Oil marketing companies (OMCs) in India are anticipated to witness a sequential increase in profits during the fourth quarter of the fiscal year 2024. Analysts predict a healthy year-on-year growth in net profits for Q4FY24, reflecting improved performance and favorable market conditions. This article will delve into the factors contributing to this expected growth and highlight the achievements of OMCs in recent quarters.
1. Healthy YoY Growth in Net Profits for Q4FY24:
Analysts project that Indian Oil Corporation (IOCL), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL) will report a substantial year-on-year increase in their consolidated net profits for the fourth quarter of FY24. This growth is attributed to healthy marketing margins and improved overall performance compared to the same period last year.
2. Sequential Rise in Profits Expected:
In addition to the anticipated year-on-year growth, OMCs are also expected to witness a sequential rise in profits for Q4FY24. The previous quarter’s profits were impacted by inventory losses, which affected gross refining margins. However, analysts believe that OMCs are unlikely to face further inventory losses in the fourth quarter, leading to improved financial results.
3. Factors Responsible for the Growth:
The growth in profits can be attributed to various factors, including increased sales volume both in the domestic market and exports. Despite declining refining margins, OMCs recorded profits in Q3FY24. Additionally, OMCs have stated that there is no threat to their oil shipments amidst escalating tensions over the Red Sea, ensuring secured shipments until April. However, the Red Sea issue has impacted freight rates, which may affect the FY25E impact.
4. OMCs’ Performance in Q3FY24:
During the third quarter of FY24, IOCL, BPCL, and HPCL reported a growth in sales volume in both the domestic and export markets. BPCL recorded the highest sales and export volumes, with a 4% and 80% increase, respectively, compared to the same period the previous year. Although the OMCs achieved profits in Q3, their refining margins witnessed a decline.
5. Outlook for Future Earnings:
Looking ahead, OMCs are expected to continue their earnings improvement over the next few fiscal years. Factors such as strong margins, strategic investments, and diversification aligned with margin improvement are projected to contribute to sustained earnings growth for OMCs, particularly HPCL, from FY24 to FY26E.
- What is the expected growth in net profits for OMCs in Q4FY24?
Analysts anticipate a healthy year-on-year growth in net profits for oil marketing companies in the fourth quarter of FY24.
- Why did OMCs record a decline in profits in the previous quarter?
Inventory losses impacting gross refining margins led to a decline in profits for OMCs in the previous quarter.
- What factors contributed to the growth in profits for OMCs in Q3FY24?
Increased sales volume in the domestic and export markets played a role in the growth of profits for OMCs in the third quarter of FY24.
- How did OMCs’ refining margins perform in Q3FY24?
Refining margins for OMCs declined in the third quarter of FY24 due to various factors, including lower gross refining margins.
- What is the outlook for OMCs’ future earnings?
OMCs are expected to experience sustained earnings improvement in the coming fiscal years, driven by strong margins, targeted investments, and diversification aligned with margin improvement.
In conclusion, oil marketing companies in India are poised to report a sequential rise in profits during the fourth quarter of FY24. This growth is attributed to various factors, including improved performance, healthy marketing margins, and increased sales volume. While refining margins may have declined in the previous quarter, the outlook for OMCs’ future earnings remains positive.