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Oil & Gas
Upstream FY11E EPS up YoY
despite higher share in subsidy
„Rise in subsidy share a concern but still prefer upstream
The government today finalized sharing of FY11 subsidy. The negative surprise
was increase in share of upstream companies in FY11 subsidy to 38.7% as
against the usual 33%. We therefore had to cut FY11 EPS of GAIL and Oil India
(OIL) by 7-8% but still their FY11 EPS is expected to be YoY higher. R&M
companies have gained from the rise in upstream share in subsidy but their
subsidy hit is still higher than our optimistic assumption. We therefore had to cut
even R&M companies’ earnings by 1-11%. Rise in subsidy share from the usual
33% is negative for upstream but we still prefer upstream OIL to R&M companies.
FY11 subsidy sharing: upstream 38.7% and R&M 8.8%
FY11 subsidy of Rs782bn (US$17.2bn) will be shared as follows – government
Rs410bn (52.4%), upstream Rs303bn (38.7%), and R&M companies Rs69bn
(8.8%). However R&M companies also have to bear the entire subsidy on petrol
from July 2010 to March 2012, which we estimate at over Rs40bn.
GAIL and OIL FY11 EPS cut by 7-8% due to higher subsidy
Upstream companies have had to bear 38.7% of FY11 subsidy as against the
expected 33.3%. Upstream companies thus had to bear higher subsidy than
expected of Rs42bn. We therefore cut FY11E EPS of GAIL and OIL by 7-8%.
GAIL & OIL FY11 EPS up 12-13% YoY despite higher subsidy
Despite a higher share in subsidy OIL’s FY11 EPS at Rs122.3 is expected to be
13% YoY higher. If upstream share in subsidy was 33% in FY11, OIL’s EPS
would have been 8% higher at Rs132.5. GAIL’s FY11 EPS at Rs27.7 is also
expected to be 12% YoY higher. GAIL’s FY11 EPS would have been 5% higher
Rs29.1 if upstream share in subsidy was 33% instead of 38.7%.
R&M FY11 EPS cut 1-11% as subsidy higher than estimate
Our FY11 EPS estimates for R&M companies were based on optimistic
assumption of subsidy hit of just Rs45bn. Their subsidy hit would have been as
high as Rs111bn if upstream share was 33%. However, with upstream share up
to 38.7% R&M companies’ subsidy will be just Rs69bn, which is still higher than
our assumption. We therefore have cut BPCL and HPCL’s FY11 EPS by 1-11%.
R&M FY11 EPS up on reported basis; down recurring basis
We now estimate FY11E EPS of HPCL and BPCL at Rs40.1-51.0 (Rs22.8-36.5 if
upstream share in subsidy was 33%). Their FY11 EPS is expected to be YoY
higher than FY10 reported EPS but YoY lower than FY10 recurring EPS. FY10
reported EPS was hit by hefty provision for mark to market on oil bonds.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Oil & Gas
Upstream FY11E EPS up YoY
despite higher share in subsidy
„Rise in subsidy share a concern but still prefer upstream
The government today finalized sharing of FY11 subsidy. The negative surprise
was increase in share of upstream companies in FY11 subsidy to 38.7% as
against the usual 33%. We therefore had to cut FY11 EPS of GAIL and Oil India
(OIL) by 7-8% but still their FY11 EPS is expected to be YoY higher. R&M
companies have gained from the rise in upstream share in subsidy but their
subsidy hit is still higher than our optimistic assumption. We therefore had to cut
even R&M companies’ earnings by 1-11%. Rise in subsidy share from the usual
33% is negative for upstream but we still prefer upstream OIL to R&M companies.
FY11 subsidy sharing: upstream 38.7% and R&M 8.8%
FY11 subsidy of Rs782bn (US$17.2bn) will be shared as follows – government
Rs410bn (52.4%), upstream Rs303bn (38.7%), and R&M companies Rs69bn
(8.8%). However R&M companies also have to bear the entire subsidy on petrol
from July 2010 to March 2012, which we estimate at over Rs40bn.
GAIL and OIL FY11 EPS cut by 7-8% due to higher subsidy
Upstream companies have had to bear 38.7% of FY11 subsidy as against the
expected 33.3%. Upstream companies thus had to bear higher subsidy than
expected of Rs42bn. We therefore cut FY11E EPS of GAIL and OIL by 7-8%.
GAIL & OIL FY11 EPS up 12-13% YoY despite higher subsidy
Despite a higher share in subsidy OIL’s FY11 EPS at Rs122.3 is expected to be
13% YoY higher. If upstream share in subsidy was 33% in FY11, OIL’s EPS
would have been 8% higher at Rs132.5. GAIL’s FY11 EPS at Rs27.7 is also
expected to be 12% YoY higher. GAIL’s FY11 EPS would have been 5% higher
Rs29.1 if upstream share in subsidy was 33% instead of 38.7%.
R&M FY11 EPS cut 1-11% as subsidy higher than estimate
Our FY11 EPS estimates for R&M companies were based on optimistic
assumption of subsidy hit of just Rs45bn. Their subsidy hit would have been as
high as Rs111bn if upstream share was 33%. However, with upstream share up
to 38.7% R&M companies’ subsidy will be just Rs69bn, which is still higher than
our assumption. We therefore have cut BPCL and HPCL’s FY11 EPS by 1-11%.
R&M FY11 EPS up on reported basis; down recurring basis
We now estimate FY11E EPS of HPCL and BPCL at Rs40.1-51.0 (Rs22.8-36.5 if
upstream share in subsidy was 33%). Their FY11 EPS is expected to be YoY
higher than FY10 reported EPS but YoY lower than FY10 recurring EPS. FY10
reported EPS was hit by hefty provision for mark to market on oil bonds.
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