• Subdued refining margins, inventory losses may dent IOC’s Q1 profit

    Indian Oil Corporation (IOC) may post a weak set of June quarter results on Wednesday, owing to subdued refining margins and inventory losses. All eyes will be on the management updates on the status of Ennore LNG terminal project and any clarity on LNG tie-up with suppliers, analysts said. Besides, comments on the progress of PP project at Paradeep will also be keenly watched, they said.

    HDFC Securities expects the oil major to report a 68.90 percent YoY in profit after tax (PAT) at Rs 2,124 crore for the quarter. It sees Ebitda margin to contract 446 basis points sequentially and 555.4 bps YoY

    Net sales for the quarter is seen coming at Rs 1,36,490 crore, up 8.1 percent QoQ and 5.4 percent YoY,
    HDFC Securities said the oil major may report a core gross refining margin (GRM) of $3.9 per barrel and crude inventory loss of $0.4 per barrel. The company’s GRM stood at $4.09 a barrel level in March quarter.

    “Inventory loss may come around Rs 510 crore and forex loss of Rs 570 crore for the June quarter,” HDFC Securities said.

    In the Jan-March quarter of FY19, the company had posted an inventory gain of Rs 2,655 crore.

    Nirmal Bang said IOC’s petrochemical segment revenues are likely to fall 10 percent YoY, while the segment’s Ebitda margin is expected to come in 500bps lower at 26 percent.

    “We expect overall revenues to fall 12.8 percent at Rs 1,12,900 crore and Ebitda margins to be down 334bps to 6.4 percent. This is likely to result in 53.5 percent fall in PAT to Rs 3,170 crore,” the brokerage added.

    HDFC Sec expects IOC’s marketing volumes to go up by 5 percent year-on-year (YoY) to 22.8mmt. “Blended marketing margin should go down by 27.2 percent QoQ to Rs 4.2 per litre, while refinery crude throughput is likely to be 17.6mmt against 17.4mmt in 4QFY19,” said the brokerage.

    Brokerage Nirmal Bang Securities thinks IOC seems to have suffered pressure on petrochemical margins due to weak global demand and spreads for naphtha crackers.

    “We expect IOC to report declines of 24.5 percent in GRMs ($7.7 per barrel) and 2 per cent in product sales volume,” said the brokerage.

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