Oil on fire: IOC, HPCL, BPCL share prices hit fresh 52-week lows as Brent crude tops $74

IOC, HPCL, BPCL share prices were trading sharply lower on Thursday, hitting their fresh 52-week lows, after global oil prices jumped nearly 10 per cent in last 15 days and that is making difficult for oil marketing companies to maintain their marketing margins. Oil prices remained close to late 2014-highs as US crude inventories declined, while top exporter Saudi Arabia pushed for higher prices. Brent crude was trading above $74 per barrel.  

HPCL share price plunged as much as 6 per cent to Rs 300.2, hitting its lowest since early January 2017. BPCL share price dropped 5.7 per cent to Rs 382.1, lowest since late September 2016, while IOC share price declined as much as 4 per cent to Rs 158.2, lowest since later December 2016. The stocks were the leading losers on Nifty50 index. 

Not just oil prices, a depreciation in rupee is also pushing pressure on OMCs. Higher crude along with weaker rupee, which has slipped 3 per cent since February, is having an impact on profit margins of the companies. 

While the oil prices have gained 10 per cent in the past 15 days, petrol prices have seen an uptick of just 24 paise per litre, and diesel prices mere 58 paise per litre. A dip in marketing margin by 0.5 per cent may reduce the earnings per share of the OMCs by 12-21 per cent, according to Zee Business research.  

The companies may also reduce dividend payment due to a fall in profits. IOC paid Rs 20 per share dividend for FY18. In addition, it came out with bonus issue in 1:1 ratio. BPCL and HPCL paid Rs 15 per share and Rs 15.6 per share dividend for FY18, respectively, while both issued bonus in 1:2 ratio. 

On the technical charts, IOC, BPCL and HPCL are showing weakness, going forward. Ruchit Jain, Equity Technical Analyst, Angel Broking expects time-wise and price-wise correction on these stocks. 

"Long-term investors have booked strong returns in last few years, so the profit-booking is expected on the stock until August to September 2018," he said. 

Meanwhile, global brokerage JP Morgan expects OMCs to report sharply lower quarter on quarter earnings in the March quarter of FY18 in the absence of large inventory gains that were seen in the December quarter, although inventory should still be a positive contributor, it said. 

Bloomberg had reported last week that the government may ask oil marketing companies to absorb Re 1 per litre price hike, quoting sources. The government has ruled out excise duty cut to lower oil prices, report added.