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Stocks of state-owned oil marketing companies may still have some steam left after gaining 11-23% this week on the back of the revision in diesel pricing norms, while Reliance Industries' stocks are likely to gain after the company reported Oct-Dec earnings that were better than estimated. On Thursday, public sector oil-marketing companies Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp raised the base price of diesel by 45 paise per litre after the government allowed them to effect a gradual increase in diesel prices in order to align them with global rates. The companies will now also sell the fuel to bulk consumers at market rates. The move is seen as a precursor to the deregulation of diesel prices, which will help reduce the revenue losses of these companies sharply, and also improve the country's fiscal situation though there are concerns over the regularity of price revisions in diesel. However, the upside in these stocks may be capped at 2-3% as profit sales may kick-in at higher levels. Terming the move as credit positive for the public sector oil marketing companies, ICRA said it would significantly decrease the subsidy burden of the government, as well as upstream companies, on a full year basis if implemented on a consistent basis.
However, there is lack of clarity on the quantum and timelines of revision of diesel prices given the politically sensitive nature of the issue. On the other hand, stocks of Reliance Industries which closed over the 900-rupee level Friday for the first time since Oct 28, 2011 are seen rising further to 960-970 rupees in the near term. The company has shown significant resilience in the refining space with its gross refining margins in Oct-Dec coming at $9.6 a barrel, higher than the widely expected $8.5-$9.0 a barrel. This helped the company beat expectations and report net profit of 55.02 bln rupees in Oct-Dec, 24% more than the year ago period. Reliance Industries' top-line as well as bottom-line were above our estimates on account of higher than expected profitability from refining segment.
Stocks of state-owned oil marketing companies may still have some steam left after gaining 11-23% this week on the back of the revision in diesel pricing norms, while Reliance Industries' stocks are likely to gain after the company reported Oct-Dec earnings that were better than estimated. On Thursday, public sector oil-marketing companies Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp raised the base price of diesel by 45 paise per litre after the government allowed them to effect a gradual increase in diesel prices in order to align them with global rates. The companies will now also sell the fuel to bulk consumers at market rates. The move is seen as a precursor to the deregulation of diesel prices, which will help reduce the revenue losses of these companies sharply, and also improve the country's fiscal situation though there are concerns over the regularity of price revisions in diesel. However, the upside in these stocks may be capped at 2-3% as profit sales may kick-in at higher levels. Terming the move as credit positive for the public sector oil marketing companies, ICRA said it would significantly decrease the subsidy burden of the government, as well as upstream companies, on a full year basis if implemented on a consistent basis.
However, there is lack of clarity on the quantum and timelines of revision of diesel prices given the politically sensitive nature of the issue. On the other hand, stocks of Reliance Industries which closed over the 900-rupee level Friday for the first time since Oct 28, 2011 are seen rising further to 960-970 rupees in the near term. The company has shown significant resilience in the refining space with its gross refining margins in Oct-Dec coming at $9.6 a barrel, higher than the widely expected $8.5-$9.0 a barrel. This helped the company beat expectations and report net profit of 55.02 bln rupees in Oct-Dec, 24% more than the year ago period. Reliance Industries' top-line as well as bottom-line were above our estimates on account of higher than expected profitability from refining segment.
