Sharekhan Suggests 7 Oil & Gas Stocks To Buy & Hold: Check The High Return Potential

The oil manufacturing, petrochemicals, and oil marketing companies (OMCs) are expected to benefit due to the recent drop in crude prices. Analysts are now recommending buying these stocks on a medium to long-term basis, when the stock prices are low, for good returns.

Oil & Gas Stocks To Buy and hold: Target price and current market price

Sharekhan suggests buying the stocks of RIL, IOCL, BPCL, HPCL, and GAIL, while suggests holding the stocks of Oil India and ONGC. Check the current market price and target price here.

Company	Current market price	Target price
RIL	Rs. 2,433	Rs. 3,050
Oil India	Rs. 191	Rs. 230
IOCL	Rs. 74	Rs. 100
BPCL	Rs. 313	Rs. 375
HPCL	Rs. 226	Rs. 310
GAIL	Rs. 134	Rs. 175
ONGC	Rs. 127	Rs. 140

Sharekhan comments on the upstream PSU stocks

Upstream PSUs have super strong earnings driven by high oil & gas realisations. The brokerage firm mentioned, "We expect upstream PSUs to have a stellar earnings performance in Q1FY2023, primarily led by a steep ~$13/bbl q-o-q rise in international crude oil prices and benefit of a 110% increase in domestic gas price to $6.1 mmBtu. We expect decent oil & gas production volume growth of 1-2% y-o-y for ONGC/Oil India and net oil realization of $110-111/bbl in Q1FY2023 and thus expect robust 80%/7% q-o-q growth in PAT of ONGC/Oil India. Strong y-o-y earnings growth of 267%/243% for ONGC/Oil India is on account of the low base of last year, given weak oil & gas prices."

Sharekhan comments on the OMC stocks

OMCs are likely to incur losses as negative auto fuel marketing margin to offset high GRM and inventory gain. Sharekhan stated about the stocks, "We expect OMCs to report a massive net loss due to large negative marketing margin of Rs. 15/Rs.11 per litre on diesel/petrol, forex loss, and LPG under-recoveries. Weak marketing performance would offset the benefit of super-normal GRM and inventory gain given the rally in crude oil price. Benchmark Singapore complex GRM rallied sharply to ~$21.5/bbl versus $7.9/bbl in Q4FY22 led by an elevated petrol/diesel crack spread of $39-40/$24-25 per bbl in Q1FY23. For RIL, we expect PAT to increase by 48% q-o-q primarily led by robust earnings from refining segment (high GRM) and higher domestic gas price of $9.9/mmBtu for deep-water blocks."

Disclaimer

The above stocks were picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.