) for CGD companies except GUJGA, and improvement in realisation for upstream companies. In turn, we expect EBITDA for oil and gas companies under our coverage to increase ~8% QoQ and ~30% YoY in Q2FY22.
  • OMCs: We expect core GRM of USD 2.9/5.6/3.8bbl for IOCL/HPCL/BPCL, down from USD -0.8/2.8/1.5bbl in Q2FY21, owing to improvement in cracks YoY from gasoline, gasoil, naphtha and ATF, offsetting negative spreads of FO and LPG. Demand has improved, post unlock, with (1) marketing volumes increasing 9-14% YoY and (2) 12-24% YoY increase in refining throughput, partially offset by planned shutdown undertaken by HPCL. The average Brent price is up ~7% QoQ and ~72% YoY to USD 73.3/bbl in Q2. Marketing margins are up ~13-15% QoQ, owing to margin improvement for diesel and petrol.
  • RIL: We expect RIL's consolidated EBITDA to increase by 14% QoQ to INR 266bn. Oil-to-chemicals (O2C) EBITDA/tonne of crude processed is estimated to increase 22% QoQ, owing to improvement in gasoil cracks by 28% YoY and steady petchem margins. We expect EBITDA to increase by 25% YoY to INR24.8bn from its retail segment. We have estimated ~15mn subscriber addition in Q2 and ARPU of INR141.6, up 2.3% QoQ.
  • Upstream players: We expect 51% and 55% improvement in revenue of ONGC and OIL respectively, owing to (1) 72% YoY jump in crude oil prices and (2) higher gas volumes YoY for OIL and ONGC.
  • CGD: The unlock has steadily improved, post the second wave. This should result in bounce-back of CNG volumes for IGL and MGL. We expect GUJGA total volumes to be a bit subdued on rising LNG price affecting industrial demand. Gas cost has increased up to 5% QoQ, we expect this to result margins to dampen by 5-9% QoQ on higher gas cost, as it has not been completely passed through. We expect IGL and MGL to register a volume increase ~18-22% QoQ in Q2, while expect GUJGA volumes to be down 3% QoQ. We expect EBITDA per unit margin of INR 7.5/12.6/7.4/scm for IGL/MGL/GGL.
  • PLNG/GAIL/GSPL: We expect PLNG's revenue to increase 77% YoY to INR 110bn and gross margin to decrease by 4% QoQ to INR 11.9bn, given 95% increase in raw material cost and 14% decrease in total volumes to 218tbtu. We expect GAIL to report an 8% jump in EBITDA sequentially, owing to profitability in gas trading segment and higher transmission volume offsetting lower volumes in petchem. GSPL's average volume is expected to decline by 2% QoQ to 36mmscmd due to higher gas cost impacting volumes in power sector. We estimate GSPL's EBITDA at INR3.6bn and PAT at INR 2.5bn.


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