10 Oil & Gas Sector Stocks Including PSUs To Buy, Recommends Sharekhan

Broking firm Sharekhan has listed 10 stocks from the Oil & Gas sector with Buy rating. These 10 stocks include Reliance Industries Ltd. (RIL), Petronet LNG Ltd., Mahanagar Gas Ltd. (MGL), Indian Oil Corporation Ltd. (IOCL), Bharat Petroleum Corporation Ltd. (BPCL), Hindustan Petroleum Corporation Ltd. (HPCL), GAIL (India) Ltd., Gujarat State Petronet Ltd. (GSPL), Gujarat Gas Ltd., and Indraprastha Gas Ltd. (IGL).

Among these 10 stocks, HPCL, IOCL, BPCL, and GAIL, state-owned (PSU) stocks. The brokerage has listed RIL, IGL, MGL, GAIL, and GSPL as its Preferred Picks.

Mixed bag Q4; OMCs shines on strong GRM

According to the brokerage firm, OMCs (IOCL, BPCL and HPCL) posted robust Q4FY23 numbers with a large earnings beat supported by continued higher-than-expected refining margin and recovery in marketing earnings given positive auto fuel gross marketing margins. "Upstream PSUs (ONGC and Oil India) EBITDA missed our estimate and declined on q-o-q basis due to higher cost and weak volume performance. ONGC reported a net loss of Rs. 248 crore due to a one-time large tax provision related to service tax & GST on royalty. CGDs (IGL/MGL) put up a good show with a strong recovery in EBITDA margin on lower gas cost; MGL outperformed with 57% q-o-q rise in EBITDA margin while margin improvement for IGL was much lower at 9% q-o-q."

It added, "Gas utilities (GAIL, Petronet LNG and GSPL) posted q-o-q earnings recovery but missed our estimate due to lower-than-expected volume recovery, higher cost and one-offs (especially for GAIL). Reliance Industries (RIL) consolidated EBITDA of Rs. 38,440 crore, up 9% q-o-q, was 7% above our estimate led by 10% beat in standalone EBITDA offsetting slight miss in retail EBITDA while Jio performance was broadly in-line. Overall, OMCs and RIL earnings were strong and well above our estimate; upstream PSUs posted weak performance while CGDs witnessed sequential margin recovery."

Sharekhan stated the Key risks to their Buy call as 1) Lower-than-expected gas sales volumes amid demand slowdown amid delay in the development of new GAs, 2) likely margin pressure on CGDs in case of high gas price, and 3) Lower refining margins.

Stocks - CMP & Target Price

Stocks	*CMP	Target Price
Reliance Industries	Rs. 2481.95	Rs. 3050
Petronet LNG	Rs. 222.8	Rs. 265
Mahanagar Gas	Rs. 1025.25	Rs. 1285
Indian Oil Corporation	Rs. 90.30	Rs. 100
Bharat Petroleum Corporation	Rs. 359.45	Rs. 430
Hindustan Petroleum Corporation	Rs. 262.20	Rs. 300
GAIL	Rs. 104.90	Rs. 128
Gujarat State Petronet	Rs. 294.40	Rs. 342
Gujarat Gas	Rs. 479.5	Rs. 620
Indraprastha Gas	Rs. 463.05	Rs. 585

Note : CMP - Current Market Price
*CMP as on Friday, May 09, 2023

Disclaimer - The stocks have been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.