Oil & Gas: High subsidy impact on diesel, LPG continues

Dolat Capital has come with its December`12 quarterly earning estimates for oil & gas sector. According to research firm, volume growth is expected for Indraprastha Gas (IGL) and Petronet LNG. Gujarat Gas and GSPL are expected to report decline in volumes. High subsidy impact on diesel and LPG continues. Some actions are expected on diesel and LPG prices in the ongoing quarter.

Q3FY13 Preview and Outlook

• For the gas space, the revenue is expected to grow by 24% on a YoY basis, mainly due to higher gas prices and increase in realizations.
• Volume growth is expected for IGL and Petronet LNG. Gujarat Gas and GSPL are expected to report decline in volumes.
• Rupee has depreciated from Q2FY13 levels. Spot LNG prices have increased due to global demand.
• Oil prices remained around USD 110 per barrel during the quarter. Subsidy burden estimates would increase further due to rupee depreciation.
• High subsidy impact on diesel and LPG continues. We expect that some action on diesel and LPG prices in the ongoing quarter.
• Refining margins have not seen any significant change from the last quarter.
• PNGRB - IGL case is in Supreme Court. Our channel checks suggest that the case outcome could be in favour of CGD space. Industry interactions indicate that Marketing Margin capping is unlikely for CGD companies and RLNG terminals.
• Both IGL and Gujarat Gas have not taken price hikes for Q3FY13, hence we expect gross spreads to decline marginally. For Gujarat Gas, we also expect decline in volumes.
• RLNG players would witness marginal volume growth. Spot volumes proportion will remain stable.
• Base oil prices have remained firm during most of the quarter. Rupee depreciation further increases the input cost.
• Castrol would marginally increase its realizations due to change in product mix. Volumes would marginally decline on a YoY basis.

Company	Key Assumptions
Indraprastha Gas	3.78 MMSCMD volumes with CNG growth at 9%
Gujarat Gas Company	Volumes at 298 MMSCM
Gujarat State Petronet	Transporation tariff at Rs 0.97 per SCM with volumes of 2620 MMSCM
Castrol India	Volume assumption of 49.5 KL with realisation of ` 157 per litre
Petronet LNG Gas	volumes at 2.8 MMTPA with re-gasification services at 0.32 MMTPA

Company	Sales (Rs Mn)			PAT (Rs mn)
	Q3FY13E	QoQ %	YoY %	Q3FY13E	QoQ %	YoY %
Indraprastha Gas	8,850	3.6	33.8	970	-2.3	40.2
Gujarat Gas Company	8,355	0.6	30.3	753	-24.2	203.8
Gujarat State Petronet	2,737	-1.3	-0.7	1,305	-1.7	3.4
Castrol India	7,790	8	0.8	880	2.7	-17.6
Petronet LNG	80,150	6.2	26.6	2,980	-5.3	0.9

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