OMCs - Post Price Cut No Cushion To Margin If Oil Price Rise: Dolat Capital

"NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Dolat Capital Report.As we have been highlighting that before “Model Code of Conduct – Election 2024” retail fuel price cut can’t be ruled out. Yesterday, Government slashed petrol/diesel price by Rs 2/litre this will drag the gross marketing margins by Rs 1.7/lt. Based on yesterday’s closing price; oil marketing companies are earning ~Rs 6/lt gross marketing margins on the sale of auto fuel. Post price cut, we calculate OMCs GMM on auto fuel would be ~Rs 4/lt (higher than the long-term average of Rs 3.5/lt). We have assumed ~ Rs 3.5/lt GMM on auto fuel for the period of FY25E and FY26E, thus no change in our estimates. However, we reduced the valuation multiple for the marketing segment from seven times to six times across the OMCs mainly due to no cushion if the oil price shoots up. Postprice cut GMM on auto fuel is largely in line with the long-term average. Post-election - no guarantee – fuel price deregulation comes into effect. OMCs are likely to post bumper profits and dividends in FY24E. These record profits in FY24E (+two times versus FY23 / FY22 earnings) are expected to lead to jumbo dividend payouts implying yields at 10% range versus long period average of ~5%. However, the same dividends are unlikely in FY25E. Hence, we downgrade the OMCs to Reduce..Click on the attachment to read the full report:.GAIL India - Nirmal Bang Retain's Accumulate As Growth Priced In.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner."

OMCs - Post Price Cut No Cushion To Margin If Oil Price Rise: Dolat Capital

Postprice cut gross marketing margin on auto fuel is largely in line with the long-term average.

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OMCs - Post Price Cut No Cushion To Margin If Oil Price Rise: Dolat Capital

Postprice cut gross marketing margin on auto fuel is largely in line with the long-term average.

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