Indian Oil Corporation, Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) largely missed Q2 results expectations. Global brokerage Goldman Sachs believes marketing and refining were among the key factors that led to the misses.

In a note on November 4, the brokerage said that the EBITDA of the aforementioned oil marketing companies (OMCs) for the July to September 2024 quarter came in broadly weaker than expected.

As per the note, the earnings before interest, taxes, depreciation, and amortization of Indian Oil for Q2 was 21% lower than Goldman Sachs estimates, HPCL’s was 6% lower whereas BPCL reported 4% less than the brokerage’s projection.

The brokerage explained that Indian Oil’s earnings miss was driven by weaker-than-expected earnings across the refining, marketing and petchem segments.

For HPCL and BPCL, the miss was driven by marketing and refining, respectively.

Goldman Sachs sees the largest downside risk for Indian Oil and has, therefore, retained its sell call on the OMC stock with a target price of ₹105. This means the brokerage expects a 27.5% downside in the stock from the closing price of November 1, the day of Muhurat Trading.

The remarks come as India’s top refiner IOC posted a nearly 99% drop in its second-quarter profit as narrowing marketing margins hurt. The state-owned firm’s standalone net profit plunged to ₹180 crore for the three months ended September 30. This was well below the CNBC-TV18 poll estimate of ₹3,278 crore.

IOC’s average gross refining margin for April-September fell to $4.08 per barrel from $13.12 per barrel a year earlier. EBITDA fell by more than half, declining by 56% from the June quarter to ₹3,773 crore, which was well below the CNBC-TV18 poll of ₹11,119 crore.

Goldman Sachs has retained a neutral rating on HPCL and BPCL stocks. The brokerage, however, has cut the target to ₹370 from ₹375 for HPCL whereas for BPCL, it has raised the to ₹370 from ₹365.

HPCL’s EBITDA increased by 29% in Q2 from last year to ₹2,724 crore but was below the poll estimate of ₹4,176 crore. Its operating profit margin (OPM) rose to 2.7% from 1.9% in the June quarter, although it remained below the expected 4.2%. Net profit also improved sequentially, reaching ₹631 crore, up 77% from ₹356 crore in the prior quarter, but well below the forecasted ₹1,779 crore.

The company’s gross refining margin (GRM) for the quarter was calculated at $3.2 per barrel, falling short of the $5.5 per barrel estimate. Crude throughput reached 6.3 million metric tonnes (MMT), exceeding expectations of 5.9 MMT.

“The primary reasons for the lower PAT include suppressed marketing margins on select petroleum products, reduced refining margins due to weaker crack spreads, and declining international crude and product prices,” the company said in an exchange filing.

Meanwhile, state-run Bharat Petroleum Corporation Ltd. (BPCL) reported a net profit of ₹2,397 crore for the July-September quarter, which was lower than the CNBC-TV18 poll of ₹4,207 crore. On a sequential basis, BPCL’s net profit declined by 20.5%.

EBITDA during the second quarter stood at ₹4,547 crore, which is lower than the CNBC-TV18 poll of ₹7,211 crore. EBITDA declined by 19.5% from the June quarter. EBITDA margin for the quarter stood at 4.4%, while a CNBC-TV18 poll had expected the figure to be 6.8%.