The third quarter earnings season for Oil Marketing Companies (OMCs) is anticipated to be a mixed bag. While the performance of some companies on a sequential basis may be disappointing, others may do well.
Harshvardhan Dole, Senior Vice President Institutional Equities at IIFL, shared his outlook on industry dynamics and the factors that could influence the sector's upcoming quarterly (October-December) results.
Dole noted that the microenvironment for OMCs in the third quarter was less favourable than the previous year as well as the second quarter. Factors such as weakened gross refining margins (GRMs) and a moderation in marketing margins could contribute to disappointing QoQ figures for the sector, both downstream and upstream.
However, given a lower base, the performance should be impressive if you evaluate on a standalone basis.
Dole points out that city gas distribution companies, such as Indraprastha Gas Limited (IGL) and Gujarat Gas, are poised to report a reasonably good quarter. He anticipates that gas utilities, especially in the City Gas Distribution (CGD) segment, will experience reasonable volume growth and an uptick in margins.
GAIL (India), he believes, is not a straightforward play on Liquified Natural Gas (LNG) due to its multifaceted business structure. While the core natural gas transmission business is expected to remain steady with 3-4% volume growth and tariff revision benefits, uncertainties loom over the commodity and petrochemical businesses.
The decline in margins in these segments, both sequentially and YoY, pose challenges, and the hope is that GAIL can source gas competitively to surprise the market positively.
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(Edited by : Shweta Mungre)
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