Crude oil prices and diesel marketing margins witnessed sharp corrections to ₹ 3.5 per litre to ₹ 13 per litre in H1FY23, as international diesel prices corrected to $103/bbl after reaching a high of $170/bbl in Mar 2022. As a result, analysts at brokerage firm Prabhudas Lilladher upgraded the shares of three oil marketing companies that have high dividend yields:
Hindustan Petroleum Corporation Limited (HPCL)
“Among OMCs, HPCL is our preferred pick, as its marketing share is double of refining. Sharp rise in crude prices due to ongoing geopolitical tension remains a key risk to our call,” said Prabhudas Lilladher.
It upgraded the scrip to ‘buy’ from ‘hold’ earlier, as it factored in higher marketing margins and lower operating expenses. The brokerage values the stock at 7x EV/E FY24E and has given a price target of ₹ 350, indicating an upside of 42% as compared to Thursday’s closing price of ₹ 246 apiece. HPCL has a dividend yield of 5.69%.
Hindustan Petroleum Corporation refines crude oil and markets petroleum products. In addition, it is engaged in the production of hydrocarbons as well as providing services for the management of E&P Blocks.
Bharat Petroleum Corporation Ltd (BPCL)
Prabhudas Lilladher upgraded BPCL to ‘buy’ from ‘reduce’ earlier, considering high marketing margins and lower operating expenses. It values BPCL at 7x EV/E FY24E and has arrived at a price target of ₹ 420. This target implies an upside of 20% as compared to its closing price of ₹ 348.50 apiece on Thursday. BPCL has a dividend yield of 4.62%.
Bharat Petroleum Corporation is a public sector company that is engaged in the business of refining crude oil and marketing petroleum products.
Indian Oil Corporation Ltd (IOCL)
Prabhudas Lilladher upgraded IOCL to ‘buy’ from ‘reduce’ earlier, considering high marketing margins and lower operating expenses. It values IOCL at 7x EV/E FY24E and has arrived at a price target of ₹ 130. This implies an upside of 67% as compared to its share price of ₹ 78.10 on Thursday.
Indian Oil Corporation Ltd is a Maharatna Company whose business interest straddles the entire hydrocarbon value chain- from refining, pipeline transportation, and marketing of petroleum products to R&D, exploration & production, and marketing of natural gas and petrochemicals.
Written by Simran Bafna
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