OMCs trade firm in a range-bound market; IOC, HPCL, BPCL surge up to 5%

After two tight quarters of profit-margin shrinkage due to global volatility, Indian OMCs are expected to see reduction in operational losses in the October-December quarter (Q3FY23).

Shares of state-owned oil marketing companies (OMCs) were firm as they gained up to 5 per cent in Wednesday’s intra-day trade, in an otherwise range-bound market.

Shares of Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL) and Indian Oil Corporation (IOCL) were up in the range of 3 per cent to 5 per cent in Wednesday's intra-day trade. In comparison, the S&P BSE Sensex traded 0.10 per cent higher at 60,175 at 12:08 PM.

In the past three months, IOCL (up 25 per cent), HPCL (up 22 per cent) and BPCL (up 19 per cent) outperformed the S&P BSE Sensex, which gained 5 per cent, during the same period. In the past one week, these stocks have outpaced the market, too, as they surged  to 9 per cent, as against 2 per cent decline in the benchmark index.

After two tight quarters of profit-margin shrinkage due to global volatility, Indian OMCs are expected to see reduction in operational losses in the October-December quarter (third quarter, or Q3) of 2022-23 (FY23), observed analysts.

However, global disruption in crude oil prices could lower marketing losses and grow gross refining margins (GRMs). From late November onwards, blended marketing margins for petrol and diesel have begun to recover. Margins, too, rose to a 10-month high of about Rs 2.5 per litre in December, said analysts. CLICK HERE FOR FULL REPORT

Analysts at Sharekhan, meanwhile, believe that H1FY23 (April to September) factors in the worst for OMCs and the gradual petrol/diesel prices hikes or decline in crude oil price coupled with likely normalisation of refining margins would drive earnings recovery in H2FY23-FY24 (October to March).

Besides, analysts at ICICI Securities expect GRMs for refiners to be around $12/bbl (inclusive of quarter-on-quarter (QoQ) inventory loss on crude oil). Refining throughout is estimated to remain flat QoQ for BPCL and increase ~6-12 per cent QoQ for HPCL and IOC.

"For OMCs, retail sales are expected to improve 3-6 per cent QoQ. The marketing segment performance is likely to improve when compared to Q2FY23 as margins on petrol have turned positive and losses on diesel have narrowed down. Petchem cracks are expected to marginally decline due to general weaker demand and a recessionary environment. On account of a weak base, we expect ~116 per cent, 182 per cent QoQ increase in EBITDA for BPCL, IOCL, respectively," the brokerage firm said.