We anticipate RIL to report 11% q/q Ebitda development driven by O2C and retail. Subscriber adds in Jio, renewed lockdown in retail and petrochemical margins are crucial. OMC operating efficiency ought to decline q/q on reduced advertising and marketing margins. Inadequate value hikes due to elections could weigh on BPCL’s privatisation. P-LNG’s Ebitda ought to decline q/q on adverse Spot value but volumes have recovered when GAIL’s Ebitda ought to develop 34% q-o-q driven by gas trading income.
RIL’s operating efficiency ought to strengthen sharply q-o-q: We anticipate 11% q-o-q improvement in consol Ebitda. O2C was buoyed by enhancing petrochemical and refining profitability when Retail benefited from demand normalisation. Jio’s Ebitda ought to be flat q-o-q on a sequential drop in revenues (IUC hit) but expanded Ebitda margin. Renewed restrictions could weigh on retail outlook in the close to term.
Refining continued modest q-o-q recovery: Asian benchmark GRM averaged $1.8/bbl in Q4FY21 (vs $1.2 in Q3) against decade typical of $6.2/bbl with continued weakness in diesel, jet and LPG. Renewed Covid associated restrictions in Western Europe and components of Asia are most likely to weigh on margins in the close to term.
Marketing margins fell sharply q-o-q: Margins fell c27% q-o-q as OMCs did not pass on the complete extent of the crude rally possibly owing to the state elections. Margins on petrol are in damaging territory and on diesel languish substantially beneath normative levels. As in previous situations, we anticipate OMCs to recoup the lost margins post elections if crude remains at present levels. OMCs lowered retail value of auto fuels by `0.6/lt in last week of March. Such reductions are damaging for BPCL’s privatisation in our view.
Weak OMC operating efficiency in Q4: With core refining remaining weak and advertising and marketing profitability falling sharply q-o-q, operating efficiency will show steep q-o-q decline. Reported numbers will be buoyed by inventory gains in refining. Marketing volumes and refinery thruput could be negatively impacted in Q1FY22e on renewed restrictions.
Petronet-LNG would see higher Spot value influence: We project 5% q-o-q decline in Dahej volume and reduction in trading margin due to pretty higher Spot value in Jan. We project 7% sequential decline in Ebitda in Q4. We note Dahej’s volume has enhanced more than the quarter with March utilisation price > one hundred% which augurs properly for Q1FY22e.
GAIL ought to report q-o-q PAT development: We anticipate 34% improvement in GAIL’s sequential Ebitda as gas trading swings from loss to robust profit on favourable Spot LNG value. LPG’s profitability ought to strengthen sequentially.
RIL best choose: We reiterate our positive stance on RIL as we see progress with an very affordable smartphone and a stake sale in O2C company in FY22e. Even even though HPCL and IOCL stay close to cyclical low valuation multiples, re-rating could wait till either crude falls or demand recovers with vaccine penetration. We favor P-LNG on eye-catching valuation.