"FY22 average is expected to be USD80/bbl. With recent weakness, we see rupee at 78/77 in FY23/24. Global gas has witnessed significant volatility, especially NBP and spot LNG, which are up to USD60/mmbtu+ each. Against USD6.5/mmbtu APM price expected in H1FY23, H2 run-rate is USD12+ and current global prices imply over USD20/mmbtu. Hence, we conservatively build in USD6 each for FY23/24E and USD5 for the long term. We believe severe distortion in NBP prices could lead to a revisit in the APM pricing formula though USD5-6 could be the floor considering the pricing of other gas and ONGC's plea for it," the brokerage has said.
"Petrol-diesel marketing margins are at negative Rs6.5-9.1/ltr, based on 15 DMA though current USD130/bbl Brent calls for an eventual hike of Rs28-30/ltr on the basis of current adjusted cracks. In our view, a coordinated action involving excise cuts, VAT reduction and RSP hikes are required as OMCs already operate with wafer thin EBITDA margins. LPG price hike is also necessary as the current under-recovery of Rs200/cy on a total domestic base of 25mmtpa implies an Rs350bn loss and it can further swell," the brokerage has said.
"We raise ONGC's FY23/24E EPS by 38%/12%, with Buy rating and TP of Rs230. For Oil India, we raise EPS by 22%/5% with Buy and target price of Rs 335. GAIL should benefit from higher oil prices and expansion in LNG/NBP vs. Henry Hub spreads. We raise FY23E EPS by 32% but FY24E is up 3% on modest LNG margins. Retain Buy with Rs 210 target price," the brokerage has said.