IOCL, HPCL and BPCL stocks rise as crude oil prices fall nearly 9% in two days

Shares of oil marketing companies, Indian Oil Corporation Ltd. (IOCL), Hindustan Petroleum Corporation Ltd. (HPCL), and Bharat Petroleum Corporation Ltd (BPCL), rose in Thursday’s trade (May 4, 2023) supported by a fall in crude oil prices. In the past two days, crude oil prices in the international market have declined nearly 9 per cent. At the time of filing this report, the crude oil stood at $73.11 per barrel. On Wednesday, oil prices fell another 4 per cent after the US Federal Reserve raised interest rates and left investors fretting about the economy.

Individually on NSE, shares of IOCL rose nearly 2 per cent and quoted at Rs 84.25 apiece, BPCL shares climbed over 2 per cent at Rs 368.15 piece and HPCL scrip traded at Rs 263.9 apiece which was up over 2 per cent.

What does brokerage suggest on OMCs?

Brokerage firm Prabhudas Lilladher has given a ‘buy’ call on shares of HPCL, BPCL, and IOCL.  For HPCL, the brokerage has given a target price of Rs 310 apiece which is an upside of 17.5 per cent. As regards BPCL, the brokerage has given a target price of Rs 420 apiece which is an upside of 14.1 per cent. The target price for IOCL is Rs 125, implying an upside of 48.4 per cent. The brokerage expects OMCs results to be operationally better owing to a recovery in marketing gains.

"For OMCs, retail sales are expected to remain flat QoQ in the March quarter. With diesel margins turning positive, we expect overall marketing margins to improve significantly this quarter when compared to Q3. On account of a weak base, we expect nearly 2.5 times, 0.8 times, 1.7 times QoQ increase in EBITDA for IOCL, BPCL, and HPCL, respectively," ICICI Securities wrote in an earnings preview note issued on April 11, 2023.

For IOCL, the brokerage wrote, "We expect crude throughput at 18.6 MMT, up nearly 2 per cent QoQ with operations commencing at Panipat post-maintenance shutdown. Marketing segment volumes are anticipated to remain flat QoQ. Gross refining margins (GRMs) are anticipated at US$10/bbl vs. US$12.9/bbl in Q4FY23 factoring in individual product cracks trend and inventory loss. On the marketing front, we expect a significant improvement with margins on diesel turning positive. IOC's marketing segment (80.5 MMT) is slightly larger than its refining segment (67.7 MMT). We estimate an operating profit of Rs 12,707.2 crore, up 2.5x QoQ (on a weak base)."

IOCL share price history

On a year-to-date (YTD) basis, the shares of IOCL have surged over 7 per cent as compared to Nifty50’s dip of 0.17 per cent. In the past six months, the stock rose over 22 per cent, as compared to the headline index’s rise of 0.27 per cent.

BPCL share price history

On a year-to-date (YTD) basis, the shares of BPCL have surged over 10 per cent as compared to Nifty50’s dip of 0.17 per cent. In the past six months, the stock rose over 22 per cent, as compared to the headline index’s rise of 0.27 per cent.

HPCL share price history

On a year-to-date (YTD) basis, the shares of HPCL have surged nearly 11 per cent as compared to Nifty50’s dip of 0.17 per cent. In the past six months, the stock rose over 29 per cent, as compared to the headline index’s rise of 0.27 per cent.

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