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PSU Oil shone last week

Posted by fairval on November 17, 2007

The day we wrote that PSU oil stocks like BPCL and HPCL looked good, two weeks ago, a large foreign brokerage came out with its report on oil. This is what it said —

Nothing has changed — R&M has had a rough time with no respite from oil prices as was hoped for at various points of time. On the policy front, we have no visibility.Recent suggestions of a possible price hike will be mostly piecemeal and hence insufficient.So while stocks may have looked tempting from a value perspective (e.g., replacement costs), we reiterate our Sell (3M) ratings on BPCL, HPCL, IOC with revised target prices of Rs303, Rs184,and Rs494 espectively.

Now lets see what are the prices of these stocks as of last Friday’s closing (Nov 16).

BPCL was Rs 342 on the day of the report. It is now Rs 435, up 27%, and 43% more than their target of Rs 303.
HPCL was Rs 239 on the day of the report. It closed at Rs 316 last Friday, up 32% in 2 weeks, also 71% over their target of Rs 184.
IOC’s price on the report day was Rs 495. IOC closed at Rs 615, up 24% in 2 weeks, and up a similar number from the target.

Two weeks may not mean much, but we will revisit this in the next few months. Lets see how this goes.


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