In response to the government’s announcement of a Rs100/cylinder reduction in the price of domestic LPG, leading to an 11% decrease to Rs803/cylinder in Delhi, oil marketing companies (OMCs) may face potential under-recovery challenges. Despite this, analysts maintain a positive outlook on OMCs and view any substantial pullback as an opportune time to enhance buying positions.
Citi analysts anticipate a potential under-recovery of approximately $100 per ton for OMCs due to the government’s price adjustment. However, they express confidence and are not overly concerned about this development.
Among the OMCs, BPCL and HPCL are highlighted as preferred picks, along with ONGC and GAIL, suggesting these companies could be better positioned to weather the impact of the price cut and potentially capitalize on any market pullbacks.
While the reduction in LPG prices may pose short-term challenges for OMCs, the overall sentiment remains optimistic regarding their long-term prospects, with analysts emphasizing the potential for strategic buying opportunities in the wake of any market fluctuations.
