“This decision is a little bit positive and has a 4-5% annualised impact on the EPS, if it lasts for the full year,” said Sen. He added that the situation remains fluid due to ongoing changes in global crude prices and geopolitical tensions.
The new APM price is based on a 10% slope to Brent crude. “If crude prices were to soften further, every dollar theoretically is another 10 cents lower APM price,” Sen explained.
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According to Sen, the government’s willingness to adjust prices in line with crude trends is encouraging. Combined with growing liquified natural gas (LNG) supply expected over the next two to three years, this could support margins and pricing power for Indian gas distributors. “Indian consumers should benefit both from a pricing power perspective and from a margin perspective, depending on how they play it.”
On demand growth, Sen noted that compressed natural gas (CNG) volumes surprised on the upside in the third and fourth quarters, prompting ICICI Securities to revise estimates upwards. “We have upgraded estimates to at least 10% plus across the board for all three companies,” he said. For piped natural gas (PNG), the growth varies: Indraprastha Gas Ltd (IGL) is estimated to grow 7-8%, Mahanagar Gas Ltd (MGL) 9-11%, while Gujarat Gas may see lower growth due to softer demand from industrial segments.
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Sen also noted that margins remain a watch area. In quarter four, some refiners shifted back to liquid fuels like naphtha, which had become more competitive due to price declines. “That’s not something that we have seen for a very long time,” he said, adding that this shift affected volumes and may limit margin gains.
Among stock picks, Sen said, “We continue to remain fairly positive on GAIL, MGL and Oil India… we remain buyers of those at this point of time.”
For the full interview, watch the accompanying video
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