ONGC Q2 PAT seen up at Rs 6,715 cr

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State-owned Oil and Natural Gas Corporation (ONGC) is expected to report a profit after tax of Rs 6,715 crore in the second quarter of FY12 as against Rs 5,388.8 crore in the corresponding quarter of last fiscal.

Sales are seen going up to Rs 20,942 crore from Rs 18,430.3 crore during the same period.

Operating profit margin is expected to be at 62.6% in July-September quarter of FY12 versus 61.4% in a year ago period.

Expectations

* Expect a stellar Q2 performance

* Subsidy assumptions on the street vary from 33% - 40%, with many closer to 38% 

* But actual payout in Q2 was only 33% (Pre-decided due to FPO) 

So,

* Q2 subsidy payout at Rs 5717 crore, down 52.5% QoQ

* Q2 net realizations will be well above USD 80/barrel (Likely to be around USD 82/bbl, highest ever) 

* But stellar Q2 is meaningless at the moment

* It's only in Q4 when the actual intention is revealed

* Remember in FY11 the assumption was 33% for the first 3 quarters; became 38.7% in Q4

* Risk of high subsidies remains an overhang

* Overhang will persist till subsidy share is crystallized

ONGC Q2 Tailwinds

* Aside of lower subsidy, there are other supporting factors in Q2

* This is the first quarter post royalty sharing by Cairn (So ONGC's share declined to 30%)

* One time reimbursement by Cairn (around Rs 1300 crore)

* Rupee depreciation as sale price is linked to dollar