Stocks To Buy: Brokerage houses have maintained a 'BUY' rating on the shares of Hindustan Petroleum Corporation Limited (HPCL), Indian Oil Corporation (IOC), and Bharat Petroleum Corporation Limited (BPCL).
Brokerage houses are keeping a close eye on the stocks of India's three major state-owned oil marketing companies – Bharat Petroleum (BPCL), Indian Oil (IOCL), and Hindustan Petroleum (HPCL). Especially with reports emerging about a potential relief package from the central government for these companies, brokerage houses believe that this move could bring a significant change in both the earnings and share performance of these companies. Foreign brokerage firm Nomura has maintained a 'BUY' rating on all three companies and has expressed expectations of good returns.
Heavy Profits from Petrol and Diesel
According to brokerage reports, India's state-owned oil marketing companies earned an average profit of ₹10.3 per liter on the sale of petrol and diesel in the first quarter. This figure is more than three times the average of ₹3 per liter over the past five years. The main reasons cited for this are the decline in crude oil prices in the international market and the stability in retail prices at the domestic level.
Due to this b earnings performance, brokerages expect that the financial position of these companies will remain b, especially if the relief package is approved.
BPCL Identified as Top Pick, 26% Upside Possible
Nomura brokerage has identified Bharat Petroleum Corporation Limited (BPCL) as its top pick. The brokerage has set a target price of ₹435 on the company's stock, while the share closed at ₹346 on Thursday (July 10). This indicates an upside of up to 26 percent.
According to Nomura, BPCL has a balanced investment in both refining and marketing. Also, its refinery operations are better, and the company's marketing capacity is quite b, which could prove more profitable than other companies.
Positive Outlook on HPCL Maintained, 21% Growth Expected
Brokerage has also shown a positive outlook on Hindustan Petroleum (HPCL) and has given a target of ₹540 on the share. On Thursday, this stock closed at ₹445, meaning there is a possibility of a rise of about 21 percent.
The brokerage says that HPCL's focus is largely on the marketing segment. This is the reason why this share has performed better in the last four months. While BPCL has seen a 40 percent increase and IOC has seen a 30 percent increase, HPCL has jumped by 49 percent. However, this also means that the possibility of a decline in the company's margins is the highest, but for now, its performance remains excellent.
Investment Recommendation for IOCL as Well, but Less Upside
Nomura brokerage has also given a ‘BUY’ rating to Indian Oil (IOCL), although its target price has been set at ₹160. From the current levels, this share can give an upside of about 6 percent.
The brokerage believes that currently, there is no immediate major benefit visible from the company's petrochemical expansion, but it can be strategically beneficial in the long term. The company's b refining capacity and extensive distribution network make it stable.
The Government and the Market's Eyes on These Companies
Market analysts say that buying sentiment has already developed in the shares of these companies even before the announcement of the relief package. Investors' eyes are now fixed on when the Finance Ministry officially announces this package.
Compared to private companies like Reliance, the policy-based stability and government support of state-owned oil marketing companies are making them a better option in the current uncertain environment. It is for this reason that brokerage houses have maintained a positive outlook for these companies.
