2 Stocks To Buy For Up To 33% Returns From Motilal Oswal

Broking firm, Motilal Oswal has recommended buying the stocks of ONGC and BPCL for good gains. The brokerage sees an upside of almost 35% on the stock of BPCL and about 29% on the stock of ONGC from current levels.

Buy BPCL for 33% Gains

Current market price	Rs 116
Target price Rs	Rs 150
Gains %	29%

Motilal Oswal Institutional equities sees gains of up to 33% on the stock of BPCL from the current market price of Rs 464, and believes the stock can rally up to a target price of Rs 615 from current levels.

BPCL reported a beat on our estimates, driven by a better-than-expected performance in the Marketing segment (volumes were down 14% QoQ). Refining throughput in 1QFY22 was aligned with demand moderation due to the second COVID wave (throughput was down 18% QoQ).

"With the total phasing out of the COVID lockdowns and closure of refinery complexes (est 3 million barrels of oil per day oveer the next 2-3 years), the refining margin would return to its long-term average (of $5 to $6 per barrel)," the brokerage has said.

 

According to Motilal Oswal, the management stated that an increase in personal mobility due to COVID continues to drive higher demand for MS (thus aiding cracks). Demand for HSD is also seeing strong recovery in the US, coupled with the re-opening of the Chinese and Indian economies.

"A virtual data room has been opened up since Apr'21, and the next two steps consist of a discussion with the senior management and visiting physical assets. We value BPCL at 2.3 times Sep'23E price to book value. We reiterate Buy on the stock of BPCL, with target price of Rs 615," Motilal Oswal has said in its report.

Buy ONGC for 29% gains

Current market price	Rs 116
Target price Rs	Rs 150
Gains %	29%

The brokerage is also bullish on the stock of ONGC and sees gains of 29%. ONGC reported in-line numbers and crude oil sales; lower gas sales were offset by higher-than-estimated VAP sales. Gas offtake was lower due to lower offtake from GAIL, led by shutdowns at the customer end.

"Brent prices have started cooling off from the peak of USD75/bbl in Jul'21 to $70 per bbl. We expect prices to return to normal levels of USD60-65/bbl as OPEC+ gradually increases its oil production (by 0.4mnbopd per month from Aug'21). We forecast Brent price of $63/$60 per bbl for FY22E/FY23E, considering the easing of the current 5.8mnbopd production cuts," the brokerage has said.

We value the company at 10 times Sep'23E adjusted EPS of Rs 11.6 and add the value of investments to arrive at a target price of Rs 150. Reiterate Buy on the stock," the brokerage has said.

Disclaimer

The article is informational in nature, which is taken from the brokerage report of Motilal Oswal institutional Equities. Please do consult a professional advisor. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in the article.