Oil marketing companies (OMCs) namely Hindustan Petroleum Corporation (HPCL), Indian Oil Corporation (IOC) and Bharat Petroleum Corporation (BPCL) reported a combined loss of 21,228 crore for the half year ended September 30, which was their highest-ever loss in the six-month period.
The numbers would have been worse, had not the government offered one-time grant of Rs 22,000 crore to the three OMCs.
For the September quarter, cumulative losses for the three OMCs mounted to Rs 2,749 crore against a profit of Rs 11,124 crore in the corresponding quarter a year ago. Analysts largely have mixed views on OMC stocks.
Should you Buy, Sell or Hold?
Brokerage Prabhudas Lilladher maintained a ‘Reduce’ rating on IOC and BPCL post Q2 results. IOC reported a net loss of Rs 272.35 crore for the September quarter compared with a profit of Rs 6,360.05 crore in the corresponding quarter last year. BPCL posted a loss of Rs 304.17 crore against a profit of Rs 2,840 crore during the same quarter.
“We believe OMCs earnings will be hit by a sharp jump in diesel marketing losses (current diesel loss at Rs10 per litre) given low inventory, gas to oil switch (led by high spot LNG prices) and drop in Russian exports, despite improvement in refining profitability,” Prabhudas Lilladher said in a report.
The brokerage has fixed a target price of Rs 50 for IOC and Rs 260 for BPCL.
HDFC Securities is positive on BPCL and has a target price of Rs 365.
“Our ‘Buy’ rating on BPCL is premised on recovery in domestic demand for petroleum products, improvement in refining margins over the coming 18 months and gradual recovery in marketing margins,” the brokerage said.
Shares of IOC settled 0.71 per cent lower at Rs 69.50 on Wednesday while those of BPCL settled 0.94 per cent lower at Rs 306.70.
HPCL, meanwhile, reported a loss of Rs 2,172.14 crore in the second quarter compared with a net profit of Rs 1,923.51 crore in the same quarter last year.
Prabhudas Lilladher has a ‘Hold’ rating on the retailer with a target price of Rs 195. “As of September-end, HPCL’s debt has increased to Rs 68,500 crore against Rs 43,100 crore as on FY22 end due to weak financial performance,” the brokerage said.
Shares of HPCL settled 2.57 per cent lower at Rs 204.50 today. The benchmark BSE Sensex was down 0.25 per cent at 61,033.
Centrum Broking has an ‘Add’ rating on HPCL with a target price of Rs 240. “Currently, excluding diesel, other oil products are earning healthy marketing margins. We estimate Ebitda recovery in FY24 and FY25 on the back of near-to-normal margins on auto fuel. This will recede concerns of higher borrowings,” Centrum said in a report. The brokerage also has an ‘Add’ rating on IOC with a price target of Rs 78.
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