Falling crude prices to surge marketing margins; strengthen OMCs earnings outlook: Probal Sen
«Yes, LPG losses which have gone up, which spoiled the Q1 results remains an uncertainty in terms of how they will be compensated for,» says Probal Sen, ICICI Securities.
Well, the crude prices have seen quite a bit of dip and has come a bit suddenly from $80 per barrel mark, now down to 76. How much would have marketing margins increased? Is this something which is going to have a bit more structural impact you think in terms of the earnings?
Probal Sen: Yes, absolutely. I think if we look at the last week itself, blended retail margins have actually gone up to the levels of around Rs 7 odd, if our calculations are correct, which is almost Rs 2.5 to Rs 3 higher compared to the 1Q average levels that we saw.
So, definitely, the softness in crude is having an impact. In fact, at the same time, even refining margins have actually improved. If we look at the average levels of GRMs in the first couple of months of this quarter, average margins are also actually trending up by about $1.5 to $2 on an average versus what Singapore benchmarks were in 1Q. So, to that extent, the prospects for the OMCs continue to get stronger.
Yes, LPG losses which have gone up, which spoiled the Q1 results remains an uncertainty in terms of how they will be compensated for.
But if marketing margins other than LPG continue to be this strong, earnings will probably continue to see upsides across the street as we go along for the rest of the year.
Earnings will continue to see upside. Will there be further upside on stock prices as well
