BPCL, HPCL, IOC: OMC stocks rally as oil slips below $90 mark; what's ahead for these PSU shares?

Three oil marketing companies (OMCs) namely Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL) and Indian Oil Corporation Ltd (IOC) saw their shares rallying up to 5 per cent in Wednesday's trade, as Brent crude oil prices slipped below the psychological mark of $90 a barrel.

Data showed Brent crude futures for June delivery last traded at $89.56 per barrel, down 0.90 per cent.

"Retail margins run at a loss of Rs 3.30-Rs 4.20 per litre at $90-92 per barrel crude. Our sensitivity analysis shows that crude price must decline to $80-81 per barrel – for retail margins to reverse to a profit of Rs1.3-Rs 1.8 per litre," Nirmal Bang said.

Shares of HPCL climbed 5.35 per cent to hit a high of Rs 483.40 on BSE. BPCL shares climbed 3.87 per cent to a high of Rs 608.25. IOC also gained 3.22 per cent to hit a high of Rs 174.20.

The domestic brokerage expects IOC to see a decline of 10.1 per cent YoY drop in profit at Rs 9,042 crore for the March quarter. BPCL, Nirmal Bang said, is set to report 16.7 per cent YoY decline in standalone adjusted PAT at Rs 6,525 crore.  This compares with 4QFY23 adjusted PAT of Rs 7,840 crore, excluding one-time exceptional expense of Rs 1,360 crore towards impairment of investment in BPCL’s upstream arm BPRL.

"HPCL will buck the trend among OMCs and report a growth of 3.2 per cent YoY in PAT at Rs 3,330 crore. .

"We estimate 4QFY24E Retail pump profit to have suffered a hit of Re 0.35 per litre due to the Rs 2 per litre cut from March 2024 in MS/HSD pump prices. This implies a hit of 14 per cent in marketing Ebitda Rs 260 per tonne. For BPCL and HPCL, the hit on retail margin in the two weeks of 4QFY24 due to the above pump price cut has shaved off 4-7 per cent from 4QFY24E PAT. In IOC, this has hit 4QFY24E by 5 per cent," Nirmal Bang.