Indian Oil Corporation (IOC) Ltd will announce its third quarter earnings for the financial year 2024-25 on January 27. Analysts expect a sharp jump in profits, mainly due to the weak performance in the previous quarter (Q2 FY25).
What to expect
Profit jump: IOC is expected to report a profit of ₹6,140 crore, a significant rise from just ₹180 crore in Q2 FY25.
Revenue growth: Revenue is estimated to grow 11% to ₹1.92 lakh crore compared to ₹1.74 lakh crore in the previous quarter.
EBITDA improvement: Earnings before interest, tax, depreciation and amortization (EBITDA) is estimated to increase from ₹3,772 crore to ₹13,078 crore.
Margin recovery: Operating margins are expected to improve to 6.8% compared to 2.2% in Q2FY25.
Crude and throughput
Gross refining margin (GRM): Analysts expect GRM to be around $6.20 per barrel, a significant increase from $1.60 per barrel in the previous quarter, although it is down from $13.50 per barrel year-on-year.
Crude throughput: The volume of crude processed is expected to increase 4% to 17.4 million metric tonnes (MMT), from 16.7 MMT in Q2FY25.
Sales: Sales of petroleum products are estimated to increase 1% to 22.2 MMT compared to 21.9 MMT in the previous quarter.
Areas to watch
Investors should focus on several key factors during the earnings announcement:
Profit growth context: The significant profit growth is primarily due to the weak base of Q2 FY25, where IOC reported its lowest earnings in the oil marketing company (OMC) sector.
Auto fuel marketing and refining: Healthy margins in auto fuel marketing and refining operations could indicate a positive trend.
LPG inventory deficit: High deficit related to liquefied petroleum gas (LPG) inventory could negatively impact overall earnings.
Petrochemical performance: The petrochemical segment may continue to struggle, with muted realisations and spreads impacting profitability.
In the second quarter, IOC faced significant challenges. Revenue declined 9.8% to ₹1.74 lakh crore, falling short of market expectations. EBITDA saw a massive drop of 56.3%, reaching just ₹3,773 crore, while operating margins fell to just 2.2% from 4.5% in the previous quarter. Profit after tax (PAT) was reported at ₹180 crore, a dramatic drop from ₹2,643 crore, indicating that the company was under financial pressure during that period.
