Some market watchers are starting to rethink their price forecasts. Morgan Stanley trimmed its Brent estimates through the rest of the year, and expects the benchmark to trade in the $60s during the second half.
Lower crude oil prices are beneficial for downstream refiners as lower input costs leads to improved profitability and margins. Crude oil is their main input source. With India being a net importer, the lower oil prices also reduces their Dollar bills.
JM Financial wrote in its note on Thursday that the risk-reward for Oil Marketing Companies is more balanced now after the recent share price correction and a fall in global oil prices.However, the brokerage is cautious on the OMC stocks as it expects the government to retain benefit of any sustained price fall in crude.
Additionally, the aggressive capex by OMCs accentuates a key structural concern that most of these projects fail to create long-term value for shareholders.
HPCL, at the current price is trading at 1.1 times financial year 2027 price-to-book, which is higher than the historical average of 1 times. BPCL trades at 1.1 times price-to-book, which is lower than its average of 1.4 times, while Indian Oil is also trading below its 0.9 times average at 0.8 times.
Therefore, JM Financial maintained its “sell” rating on HPCL and Indian Oil, along with its “hold” rating on BPCL.
Shares of HPCL are trading 3.7% higher at ₹338.25, those of BPCL are trading 1.8% higher at ₹260.6, while those of Indian Oil are up 2.1% at ₹124.79. Shares of Chennai Petro are up 6.6% at ₹502.2, while those of MRPL are trading 3.7% higher at ₹110.2.
