Maharatna CPSEs Perform Robustly In 2023. CIL, OIL, GAIL Ensure Above 50% Gains YoY

The Government of India have smartly consolidated the major state-owned corporations and awarded them the tag of 'Maharatna' companies as they deliver consistently immense earnings in the form of profits, assets and dividends to the government reserves. Out of 13 sector-intensive companies owned, a total of 9 companies are related to the energy sector, either production or transmission, two with finance, one with steel and one in engineering product manufacturing and services.

Coal India Ltd. Shares Extend More Than 52%

The country still depends 70% on coal-based power generation, and despite a strong addition in renewable energy, the plant load factors of the producing companies with favourable coal supply, are expected to grow more than 50% this fiscal year. This year CIL gained 10.8% growth in production with an 8.9% increase in dispatch coal. Its production value is projected to grow by 8%, while the dispatch volume might grow by 8.1% in the next fiscal. Moreover, the increase in railway rakes for coal transfer this year would facilitate higher exchange and utilisation of the fuel.

ICICI securities recommend COAL India as it is about to benefit from both volume increase and firm e-auction prices. As per the research report, "Taking cognisance of 8MFY24 performance, we believe there is no risk to our volume estimate of 751mt for FY24E. Besides, e-auction prices have started increasing again due to an uptick in Indonesian coal prices. We believe there is headroom of at least a 20% upward revision in consensus estimates. We maintain BUY on CIL with an unchanged TP of Rs. 395 based on 8x FY25(E) EPS. Our recommendation is also based on a dividend yield of 8-10% through to FY25."

The company's earnings per share is 45.53 PE ratio stands at 7.82. The day-ending share price of CIL on 15th December 2022 was Rs. 228.2/- per share, and on 14th December 2023, it floats around Rs. 348/- or 52% growth in 12 months. It has a 52-week low of Rs. 208 in the last week of March, and a 52-week high posted today of Rs. 362.5/-, out of which 51% delivered in the previous three and half months alone. According to yearly dividend payments, CIL paid total dividends in 2023 are the same levels paid last year of around 245% or Rs. 24.5/- per share of stock owned, the highest in all Maharatna stocks.

OIL Shares Deliver ROI of 51%

Oil India Limited (OIL) is one of the cash cows of the Indian government as it consistently posts robust returns for shareholders in the forms of dividends and EPS. This September quarter, the company reported a Total income of more than Rs. 9,000 crores, which is 44% higher than previous results and 6.99% higher than last September. Similarly, the net PAT delivered was Rs. 694 crores in the second quarter. The price coloured on 15th December 2022 was Rs. 213/- and on 14th December 2023, it reached new heights of Rs. 321.6/- per share, gaining more than 50%. For FY24, the company has allocated a dividend payout of 190% or Rs. 19/- per share in total.

HDFC securities maintain a 'Buy' rating for Oil India as it is premised on oil and gas production growth at 3% CAGR over FY24- 26E. Attractive valuations of 4.8x Mar-25 EPS, a 20% discount to long-term average P/E of 6x, 0.6x Mar-25 P/Bv with RoE of ~15% and a dividend yield of ~8%. However, this is offset by limited earnings potential, owing to the levy of a windfall tax on crude oil prices and a decline in domestically produced APM gas prices.

GAIL India Shares Surges Almost 50%

Gas Authority Of India Limited (GAIL) belongs to the oil and gas sector, which is among the eight core industries of India that influence almost all other important sectors of the economy. Gas consumption in India, considering the growing population would grow 9% annually by 2024, increasing 25 billion cubic metres. The union government allowing 100% FDI in the natural gas segment also presents a positive focus for upcoming years and remains strong as GAIL has the largest share in Natural Gas Pipeline Network. The price momentum of GAIL shares remains strong with fundamentals, and risk stays at the mid-range. However, the company valuation and earnings per share remain lower than other factors.

Recently, the share prices of GAIL reached Rs. 146/- on 14th December 2023, delivering almost 49% returns since 15th December 2022 when the prices were floating around Rs. 98/- per share. In this September quarter, the company lost more than 14% in total income compared September quarter of 2022, and net profit after tax was around Rs. 2,052 crores. GAIL have only allocated one interim dividend payout for investors this year of 40% or Rs. 4 per share amidst lower financial performance in 2023.

Power Grid Corporation Shares Climb About 43%

India is the third largest producer and consumer of electricity, only behind China and the USA, with an installed capacity of 423.35 GW, and power generation witnessed the highest growth in 2023 since the last 30 years, growing 8.87% in FY23. It ranks fourth in solar power and renewable energy production, with renewable energy accounting for around 41% of the production capacity. As per the current updates, 100% Foreign Dicilt Investment (FDI) is allowed in the sector and issuance of Sovereign Green Bonds is ahead. Power Grid Corporation of India is the largest electric power transmission utility under the direct control of the Ministry of Power and serves more than 23 countries. In Union budget 22-23, solar power projects have been allocated more than Rs. 7,000 crores for grid, off-grid and PM-KUSUM Projects, which focuses on better growth for the company in upcoming years.

Currently, the prices are rising higher than the target price set by BOB Caps at Rs. 250/- each share. A year ago on 15th December 2022, the share prices of Power Grid Corp. by the end of the day recorded as Rs. 163/- and within 365 days, the prices heavily jumped above 43% to reach Rs. 232.45/- on the 15th December 2023. In accumulation, the company ensured investors receive dividends of around 137% or Rs. 13.7/- per share for the current fiscal.

ONGC Stocks soar by 32%

As per India Energy Outlook, primary energy demand in the country is expected to reach twice its size as the GDP is forecast to grow with a strong phase. Petroleum consumption stood above 4.4 million barrels per day by March 2023, and by 2030, it expects to double its oil refining capacity. 50% of the Strategic Petroleum Reserves (SPRs) are to be considered for commercialisation by the central government to raise funds for building additional storage capacity and sustain international prices. A major challenge ahead for all Oil-based PSU corporations would be the new entry of Jio-BP, a joint venture between Reliance and British Petroleum, which aims at selling diesel mixed with dispersants and detergents by Re. 1 /- less than domestic competitors.

Share prices recorded on 15th December 2022 were Rs. 148/-, and on 14th December 2023, the prices breached all-time high levels and stabilised around Rs. 195.95/- per share. As the company posted more than 10% less income in the September quarter than June 2023 and net profit after tax of Rs. 15,900 crores, dividend payments made were Rs. 10/- per share in total, similar to those of other Maharatna companies. Considering India's energy demand to grow faster than all other major economies, investors can consider adding ONGC to their watch list as the company might be able to grab top positions in Mahratana returns for the upcoming years.

Steel Authority of India Limited Jumps 33%

India holds a fair advantage in cost of production and conversion costs in steel and alumina as it holds the fifth largest iron-ore reserves in the world. As per the World Steel Association, the demand in India increased by 8.6%, compared to the worldwide average of 1.8%. The country has set the targets of achieving a total crude steel capacity of 300 million tonnes per annum (MTPA) and total crude steel demand/production of 255 MTPA by 2030-31. Moreover, SAIL is the only steel-producing corporation that provides DMR-grade speciality steel for building India's aircraft carriers and the raw steel supply for railway track production.

On 15th December 2022, the prices were recorded at Rs. 83.55/-, with a 52-week low posted on 23rd December 2022 at Rs. 74.7/- and a 52-week high at Rs. 113.5/- on 15th December 2023, the prices have surged by more than 33%, closing at Rs. 111.35/- per share. Despite being a top-notch player in the Steel sector, long-term investors would be reluctant to include SAIL in their list as dividend payouts are among the lowest at 15% or Rs. 1.5/- per share to be allocated to investors.

India's stance on heavily investing in infrastructure to sustain the needs of the growing population can attract investors towards Maharatna PSU for future investments. However, companies like Tata Steel, JSW Steel, RINL and ArcelorMittal are the biggest competitors that might counter the market share of SAIL ahead.

BPCL Shares Gains Around 27%

Bharat Petroleum Corporation Limited (BPCL) is the fourth largest market-cap company in the Gas and petroleum sector ranking third according to retail outlets. The government cash cow has posted a quarterly net profit of Rs. 8,422 crores and the board approved for 210% dividend for shareholders this year. As per the face value of the share, it is about Rs. 21/- for each share that investors own. Bharat Oman Refineries Limited has merged with BPCL this year and the company focuses in the light of the changing latest energy industry trends with an investment of Rs. 1.5 lakh crore in 'Project Aspire', a remoulding initiative for the next five years. It has planned for key areas like Gas, non-fuel retailing, green energy, and digital ventures. Charging facilities in 7000 energy stations are about to be set up

The 52-week high share price of BPCL stood at 482.5/- on 7th December 2023 and the 52-week low was around Rs. 315/- recorded on 1st March 2023. On 15th December 2022, the prices stayed around Rs. 349/- per share and within 12 months, the prices surged almost 28%, reaching close to the all-time high range at Rs. 446/- on 14th December 2023. Since 20th October, the share price has exponentially risen from the lower range of Rs. 335/- per share on October last week, to Rs. 482/- per share on 6th December, delivering almost 43% return per share within five weeks.