BPCL and HPCL, and an Accumulate rating on IOCL. This recommendation is based on factors such as a super normal Gross Refining Margin (GRM) becoming the new normal, a well-diversified crude basket with substantial discounts for Indian refiners, anticipated bumper dividends from OMCs, and the government's budgeted capital infusion of ₹30,000 crore, guaranteeing the protection of book value and a reduction in the net debt to EBITDA ratio, explained the brokerage. It has a target price of ₹550 for BPCL, implying an over 25% upside.
Meanwhile, it has targets of ₹450 and ₹137 for HPCL and IOC, indicating a 30% and 18% upside, respectively. As per the brokerage, the recent announcement of major state election results signals the initiation of the General Election 2024 code of conduct, expected to be effective from the second week of March. Consequently, the analysis suggests that there won't be an auto fuel price cut in Q3FY24.
Hence, OMCs are projected to report healthy Q3FY24 EBITDA/PAT with year-on-year growth, noted the brokerage. The brokerage also informed that during H1FY24, BPCL/HPCL/IOCL's consolidated Book Value Per Share (BVPS) stood at Rs329/Rs318/Rs121. By the end of Q3FY24, the visibility of earnings indicates BVPS is expected to reach Rs354/Rs328/Rs124.
Historical evidence suggests that OMCs have traditionally implemented petrol/diesel price changes even during the code of conduct period, potentially causing volatility in Gross Marketing Margins (GMM) for a brief period. However, it is anticipated that post the General Election, GMM will return to normal or above-normal levels, it predicted. After the election, a resumption of auto fuel price adjustments to normal marketing margins of approximately Rs3/lt is
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