Morgan Stanley has retained its overweight call on the oil marketing companies such as Bharat Petroleum, Indian Oil and Hindustan Petroleum, after Oil Minister Dharmendra Pradhan categorically denied media reports of a possible government intervention to keep the retail fuel prices under check.
Morgan Stanley remains bullish on oil marketing companies, after oil minister Dharmendra Pradhan clarified yesterday that the government will not step in to check rising petrol and diesel prices, which hit three-year highs this week. The State-owned oil marketing companies’ (OMCs) shares plunged on Wednesday after media reports said that government could direct these OMCs to absorb the effects of the current global crude price rise.
Morgan Stanley has a buy on Indian Oil Corporation with a target price of Rs 571. The shares were trading at Rs 428.7 on NSE this morning, up by more than 3%. The stock of the nation’s largest company Indian Oil Corporation fell as much as 6.2% to the day’s low of Rs 408 yesterday.
Morgan Stanley believes that since there’s no intervention from the government now, these Oil marketing companies are going to benefit. The shares of BPCL were trading at Rs 517.3 on Thursday morning up by more than 3.4%, after plunging 8.4% to the day’s low of Rs 489 yesterday. Morgan Stanley remains overweight on the stock with a target of Rs 597.
In case of HPCL the global research firm has a buy recommendation with a target of Rs 543. The shares were trading at Rs 467, up by more than 2% since the previous close. On Tuesday, Jal Irani of Edelweiss Securities said that these three companies are slated to benefit after Petronet LNG successfully re-negotiated a deal with Exxonmobil, as the companies have these companies have the highest number of take-or-pay contracts. The expert pointed out that GAIL and BPCL are poised to benefit from the deal, as both the companies have the largest take-or-pay contracts, followed by IOCL. “We like BPCL among the three the most,” he said, adding that IOCL is also on top in the pecking order.
Morgan Stanley said that all the oil marketing companies have registered strong gross refining margins in the quarter so far. Going forward, the global firm believes that the OMCs will report a core profit growth of 20-25% quarter on quarter.