Multibagger Alert: Dolly Khanna Can't Keep Her Hands Off Chennai Petroleum, Increases Exposure in Q1

A select few companies have declared their shareholding pattern for June 2022 quarter.

Among these companies is a refinery and marketing firm which is this year's multibagger stock.

Am I talking about Reliance? No. Because Reliance share price is falling...

Is it GAIL? Again no, because GAIL share price is also falling and is under pressure for the past one month.

The company in consideration is Chennai Petroleum.

Chennai Petroleum, a subsidiary of the state-run Indian Oil Corporation, operates in the downstream petroleum sector to produce an array of value-added petroleum products.

The latest shareholding filing revealed that ace investor Dolly Khanna has increased her stake in the company during the quarter under review.

Who is Dolly Khanna?

Dolly Khanna is a Chennai based investor, who is known for picking lesser-known midcaps and smallcaps. She has been investing in stocks since 1996.

Dolly Khanna's portfolio, which is managed by her husband Rajiv Khanna, is usually inclined towards more conventional stocks in manufacturing, textile, chemical, and sugar stocks.

Why did Dolly Khanna increase her stake in Chennai Petroleum?

In the March 2022 quarter, Dolly Khanna had bought 1 m shares of the company via open market. This gave her nearly 0.7% stake worth Rs 263 m.

In Chennai Petroleum's latest shareholding pattern, Dolly Khanna's name appeared in the list of individual shareholders who own 1% or more.

In January to March 2022 quarter, her name was missing as she had only 0.7% stake. Now, she has bought fresh shares during the quarter under review.

At present, she holds 3.27% stake in Chennai Petroleum, which is 4.9 m shares in total.

So why did she increase her stake in the company? And why now when the stock market is falling and has turnd quite volatile?

While we can't know for sure why the star investor bought into it, there are some reasons that we can guess...

For the March 2022 quarter, the company reported a four-fold jump in its bottom line at Rs 9.9 bn against Rs 2.3 bn reported in the same quarter previous year.

During the same quarter, net sales jumped 88% year-on-year (YoY) to Rs 164.1 bn from Rs 87.4 bn in previous year's quarter.

These are undoubtedly solid results. For more details, check out the latest quarterly results of Chennai Petroleum.

We all know the oil and gas industry has been heavily impacted by the Covid pandemic and the escalating Russia-Ukraine war.

Despite this, according to the Indian Energy outlook report by International Energy Agency (IEA), demand for crude oil in India is expected to increase from 242 MMT in 2019 to 411 MMT by 2040.

While the demand will be fuelled by improving living conditions, the population is also expected to increase by 0.27 bn.

In line with this belief, the company's 2021 annual report stated,

• The expected demand for more crude oil will provide an opportunity to invest in new refining facilities and requires huge investment in the future.
  
  In order to meet the expected growing energy needs in India, especially in the State of Tamilnadu and in other states, CPCL is planning to set up a 9.0 MMTPA refinery at Nagapattinam in Cauvery Basin in Tamilnadu.

Another factor here is foreign investors.

Continuing their trend, FIIs have been selling Indian equities big time and have pulled out massive amounts.

But they have increased their exposure to Chennai Petroleum. During the quarter under review, FIIs stake increase to 4.01% from 3.37% in the March 2022 quarter.

In fact, they have been bullish on the stock for past three quarters now.

Now, we sure there are more reasons as to why Dolly Khanna bought into it, but these are to our mind among the key ones.

How Chennai Petroleum has performed recently

On a YTD basis, shares of Chennai Petroleum have surged 160%, making it one of the best performing stocks of 2022.

If we take into consideration the past one year, i.e. July 2021 to July 2022, the gains stand at 94%.

Chennai Petroleum enjoyed massive gains when crude oil price was rising. The company's management has also guided for a bumper year ahead.

But as crude oil prices have started to fall, Chennai Petroleum has come under pressure, as is visible on the chart above.

About the company

Chennai Petroleum (CPCL) is a subsidiary of the state-run Indian Oil Corporation which holds 51.9% stake in the company.

The company was formed as a joint venture between the Government of India (GOI), AMOCO, and National Iranian Oil Company (NIOC) in 1965.

Operating in the downstream petroleum sector, Chennai Petroleum produces an array of value-added petroleum products. The company has two refineries.

Located in North Chennai, the Manali Refinery has a capacity of 10.5 m metric tonne per annum (MTPA).

CPCL's second refinery is located at Cauvery Basin at Nagapattinam and has a capacity of 1 m MTPA.

To know more about the company, check out Chennai Petroleum financial fact sheet.

For a sector overview, read our energy sector report.

You can also compare CPCL with its peers:

Chennai Petroleum vs HPCL

Chennai Petroleum vs BPCL

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...