Inventory loss during the first nine has been to the tune of Rs 230 crore.
Total LPG & SKO under-recovery for the nine months of this fiscal was Rs 1,300 crore. HPCL is estimated to have amassed Rs 400 crore in the form of lower raw material cost on account of discount on crude oil and LPG/SKO (kerosene) received from ONGC and GAIL based on a government scheme.
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| Analysts are expecting that a economic recovery will aid sales growth of oil companies going forward. Also, refining margins will remain strong in fiscal 2005, thanks to buoyant global demand for petroleum products.
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| According to Anish Desai, analyst with HDFC Securities, marketing margins will depend on the extent of under-recovery on LPG & SKO in the short-term and private sector competition in the medium term.
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| Says Desai, "At Rs 431, the stock trades on a multiple of 7.8x FY04E earnings. We expect HPCL to incur net under-recovery on LPG & SKO of Rs 1,250 crore in FY04. Over the medium term, the subsidy issue will be resolved, as private sector competition enters the market and the new government makes efforts to live up to the spirit of deregulation. Also, post-election, we expect acceleration in reforms, leading to privatisation." He expects the stock to outperform.
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BPCL
Recovery in diesel sales boosts profits
BPCL's third-quarter performance was better than its peer HPCL, with sales growing 8.82 per cent, driven primarily by a recovery in diesel sales.
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However, in volume terms, BPCL went up to 5.27 mmt from 5.18 mmt, lagging behind HPCL's 8.4 per cent growth.
- GRMs for the nine-month period was 3.36 per bbl compared to 2.99 per bbl for the corresponding previous period.
- According to analysts, the total LPG & SKO under-recovery for the first nine months of this fiscal was Rs 1,250 crore.
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| As per the new government scheme for sharing subsidy under recovery on SKO and LPG, BPCL received a discount of Rs 278 crore towards supply of crude oil. The entire benefit has been accounted in the current year.
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| According to Desai, the fourth quarter has started on a firm note for refineries with GRMs strengthening in January 2004.
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| Refining margins are likely to remain firm. And marketing margins will be a function of under recoveries and competition.
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| Desai says in his results review report, "At Rs 466, the stock trades on a multiple of 8.5x FY04E earnings. We expect BPCL to incur net under-recovery on LPG & SKO of Rs 1,350 crore in FY04.
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MAHINDRA & MAHINDRA
Turnaround in tractor business buoys results Mahindra & Mahindra posted impressive results in the December quarter, buoyed by a turnaround in its tractor business and a stellar performance in its automotive division.
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| The performance of the company's automotive division continued to be driven by higher sales of Scorpio, which now accounts for around 28 per cent of utility vehicle (UV) sales.
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Revenues grew 38.30 per cent in the quarter to Rs 1327.65 crore while net profit surged by a whopping 183.92 per cent to Rs 87.42 crore.
- Other income saw a 48 per cent drop on a y-o-y basis, mainly on account of a 60 per cent decline in dividend received from subsidiaries.
- Operating margins saw a 460 basis-point improvement on account of the improved performance in the automotive and tractor division.
- Segment earnings in the tractor business jumped by 118 per cent, driven by a 21.3 per cent jump in sales and a 475 basis-point jump in EBITA margins.
- The company
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