India's oil refiners HPCL, BPCL, Indian Oil hit a 52-week high after HSBC projects better earnings

Shares of India's three state-run oil marketing companies, HPCL Ltd., BPCL Ltd. and Indian Oil Corp Ltd., are trading at their respective 52-week highs on Monday after brokerage firm HSBC projected better earnings prospects for these companies.

The brokerage upgraded all three refiners to a "buy" rating from its earlier recommendation of "hold."

BPCL's price target was raised to ₹555 from ₹340 earlier, while HPCL's target was raised to ₹375 from the earlier target of ₹215.

Indian Oil, along with the upgrade, also received a hike in price target to ₹130 from ₹80 earlier.

HSBC mentioned that the performance of oil marketing companies has improved in the first half of financial year 2024 which has boosted their cash flows and book value.

The brokerage expects decent refining margins for these companies and the potential for free pricing as the government continues to extend support.

For financial year 2024 - 2025, HSBC revised Indian Oil's earnings growth estimate higher by 58%, HPCL's by 40% and BPCL's by 76%.

Oil Marketing Companies reported a 53% surge in their Gross Refining Margin on average for the September quarter on a sequential basis. When compared to the same quarter last year, that figure stood at 26%.

For HPCL, the stock is up 38% over the last one month. Shares have surged since its earnings and some positive management commentary, in which it said that it is expanding its refinery capacity by 7 MTPA at Vizag and 9 MTPA to commission the Barmer refinery. The refinery in Mumbai has already expanded its capacity to 9.5 MTPA from 7.5 MTPA. HPCL also commissioned a 5 MT regasification and storage terminal at Chhara.

Shares of the three OMCs are trading with gains between 2% and 6% in Monday's session.