CLSA has given a 'sell' call on Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL) and Indian Oil Corporation (IOC).
The brokerage firm says $80 per barrel is the breakeven point for the marketing margin. If crude prices go above that the marketing margins could turn negative for the three companies.
Given the general elections are around the corner, CLSA suggests that a retail price hike is unlikely. This lack of pricing power could result in further losses for the companies.
In contrast, Nomura has upgraded HPCL, with the target price raised to ₹570. Similar upgrades apply to BPCL and IOC.
Nomura argues that the recent price cut has eliminated the overhang concerning the marketing segment.
Nomura is optimistic about the refining sector. They have factored in refining margins of $9 per barrel for the next financial year (FY25) and the year after (FY26), exceeding current levels of Singapore GRMs.
They anticipate continued benefits from favorable crude sourcing, expressing bullish sentiment toward refining.
The primary risk identified at present is crude oil prices, which have stabilised around ₹86 per barrel.
(Edited by : Shweta Mungre)
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