New Delhi
Amidst the backdrop of upcoming general elections, the fiscal year 2024 is shaping up to be a stellar period for oil marketing companies, marking record-breaking earnings. Emkay Global Financial Services reported an upward revision of earnings estimates by 8-50% for FY24-26, with Bharat Petroleum Corporation Limited (BPCL) receiving the highest upgrade, followed by Hindustan Petroleum Corporation Limited (HPCL) and Indian Oil Corporation Limited (IOCL). The projected dividend yields for FY24 and FY25 are estimated to be between 9-12% and 5-7%, respectively. The report stated, We reiterate BUY on BPCL and upgrade HPCL and IOCL to BUY from Hold. Recent media reports revisiting the government’s capital infusion plans and HPCL’s aim to double EBITDA in the next five years add up to the positive sentiments. Favorable macroeconomic conditions, including oil prices, currency stability, and refining margins, have contributed to this positive outlook. Despite concerns about a potential reduction in auto-fuel retail selling prices, the impact is expected to be limited, lasting no more than 4-5 months, especially between state and national elections. After a robust first half of the fiscal year, the second half has surpassed expectations for oil marketing companies. The only anticipated setback is some intermediate inventory losses likely in Q3, contingent on oil prices stabilizing at USD80-85/bbl. However, this would result in strong core earnings in Q4, according to the report. HPCL’s management has outlined ambitious plans, foreseeing a more than 2x increase in EBITDA by FY28E, driven by the commissioning of Vizag’s expanded capacity and the Barmer project. The management also indicated that standalone debt has reached its peak, and consolidated debt is nearing its peak. Recent reports about a Rs 300 billion capital infusion through a rights issue signal positive developments for OMCs, improving their balance sheets.
