The brokerage firm Emkay Global Financial Services Ltd has picked up stocks from the oil and gas space with ONGC, Oil India, GAIL, Indian Oil, BPCL, HPCL, Gujarat State Petronet, Petronet LNG, and Gulf Oil Lubricants as its top picks to buy.
The brokerage has said "OMCs are expected to see strong core GRMs and significant inventory gains, but marketing margins in key products such as petrol, diesel and LPG should be negative due to the delay/freeze in retail prices, amid the jump in oil prices, affecting overall earnings. There would be some forex losses as well. Hence, we expect the PAT of IOCL/BPCL/HPCL to be at Rs68bn/Rs15bn/Rs7bn in Q4FY22, with IOCL benefiting the most from inventory gains. We estimate ONGC/Oil India Q4 PAT at Rs114bn/Rs14bn, driven by higher oil realizations and dividend income. Total production of ONGC/OIL is expected to decline 3%/grow 5% yoy. The quarter should see expenses rising on account of inflation and higher energy costs."
According to Emkay Global "We estimate GAIL's standalone PAT to fall slightly by 4% qoq to Rs31.6bn, due to higher cost pressure in petchem, which could be largely offset by better gas marketing and LPG margins. Transmission volumes are likely to be down by 5% qoq though petchem utilization should be healthy. GSPL's volumes should also fall by 6% qoq to 30mmscmd, while APAT should decline by 6% qoq to Rs2.0bn. We estimate IGL's PAT to rise by 19% qoq to Rs3.7bn, building in 3% growth in volumes qoq, along with a 15% expansion in EBITDA/scm to Rs7.7. Guj Gas's PAT should more than double to Rs2.8bn due to the jump in EBITDA/scm to Rs5.3, partly offset by a 14% decline in volumes to 9.8mmscmd. For PLNG, we estimate a 32% qoq decline in PAT to Rs7.7bn, with Dahej/Kochi utilization at 84%/16% and a modest implied spot margin of USD5/mmbtu, which could be a surprise, though."
The brokerage has also claimed that "We estimate Reliance Industries Ltd's consolidated EBITDA to rise by 4% qoq to Rs310bn, with only a modest 4% uptick in O2C earnings as a result of tight physical markets. For Jio, we expect a net subscriber decline of ~5mn but a 8% rise in ARPU to Rs164. Retail EBITDA should rise by 8% qoq to Rs41.5bn (incl. Other Income), while upstream EBITDA should remain range-bound. We estimate the consolidated APAT after JPL-RRVL minority interest to increase by 6% qoq to Rs167bn. For GOLI, we expect a 6% yoy growth in volumes, while EBITDA/ltr should decline by 5% qoq to Rs20.3 amid input cost pressures. We expect EBITDA/PAT of Rs753mn/Rs545mn. ONGC, Oil India, Guj Gas, IGL and GAIL should report resilient earnings in Q4FY22."
|Companies||Rating||Target Price in Rs|
|Gujarat State Petronet||BUY||430|
|Gulf Oil Lubricants||BUY||720|
|Source: Emkay Research. Data as of April 8, 2022|