Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Following the price hikes, duty cuts announced by the government we
adjust our earnings, PTs for the SOE oil companies. We retain OW on
ONGC, GAIL, Neutral weighting on BPCL, IOC and UW on OIL, HPCL.
Upstream companies will be key beneficiaries. Even assuming higher
upstream subsidy sharing (45% in FY12, 60% in FY13), the better
contained subsidy in FY12/13 leads to lower-than-anticipated absolute
subsidy outgo given price hikes, duty cuts. We retain our OW ratings on
ONGC, GAIL despite lowering our PTs to adjust for a higher subsidy
sharing for both companies, and building lower gas volumes for GAIL.
Our new PTs for ONGC/OIL are Rs335/Rs1310, based on 4xEV/Ebitda
(in-line with the region). For GAIL our DCF-based PT is Rs535.
Downside risk for ONGC and GAIL would arise from higher than
anticipated subsidy sharing, lower crude/gas volumes. We retain our UW
on OIL given its lower resilience to changes in subsidy sharing and <5%
upside to fair value. Upside risk for OIL would be from lower subsidy
sharing.
Controlled earnings environment will continue for BP, HP, IOC:
With diesel prices now adjusted to US$83/bbl, we would need to see
crude prices correct to that level for the downstream companies to move
out of the controlled earnings environment they have been in since
FY05. We are building in lower absolute subsidy share (Rs55bn) for the
downstream companies based on our forecast of lower crude
(US$93.8/bbl in FY13) and some success in targeting of subsidies in
FY13E. Based on 6xEV/Ebitda and building in value of E&P successes
for BPCL, our new PTs for BPCL/HPCL/IOC are Rs715/Rs410/Rs420.
Although we see a short-term bounce in stock prices due to potential
reform implications of the government action, we believe a sharper
correction in crude/sustainable reform steps are needed to get more
constructive on these names. We retain our Neutral rating on BPCL, IOC
and UW on HPCL. Upside risk for our ratings/PT on BPCL/HPCL/IOC
emanates from a sharp correction in crude (to below US$85/bbl).
Downside risk on BPCL/IOC would arise out of lower refining margins,
higher subsidy sharing.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Following the price hikes, duty cuts announced by the government we
adjust our earnings, PTs for the SOE oil companies. We retain OW on
ONGC, GAIL, Neutral weighting on BPCL, IOC and UW on OIL, HPCL.
Upstream companies will be key beneficiaries. Even assuming higher
upstream subsidy sharing (45% in FY12, 60% in FY13), the better
contained subsidy in FY12/13 leads to lower-than-anticipated absolute
subsidy outgo given price hikes, duty cuts. We retain our OW ratings on
ONGC, GAIL despite lowering our PTs to adjust for a higher subsidy
sharing for both companies, and building lower gas volumes for GAIL.
Our new PTs for ONGC/OIL are Rs335/Rs1310, based on 4xEV/Ebitda
(in-line with the region). For GAIL our DCF-based PT is Rs535.
Downside risk for ONGC and GAIL would arise from higher than
anticipated subsidy sharing, lower crude/gas volumes. We retain our UW
on OIL given its lower resilience to changes in subsidy sharing and <5%
upside to fair value. Upside risk for OIL would be from lower subsidy
sharing.
Controlled earnings environment will continue for BP, HP, IOC:
With diesel prices now adjusted to US$83/bbl, we would need to see
crude prices correct to that level for the downstream companies to move
out of the controlled earnings environment they have been in since
FY05. We are building in lower absolute subsidy share (Rs55bn) for the
downstream companies based on our forecast of lower crude
(US$93.8/bbl in FY13) and some success in targeting of subsidies in
FY13E. Based on 6xEV/Ebitda and building in value of E&P successes
for BPCL, our new PTs for BPCL/HPCL/IOC are Rs715/Rs410/Rs420.
Although we see a short-term bounce in stock prices due to potential
reform implications of the government action, we believe a sharper
correction in crude/sustainable reform steps are needed to get more
constructive on these names. We retain our Neutral rating on BPCL, IOC
and UW on HPCL. Upside risk for our ratings/PT on BPCL/HPCL/IOC
emanates from a sharp correction in crude (to below US$85/bbl).
Downside risk on BPCL/IOC would arise out of lower refining margins,
higher subsidy sharing.
No comments:
Post a Comment