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Strong growth for Gujarat Gas and GSPL in Q1FY20E
The key trends in the oil & gas sector in Q1FY20 were: 1) Auto fuel net marketing margin was down 62% QoQ but up 182% YoY, 2) Reuters’ Singapore gross refining margin was up 9% QoQ but down 42% YoY, 3) Crude and product inventory loss is likely due to fall in crude and product prices from the beginning of the quarter, 5) Indian gas price was up 25% YoY in INR, and 6) LPG and kerosene subsidy at Rs76.5bn is estimated to have been up 14% YoY. We estimate strong earnings growth for Gujarat Gas (GGL) driven by Morbi volumes and GSPL on a low base. Steep earnings decline is expected for OMCs hit by decline in GRM and inventory loss.
* Subsidy estimated at Rs76.5bn: We estimate Q1FY20 subsidy at Rs76.5bn to be up 14% YoY and 17% QoQ. No subsidy hit is assumed for oil PSUs in Q1FY20.
* OMCs’ EPS to be down 47%-75%: We estimate Q1FY20 EPS of HPCL, BPCL and IOC to be down 47% YoY, 54% YoY and 75% YoY respectively, despite 182% YoY surge in auto fuel marketing margins, hit by 40%-65% YoY fall in GRM and product inventory loss of Rs5.6-11.3bn vs gain of Rs7.4bn-19.8bn. OMCs’ Q1FY20 EPS would be up 88%-195% YoY if impact of crude and product inventory loss in Q1FY20 and gain in Q1FY19 is excluded.
* ONGC’s Q1E EPS to be down 2% YoY assuming no subsidy hit: We estimate ONGC’s Q1FY20 EPS to be down 2% YoY hit by: 1) 5% YoY lower oil price realisation at US$68/bbl and 1% YoY fall in INR; 2) 4.2% YoY fall in nominated fields’ oil sales volume and 9% YoY fall in volumes including JV fields and 3) 3% YoY higher DD&A at Rs40bn. We estimate gas price to be up 25% YoY in INR terms and nominated and total gas sales volume to be up by 4% and 4.8% YoY respectively.
* GAIL’s Q1 EPS to be down 16% YoY: We estimate GAIL’s earnings to be down 16% YoY hit by 21%-90% YoY fall in LPG production and petrochemical EBITDA. Both would be hit by the rise in gas cost and petrochemical business would also be hit by the fall in realisation.
* PLNG’s Q1 EPS to rise 12% YoY: Q1FY20 EPS is estimated to rise 12% YoY driven by 6% YoY rise in regas volumes and 2% rise in regas charge at Dahej.
* 31%-116% YoY rise in EPS of GSPL and GGL: We estimate GGL’s Q1FY20 EPS to surge 116% YoY driven by 31% YoY rise in volumes to 8.4mmscmd (industrial by 40% YoY driven by Morbi) and EBITDA margin by 10% YoY to Rs4.6/scm boosted by low spot LNG prices. GSPL’s EPS is estimated to rise by 31% YoY driven by 27% YoY rise in tariff on low base of Q1FY19 and 3% YoY rise in volumes.
* 6%-27% YoY rise in EPS of MGL and IGL: We estimate IGL’s EPS to rise by 27% YoY driven by 14% YoY volume rise and 1% YoY rise in EBITDA margin. MGL’s EPS is estimated to rise 6% YoY driven by 7% YoY rise in volume.
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