News Release Details
Rise in oil cos' shares can be used as exit point: Citigroup
New Delhi 30-Sep-2007
The recent rise in shares of public sector oil marketing companies such as BPCL, HPCL and IndianOil can be used as an opportunity to exit these stocks, Citigroup said in a recent note to clients."Downstream R&M (refining and marketing), though benefiting on their refinery assets, are still bogged down by policy uncertainty, which is not getting any better in the current political context," the investment bank said. Shares of public sector oil companies have underperformed the benchmarks in the last few years due to earnings uncertainty as these companies have sold products at prices below production 'costs. Even though crude oil prices hit a record high last week, domestic state-owned oil marketing companies have been unable to hike product prices accordingly due to government compulsions. Most of these companies have refinery subsidiaries, which manage sell output at market rates to the marketing companies. "The resultant discount on marketing assets would continue to have an overbearing impact on these stocks. We therefore see the recent move in these stocks on sympathy as an exit opportunity/ the Citi note said.Crude oil prices retreated on Friday, with New York's crude oil futures contract for delivery in November closing at $81.66 a barrel. Last week. New York crude touched record levels of $84.10. The weaker dollar has been a key reason for rising oil prices, as the recent slide in the US currency has made dollar-denominated commodities cheaper, thereby encouraging demand. "Last couple of weeks has seen a sharp spurt in the standalone refinery stocks viz. RPL, CPCL, MRPL, and ', BRPL. The re-rating has been driven by comparative asset valuations led by RPL," it said."Greenfield refinery costs have shot up globally and therefore this does not come as a complete surprise. Post the sharp upward move, refinery stocks are trading at EVI complexity bbl of $1,400-2,600, broadly in line with the current replacement cost of $2,000-2,200/complexity bbL" Citi said. . The investment bank has assigned a target price of Rs 450 for The recent rise in shares of public sector oil marketing companies such as BPCL, HPCL and IndianOil can be used as an opportunity to exit these stocks, Citigroup said in a recent note to clients."Downstream R&M (refining and marketing), though benefiting on their refinery assets, are still bogged down by policy uncertainty, which is not getting any better in the current political context," the investment bank said., Rs 360 for Chennai Petroleum, Rs 385 for BPCL and Rs 299 for BPCL. On IndianOil , Citigroup said, "We are maintaining a valuation premium (for core earnings) to BPCL and HPCL considering IndianOil's superior revenue mix and sustainable competitive advantage. The target price includes the value of IndianOil's holdings in ONGC and Gail at current market prices-worth Rs 103/share at a 20% discount to the current market prices."
New Delhi 30-Sep-2007
The recent rise in shares of public sector oil marketing companies such as BPCL, HPCL and IndianOil can be used as an opportunity to exit these stocks, Citigroup said in a recent note to clients."Downstream R&M (refining and marketing), though benefiting on their refinery assets, are still bogged down by policy uncertainty, which is not getting any better in the current political context," the investment bank said. Shares of public sector oil companies have underperformed the benchmarks in the last few years due to earnings uncertainty as these companies have sold products at prices below production 'costs. Even though crude oil prices hit a record high last week, domestic state-owned oil marketing companies have been unable to hike product prices accordingly due to government compulsions. Most of these companies have refinery subsidiaries, which manage sell output at market rates to the marketing companies. "The resultant discount on marketing assets would continue to have an overbearing impact on these stocks. We therefore see the recent move in these stocks on sympathy as an exit opportunity/ the Citi note said.Crude oil prices retreated on Friday, with New York's crude oil futures contract for delivery in November closing at $81.66 a barrel. Last week. New York crude touched record levels of $84.10. The weaker dollar has been a key reason for rising oil prices, as the recent slide in the US currency has made dollar-denominated commodities cheaper, thereby encouraging demand. "Last couple of weeks has seen a sharp spurt in the standalone refinery stocks viz. RPL, CPCL, MRPL, and ', BRPL. The re-rating has been driven by comparative asset valuations led by RPL," it said."Greenfield refinery costs have shot up globally and therefore this does not come as a complete surprise. Post the sharp upward move, refinery stocks are trading at EVI complexity bbl of $1,400-2,600, broadly in line with the current replacement cost of $2,000-2,200/complexity bbL" Citi said. . The investment bank has assigned a target price of Rs 450 for The recent rise in shares of public sector oil marketing companies such as BPCL, HPCL and IndianOil can be used as an opportunity to exit these stocks, Citigroup said in a recent note to clients."Downstream R&M (refining and marketing), though benefiting on their refinery assets, are still bogged down by policy uncertainty, which is not getting any better in the current political context," the investment bank said., Rs 360 for Chennai Petroleum, Rs 385 for BPCL and Rs 299 for BPCL. On IndianOil , Citigroup said, "We are maintaining a valuation premium (for core earnings) to BPCL and HPCL considering IndianOil's superior revenue mix and sustainable competitive advantage. The target price includes the value of IndianOil's holdings in ONGC and Gail at current market prices-worth Rs 103/share at a 20% discount to the current market prices."