Auto fuel net marketing margin is down 7 per cent Year-on-Year (YoY) at Rs 2 per liter in July but Gross Refining Margin (GRM) and inventory gains are likely to be higher YoY. The company’s core GRM in July is estimated at $2.5 per barrel and that including crude inventory gain is estimated at $8.1 per barrel.
“We estimate IOC’s crude cost in July 2020 at $37.1/bbl vs spot price of $42.6/bbl, implying inventory gain of $5.6/bbl; July 2020 crude cost is estimated as weighted average of opening inventory valued at $33.4/bbl and crude purchases in July 2020 at spot prices,” equity research firm ICICI Securities said in a note.
IOC’s product inventory gain is estimated to be up 316 per cent YoY at Rs 14.7 billion in second quarter so far. The company’s Earnings per Share is likely to be up sharply YoY on a very low base, as compared to second EPS at just Rs 0.6.
According to the firm, strong marketing margins and inventory gains are likely to make up for any disappointment on GRM front. Auto fuel net marketing margin is at Rs 5.07 per liter in Apr-July 2020 and at Rs 2 per liter now, which suggests it is on track to be either in line with or higher than the estimate of Rs 2.5 per liter in 2020-21.