Oil stocks Outlook for the week – 18 to 22.08.2014
( www.rupeedesk.in )
( www.rupeedesk.in )
With the outlook for state-owned oil marketing companies
improving due to declining
subsidies, their shares are likely to remain on the upward
trajectory next week, though the
broad market trend and movement of the rupee against the
dollar will continue to have a
bearing.
Revenue loss on diesel is likely to have declined from the
last revised figure of 1.50
rupees a litre. If the current trend in crude oil prices and
that of the rupee against the
dollar continue, the fuel is likely to inch very close to
market parity within a month or
two.
The Indian currency recovered this week and ended at 60.76 a
dollar. Further gains in the
rupee could add to the upside in shares of Indian Oil Corp,
Bharat Petroleum Corp and
Hindustan Petroleum Corp. Full diesel deregulation will lead
to lower interest costs and a
potential doubling in marketing margin.
Also, timely payment of subsidy by the government in the
past few quarters has
improved the financials of these companies by reducing their
borrowings, and
consequently interest costs.
We expect the company (Indian Oil) to get fully compensated
from the government and
upstream companies in FY15 and FY16 and its subsidy burden
to remain nil, which
would drive growth for the company.
The improvement of financial health of the oil retailers
will also bring in some cheer to
the upstream companies, who have to share 40-50% of the
revenue loss on subsidised
fuel.
Another major trigger for Oil and Natural Gas Corp and Oil
India will be revision in gas
prices. Oil Minister Dharmendra Pradhan said in parliament
this week that the new gas
price formula will be finalised by Sep 30.
We believe ONGC can be the biggest beneficiary of
under-recovery reduction. Gas price hike could be another trigger.
