HSBC has reiterated its ‘Buy’ rating on India’s top three oil marketing companies (OMCs)—IOC, BPCL, and HPCL—despite trimming valuation targets, citing a higher risk perception following the government’s swift move to increase excise duty on petrol and diesel amid falling global oil prices.
In its latest note, HSBC said the government’s action came just two days after crude prices began falling, and while OMCs have not changed pump prices, the excise duty hike has effectively capped their marketing margin upside. The current oil price levels, revised excise duty, and unchanged pump prices still allow higher-than-usual margins, but the unexpected policy move increases uncertainty.
HSBC now sees reduced upside potential and has accordingly revised its target prices:
-
IOC: Buy, TP cut to ₹150 (from ₹170)
-
BPCL: Buy, TP cut to ₹400 (from ₹440)
-
HPCL: Buy, TP raised to ₹480 (from ₹450), given a relatively stronger margin and earnings outlook
Despite the valuation trims, HSBC maintains a positive stance due to the continued margin comfort and believes the long-term story remains intact.
Disclaimer: The above views are of the broker’s and not the author or the publication’s. Please make any and every investment decision after consulting your financial advisor.
