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In 2QFY25, we expect RIL’s EBITDA to grow 2.5% QoQ to INR 397bn due to sharp tariff-hike-led 9.4% QoQ rise in Digital EBITDA; that, though, is likely to be partly offset by 3.9% QoQ decline in O2C segment driven by lower refining & petchem margins while Retail EBITDA is expected to be flattish QoQ. ONGC/Oil India’s 2QFY25 net crude and gas realisation is expected to be stable QoQ; Oil India’s EBITDA could grow 11.3% QoQ on 8.5% higher crude sales volume QoQ while ONGC’s EBITDA may grow only by 1% QoQ. OMCs’ 2QFY25 EBITDA could improve QoQ driven by robust marketing margin, though will be partly offset by continued weakness in refining margin and higher inventory loss. GAIL’s EBITDA could decline 7% QoQ due to normalisation of transmission volume and trading margin; GSPL/ PLNG also may see normalisation of volume with end of peak summer demand. IGL/MGL earnings could be steady QoQ as higher CNG price offsets rise in gas cost; Gujarat Gas earnings may be hit due to ~35% QoQ decline in industrial volume. We maintain BUY on RIL as we believe net debt concerns are overdone, and also because RIL has industry leading capabilities across businesses to drive robust 14-15% EPS CAGR over the next 3-5 years. We reiterate BUY on ONGC and Oil India given strong 4-6% dividend potential, ~30%/15% production growth outlook in the next 1-3 years and our expectation of OPEC+ supporting crude ~USD 75-80/bbl. Further, we reiterate BUY on GGas as we expect spot LNG prices to moderate in the medium to long term due to significant LNG supply additions in US and Qatar. However, we maintain our cautious view on OMCs (SELL on HPCL and IOCL; HOLD on BPCL) as risk-reward is still unfavourable.

* RIL’s 2QFY25 EBITDA is likely to grow 2.5% QoQ as the sharp telecom tariff hike is partly offset by weakness in O2C segment and muted growth in the Retail segment: RIL’s 2QFY25 EBITDA is likely to grow 2.5% QoQ to INR 397bn due to tariff-hike-led 9.4% QoQ rise in Digital EBITDA; though that is likely to be partly offset by 3.9% QoQ decline in O2C segment driven by lower refining & petchem margins. Further, Retail EBITDA is expected to be up only 0.6% QoQ and E&P EBITDA up only 0.5% QoQ. Key assumptions: a) O2C EBITDA to fall 3.9% QoQ to INR 126bn due to decline in GRM to ~USD 7.2/bbl (vs. implied GRM of ~USD 7.7/bbl in 1QFY25) due to lower diesel cracks while refining throughput could rise 1.6% QoQ to 16.3mmt; further, petchem margin is expected to decline QoQ; b) E&P EBITDA to increase 0.5% QoQ to INR 52bn due to largely flattish gas output and price; c) Retail EBITDA is likely to grow only by 0.6% QoQ only to INR 57bn due to ongoing store rationalisation and impact of heavy monsoon; d) Digital EBITDA is expected to grow 9.4% QoQ to INR 164bn on 7% QoQ rise in ARPU to INR 194, led by tariff hike and aided by upgrades and one more day during the quarter - Exhibit 1.

* ONGC/Oil India’s 2QFY25 net crude realisation and sales volume to be higher QoQ; gas realisation largely stable QoQ: ONGC and Oil India’s net crude realisation adjusted for windfall tax will continue to be capped at ~USD 73/bbl with lower gross crude realisation QoQ (as Brent crude price averaged USD 80.3/bbl in 2QFY25 vs. USD 84.9/bbl in 1QFY25) being offset by decline in windfall tax. ONGC and Oil India’s gas realisations are also expected to be largely stable QoQ with domestic APM gas realisation being capped at USD 6.5/mmbtu. However, Oil India is likely to witness 8.5% QoQ growth in its crude sales volume while ONGC could register 2% QoQ growth in crude sales volume. Hence, Oil India’s 2QFY25 EBITDA is expected to be 11.3% higher QoQ while ONGC’s 2QFY25 EBITDA is expected to be 1% higher QoQ — Exhibit 2.

* OMCs’ 2QFY25 EBITDA to improve QoQ driven by robust marketing margin, though will be partly offset by continued weakness in refining margin and higher inventory loss: OMCs are likely to report QoQ improvement in EBITDA on robust auto-fuel marketing margin; that, though, will be partly offset by continued weak diesel cracks and higher inventory loss — Exhibit 3. We expect OMCs’ 2QFY25 reported GRM (adjusted for USD 1.4-2.2/bbl of crude inventory loss) to decline to USD 4.8- 6.7/bbl (vs. USD 5-7.9/bbl reported in 1QFY25) driven by continued weak diesel cracks (USD 12.8/bbl in 2QFY25 vs USD 13.9/bbl in 1QFY25) and crude inventory loss (of USD 1.4-2.2/bbl) on account of sharp decline of USD 8.3/bbl in Brent crude price (averaged at USD 74.3/bbl in Sep’24 vs. USD 82.6/bbl in Jun’24) — Exhibit 4-8. However, OMCs’ weighted average auto-fuel gross marketing margin rose to INR 6.4/ltr in 2QFY25 (vs. INR 3.3/ltr in 1QFY25) — Exhibit 12. Hence, we expect 2QFY25 EBITDA to rise by 10% QoQ for BPCL, 16% QoQ for IOCL and up sharp 111% QoQ for HPCL on a low base and given its higher leverage to marketing business.

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