Oil explorers are set to benefit from the sharp rise in global crude oil prices and some of them have started getting ratings from analysts again.
The gradual but rapid rise in crude oil prices and petroleum products may have put pressure on the foreheads of Indian policymakers, but there is also a section on Dalal Street that is not complained about.
Oil explorers are set to benefit from the sharp rise in global crude oil prices and some of them have started getting ratings from analysts again. Oil India NSE 1.14%, which came out with its earnings on Monday, is one such stock.
India’s largest traditional brokerage firm ICICI Securities sees the stock climbing nearly 55 percent over the next year from current levels. The brokerage increased the target price by 17 percent and the target price by 13 percent in the FY22-FY23 EPS estimates.
“To factor in the price outlook for better oil and gas, we have raised the FY22-FY23 Brent estimate from $67.5-65/BBL to $60/BBL first and the price of gas to $2.6-4.25/mmbtu. The current share price represents the long-term Brent price of just $46/BBL. We estimate that 22 EPS will remain at 54 percent in the financial year, said Vidyadhar Ginde, the analyst at ICICI Securities NSE 1.08%.
The price estimate of crude by ICICI Securities seems to be controversial. BofA Global Research raised its Brent crude price forecast for this year and next, saying tighter oil supply and demand balance in 2022 could briefly push oil to $100 a barrel.
The bank raised its Brent crude oil price forecast from $63 to $68 a barrel earlier. In 2022, it expects Brent to average $75 a barrel versus its first estimate of $60. If that is true, the price of the stock may get another re-rating.
Oil India has already seen a positive impact of recovery in crude oil prices in the fourth quarter. The standalone recurring EPS was at Rs 8.5 versus Minus Rs 1.9 in Q4FY20 driven by a 15 percent rise in oil prices and a 34 percent rise in other earnings.
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