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Energy: Reprieve in sight? - Views on News from Equitymaster
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  • Dec 20, 2000

    Energy: Reprieve in sight?

    The refining stocks are once again in the limelight. This time, however, the sentiment is positive as compared to the early part of the year when rising oil prices took their toll on the stocks of these companies.

    The public sector (PSU) oil companies have seen a run up in their prices from the lows touched in mid October. The rise could be due to several reasons. The oil prices, which were ruling at 10 year highs of $35 / barrel (Brent) in October have cooled down over the last two months. Considerable amount of crude oil has entered the oil markets. The U.S released 30 m barrels from the strategic petroleum reserve (SPR) in the month of October to soften the fuel oil prices. Over the first six months of the current fiscal the Organisation of Petroleum Exporting Countries (OPEC) have augmented production by 3.2 m barrels per day (mbd). Further, Saudi is expected to be releasing crude into the markets above their quota allocations. With the increased oil supply prices are trading at $26 / barrel, which is a welcome relief for the refining companies.

        HPCL** BPCL** IOC** MRPL** RPL**
    CMP* Rs 141.0 120.0 139.0 9.0 58.0
    No.of shares no. m 339.3 300.0 778.7 795.0 5,203.1
    Market Cap Rs bn 47.8 36.0 108.2 7.2 301.8
    Sales Rs bn 432.3 424.4 1,157.6 49.7 286.2
    EBITDA Rs bn 17.3 18.2 57.9 1.5 25.8
    PAT   8,664.0 9,091.0 29,759.2 (4,247.0) 14,520.0
    EPS Rs 25.5 30.3 38.2 (5.3) 2.8
    P/E   5.5 4.0 3.6 - 20.8
    Mkt cap / sales   0.11 0.08 0.09 0.14 1.05
    Mkt cap / EBITDA   2.8 2.0 1.9 4.8 11.7
    BVPS Rs 184.6 146.0 180.6 6.8 15.4
    CMP/BVPS   0.8 0.8 0.8 1.3 3.8
    Refining capacity MMTPA 13.0 7.0 35.5 6.0 27.0
    Mkt Cap/ tonne Rs 3,680.1 5,142.9 3,048.9 1,192.5 11,176.9

    *Current Market Price   **Estimates

    With the winter session of parliament in progress there is some news on disinvestments and policy reforms finding space in the media. Consequently, the markets are anticipating positive news flow on the disinvestment front in the energy sector. Further, the markets have risen from the lows of October, which has contributed to the rise in these stocks.

    The valuations of the PSU oil companies and the private sector continue to show wide disparity. With improvement on the external front the PSU oil companies could see a reprieve in valuations.



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