NEW DELHI: Gradual but rapid rise in crude oil prices and petroleum products may have put strain on the foreheads of Indian policymakers, but there is one section on Dalal Street who is not complaining.
Oil explorers are set to gain from the swift climb in the global crude prices and some of them have already started getting re-rating from analysts.
, which came out with its earnings on Monday, is one such stock.
ICICI Securities, India’s largest traditional brokerage firm, sees the stock climbing nearly 55 per cent in the next one year from current levels. The brokerage raised FY22-FY23 EPS estimates by 17 per cent and target price by 13 per cent.
“To factor in the improved oil and gas price outlook, we have raised FY22-FY23 Brent estimate to $67.5-65/bbl from $60/bbl earlier and gas price to $2.6-4.25/mmbtu. Current share price reflects long-term Brent price of just $46/bbl. We estimate FY22 EPS to be up 54 per cent YoY,” said Vidyadhar Ginde, an analyst at .
The crude price estimate by ICICI Securities seems to be consevative. BofA Global Research raised its Brent crude price forecasts for this year and next, saying that tighter oil supply and demand balances in 2022 could push oil briefly to $100 per barrel.
The bank raised its Brent crude oil price forecast to $68 per barrel from $63 earlier. In 2022, it expects Brent to average $75 per barrel versus its earlier estimate of $60. If this comes true, the stock price could get another re-rating.
In the fourth quarter, Oil India has already seen the positive impact of recovery in crude oil prices. Standalone recurring EPS stood at Rs 8.5 versus minus Rs 1.9 in Q4FY20 driven by 15 per cent YoY rise in oil price realisation and 34 per cent YoY rise in other income.
The company said its Ebitda came in at Rs 425 crore (-37% YoY) due to higher opex in 4QFY21, which was lower than Motilal estimates. The company disbursed Rs 980 crore under pay revision of unionized employees. It recognized an exceptional item of Rs 70 crore as losses to control the Baghjan blowout. PAT stood at Rs 850 crore (-8% YoY). Adjusted PAT stood at Rs 920 crore.
Apart from the crude prices, there are other factors that may work out for the oil explorer. “If oil and gas price is higher in line with futures and Numaligarh Refinery’s FY22 estimated GRM (gross refining margin) is at $37/bbl, upside to Oil India FY22-FY23 EPS would be 14 per cent-5 per cent and to its FV 8 per cent at Rs 250 share,” said Ginde.
Moreover, high excise duty on auto fuels appears likely to continue for longer than expected and hence upside appears likely to Numaligarh Refinery’s GRM.
According to data collated from Refinitive, the stock is a consensus ‘buy’. The stock rates higher on earnings, relative valuations and risk parameters, which underlines the bullish views of analysts.
Over the last one year, the stock has gained 45 per cent. This calendar, it has surged 38 per cent.
For all the latest Business News Click Here
For the latest news and updates, follow us on Google News.
Denial of responsibility! NewsBit.us is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.
