The fall in stock prices comes on concerns of reduction in marketing margins ahead, which although, will be partly offset by higher gross refining margins (GRMs).
Among the individual stocks, HPCL hit a 52-week low, down 6 per cent at Rs 213 on the BSE, falling 10 per cent in the past two trading days. In the past one month, the stock has slipped 17 per cent as compared to a less than 1 per cent decline in the benchmark index.
HPCL had reported a 40 per cent drop in net profit in the quarter ended March 31 as higher refining margins were wiped away by losses on auto fuel sales. The company posted net profit of Rs 1,795 crore in January-March compared with Rs 3,018 crore a year ago.
Crude is likely to continue building a risk premium and hence is likely to sustain over US$ 100/bbl consistently at least for the next 3 months and refining margins are likely to sustain in the US$ 25/bbl range, said Antique Stock Broking.
This puts upstream in a sweet spot (windfall unlikely), while OMCs are likely to remain under pressure with the industry integrated gross margins trending towards zero, down from Rs 1 bn/day average quarter-to-date (QTD) and Rs 1.3 bn/day for 4Q22 and Rs 2 bn/day in FY22, despite the Russian discounted crude cushion, the brokerage said in its oil & gas sector report.
Assuming no change in retail prices, the integrated margin will further deteriorate to Rs -0.01 bn given the recent jump in the crude oil prices, it added.
Gross margins currently are at Rs 1.4 bn for Indian Oil Corporation (IOCL), Rs 0.47 bn for Bharat Petroleum Corporation (BPCL) and Rs -0.17 bn for HPCL. Clearly IOCL is better off and HPCL is worse off on account of varying refining and marketing exposures. These gross margins are likely to get worse because of deterioration in retail marketing margins but cushioned by LPG (Aramco contract price for June down by almost US$100/ton MoM). This calculation builds in the Russian crude discounts, acording to the report by the brokerage.
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