Moneycontrol Bureau
Shares of HPCL jumped 3.5 percent intraday Thursday on analysts’ growing bullishness. Macquarie has maintained outperform rating with an increased target of Rs 506 per share with a decline on crude price and gains from oil reforms. The stock has already seen a 20 percent rally from August till date.
The brokerage is positive on HPCL’s ability to rampup refining capacity & face private sector retail competition. Overall, HPCL is aiming to spend USD 2.88 billion to raise its refinery capacity by 69 percent over three years post getting clearances.
“With the decline in overall subsidies the time-lag between cash allocation and disbursal has reduced to 3 months for the 6 months it was earlier. This helps reduce working capital requirements, which cuts OMCs interest expense as 55-70 percent of their debt is short-term working capital loans,” it says in a report.
Investors have been buying oil marketing stocks like HPCL and BPCL with a hope to see zero losses on diesel. Earlier, the government has also said the under-recovery on high speed diesel (HSD) applicable for first fortnight of September will go down to Rs 0.08 per litre. This was Rs 1.78 per litre during second fortnight of August 2014.
Brent crude price is already around 17-month low, at around USD 96-97 per barrel. Brent crude nudged higher to stay above USD 98 a barrel amid geopolitical concerns in the Middle East, although worries about ample supply and weak demand that dragged prices to 17-month lows in the previous session kept a lid on gains.
The Organization of the Petroleum Exporting Countries has cut its forecasts for demand for OPEC crude this year and next, pointing to a surplus of more than 1 million barrels per day in 2015 if OPEC keeps output at current levels.
At 11:34 hrs, the stock was quoting at Rs 494.75, up Rs 9.50, or 1.96 percent on the BSE.
Posted by Nasrin Sultana
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