- BPCL and HPCL expected to drive 31% of Nifty’s profit growth in FY24.
- Kotak projects higher margins for oil marketing companies in FY24-26.
- Despite challenges, OMCs like HPCL and IOC anticipate strong profit rebounds in FY24.
Kotak Institutional Equities, a research firm, mentioned that in the coming financial year (FY24), two companies, BPCL and HPCL, could significantly boost the profits of Nifty, a stock market index.
They predicted that these oil companies might contribute around 31% of the increased profits in Nifty. However, they also warned that overall profits might decrease in the following year (FY25) due to normal market conditions.
Kotak Institutional Equities expects the profit margins of oil marketing companies (OMCs) like BPCL, HPCL, and IOC to be much better from 2024 to 2026 compared to previous years.
They noted that IOC performed better than expected in the last quarter, largely due to higher refining and marketing margins.
Similarly, BPCL’s performance exceeded expectations in refining but fell short in marketing margins. HPCL, on the other hand, missed expectations due to lower marketing margins, particularly in diesel.
Looking ahead, Kotak anticipates a 23% increase in profits for oil, gas, and consumable fuels in the Nifty-50 index for FY24. They expect this growth to be driven mainly by BPCL and HPCL, with support from ONGC’s stake in HPCL. However, they also foresee lower profits for Coal India and ONGC due to various factors.
Although HPCL and IOC are not part of the Nifty index, Kotak predicts a significant profit recovery for them in FY24. In fact, in the last quarter, OMCs’ profitability increased almost five times compared to the same period last year, thanks to strong marketing margins.
As for future plans, HPCL aims for a recovery in the fourth quarter of FY24. They plan to increase refinery throughput and marketing sales volume. Additionally, they intend to start petrochemical production by 2025.
BPCL expects steady growth in petrol and diesel consumption despite the rise of electric vehicles. They also anticipate resolving the issues in Mozambique by mid-2024.
Kotak Institutional Equities foresees a promising outlook for oil companies in the coming years, with BPCL and HPCL expected to play a significant role in boosting Nifty profits. However, challenges like fluctuating margins and market conditions remain, which companies need to navigate through for sustained growth.