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UBS Investment Research
India Oil and Gas
S ubsidy payout should favour upstream
Event: we expect lower subsidy payouts in Q1 FY12 than actual
Q1 FY12 subsidy payouts should benefit upstream companies (ONGC, OIL and
GAIL), in our view. This is because we expect the upstream subsidy to be based on
the average of the full-year estimated under-recovery (we estimate Rs30bn at
Rs120bn pa in Q1) instead of actual Q1 (we estimate Rs40bn). This implies
downstream will be affected in Q1, but it should receive higher payouts in
subsequent quarters.
Impact: OMCs losses to be higher in Q1, but decline in FY12
We expect full-year losses to be lower due to the recent price hike in June (end-
Q1). This should result in higher Q1 losses but lower losses for the rest of the year.
We forecast subsidy sharing at 38.7% for upstream, and upside if this is lower, ie,
at 33%. However, we are conservative at present as oil prices are high and show no
sign of cooling.
Action: we prefer upstream to downstream companies
We expect phased reforms to favour upstream companies, and for the government
to reduce subsidies before allowing higher margins for downstream companies.
Our view is that downstream company losses are mainly due to lower margins (on
a full-year basis), and are opportunity losses and not operational losses. In the
present environment we do not expect higher margins, and we have Sell ratings on
BPCL and HPCL.
Top picks: ONGC and GAIL
We believe our subsidy assumptions are conservative with upside available for
upstream companies. We have Buy ratings on ONGC and GAIL, although ONGC
may be affected by an overhang from FPO.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
India Oil and Gas
S ubsidy payout should favour upstream
Event: we expect lower subsidy payouts in Q1 FY12 than actual
Q1 FY12 subsidy payouts should benefit upstream companies (ONGC, OIL and
GAIL), in our view. This is because we expect the upstream subsidy to be based on
the average of the full-year estimated under-recovery (we estimate Rs30bn at
Rs120bn pa in Q1) instead of actual Q1 (we estimate Rs40bn). This implies
downstream will be affected in Q1, but it should receive higher payouts in
subsequent quarters.
Impact: OMCs losses to be higher in Q1, but decline in FY12
We expect full-year losses to be lower due to the recent price hike in June (end-
Q1). This should result in higher Q1 losses but lower losses for the rest of the year.
We forecast subsidy sharing at 38.7% for upstream, and upside if this is lower, ie,
at 33%. However, we are conservative at present as oil prices are high and show no
sign of cooling.
Action: we prefer upstream to downstream companies
We expect phased reforms to favour upstream companies, and for the government
to reduce subsidies before allowing higher margins for downstream companies.
Our view is that downstream company losses are mainly due to lower margins (on
a full-year basis), and are opportunity losses and not operational losses. In the
present environment we do not expect higher margins, and we have Sell ratings on
BPCL and HPCL.
Top picks: ONGC and GAIL
We believe our subsidy assumptions are conservative with upside available for
upstream companies. We have Buy ratings on ONGC and GAIL, although ONGC
may be affected by an overhang from FPO.
ptc has consolidated very well and has given 10% returns in last one month... and has matched Inverted Hammer Or Gravestone Doji Bullish candlestick pattern on 25 July... just watch if it can break the resistence at 86...http://t.in.com/efh4
ReplyDeleteJindalSaw has given 7% returns in last one month, but overall in a year it has given negative returns... so take ur call... if it breaks the support at 157.50, the stock can touch Rs 150
looking at Neyveli Lignite technical chart, it looks like its in a dwn trend.... but for couple of months its consolidating very well and looks Rs. 100/- is a very gud support. if it crosses the resistence at 105 it might go up to 110 or 111