The rising global uncertainty and declining trend in refining margins have forced the three state-owned oil marketing companies to a weaker start to the current financial year 2024-25. With peak earnings of FY24 fading away, the three OMCs are now likely to report lower gross refining margins in the third quarter of the current fiscal too, taking a hit on their profitability, as per analysts. On a sequential basis, the downstream companies may see some improvement.
In the second quarter of FY25, the three oil marketing companies – Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp reported weak earnings owing to lower gross refining margins and under recoveries made on LPG.
“BPCL’s and HPCL’s reported Q2FY25 financial performance was significantly below our expectations, mainly due to a weaker refining margin. LPG under recoveries have largely remained in line with the Q1FY25 trend,” said Motilal Oswal in its report. “Overall, the gross refining margins remain muted in October 2024, along with the oil demand outlook.”
Also Read No help from government? THIS Bihar village took on the system and built their own bridge- Here’s how India-China Relations Thaw: Verification Patrolling Marks a New Beginning Q2FY25 Review: IT sector saw moderate deal wins, weak second half outlook, says JM Financial India not looking for gains from US-China trade tensions: Piyush Goyal
Also ReadTrump triumph augurs well for India: Kiran Mazumdar Shaw
The firm highlighted that Singapore gross refining margin has been averaging $3 per barrel in October 2024 against $3.6 per barrel in the second quarter of FY25, implying that refining might remain under pressure in the third quarter as well.
IOCL reported a chemical EBIT (earnings before interest and taxes) loss of Rs 91.6 crore as weak margins offset the 3% QoQ volume rise, Nuvama Institutional Equities said. “Valuations remain expensive (close to long-term average), baking in strong earnings growth of the past few quarters,” it said, adding that further deterioration (in earnings) is underway.
While refining margins have taken a hit due to volatility in the crude oil prices, the three OMCs continue to generate strong marketing margins on petrol and diesel currently, as per analysts. Despite a dismal Q2FY25 earnings performance, analysts at Motilal Oswal believe Q3FY25 profitability to improve further on a sequential basis on the back of strong marketing margins.
» Read More
