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This State-Run Oil Refiner Has Several Buy Ratings; Upside Of Up To 40% Seen

Roshni Agarwal

State oil marketer BPCL has been recommended a buy by most broker firms. This is even as the company suffered losses to the tune of Rs. 1819.6 crore for the quarter ended March 2020 on account of inventory loss and lower refining margins. On Friday (June 5, 2020), the stock ended higher by 3.54% at Rs. 369.90

The brokerage houses which have asserted a buy call on the counter:

Brokerage Rating before result Rating after result Revised target rate
CLSA Sell Sell Rs. 330
Antique Buy Buy Rs. 425
Nomura Buy Buy Rs. 390
Kotak Institutions Buy Buy Rs. 440
Edelweiss Buy Buy Rs. 501
Morgan Stanley Overweight Rs. 517

"Core earnings beat expectations with robust integrated margins and stable refinery run rates. Covid-19 impact was less severe in current quarter with refinery utilisation up to 77 per cent by end May and India's fuel demand recovering to 70 per cent of pre-Covid levels despite the ongoing lockdowns," said Morgan Stanley, which has maintained overweight rating on the stock with a target price of Rs 517.

Postives at the company: Net cash generation or net cash flow has been improving for last 2 years.

Negatives: Increasing debt is a one concern at the company

Another risk is the weak prospect in the refining and marketing space amid Covid 19 backdrop. Though demand as the economy has begun to open up is expected to return to pre-Covid 19 levels in July for both diesel and gasoline.

Also, as there is a threat to India's fiscal deficit, we can see a divestment in the company.

GoodReturns.in

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