Indian Oil Corporation (IOC) is one of our core portfolio holdings. IOC and other oil marketing companies (OMCs) like BPCL and HPCL are in a good spot these days due to:
(a) deregulation of petrol prices which means OMCs can derive benefits from operational efficiencies in both refining and marketing, and they will get cash immediately from sales, rather than waiting for government bonds.
(b) crude oil prices have fallen 15% from their recent highs of $83 per barrel to about $73 per barrel. Lower crude oil prices improve profit margin of IOC, and we can expect improved financial performance if crude prices remain between $70 and $80 for next few quarters.
IOC is the largest OMC in India, and has delivered the best Return on Equity among the OMCs over the last 5 years at about 16% per year on average, and the ROE can now increase to 20%+ due to above reasons.
IOC shares generous dividend with shareholders, and has ambitious plans in the energy space. Being a top 5 Govt of India company with a strong balance sheet, new opportunities will materialize in upstream exploration, overseas expansion, and nuclear energy as well in coming years.
In addition, IOC may issue about 10% new equity in the near future, which may bring more liquidity to the stock and also fetch better stock prices. Overall, we remain positive on the business outlook for IOC over the next 5 years.
For more information:
http://bseindia.com/bseplus/StockReach/AdvanceStockReach.aspx?scripcode=530965
Ownership Pattern
Posted in Energy, Oil & Gas
|
Tagged IOC, OMC
|
Reliance Industries (RIL) has come down from Rs 1070 levels to Rs 960 levels in the last 3 weeks, without much resistance. The selling pressure was partly due to FIs offloading their holdings, and short-sellers accelerating the downward push.
Many market analysts, who were bullish on RIL just 4 weeks back are now talking about further downside in price. But that does not bother us. As long term investors, Rs 960-970 is a great buying opportunity in this top quality business. We estimate RIL FY11 EPS at around Rs 70, and at a P/E of 20 (surely justifiable for a market leader like RIL with top quality assets), the fair value of RIL stock is Rs 1400. Continue reading →
Parabolic Drugs is the new pharma stock in our portfolio, and we are happy to become their shareholders. The company recently did an IPO at Rs 75, however we have started buying from the secondary market at current price of Rs 60.
After learning about their growth plans from their IPO document and their management, we feel confident about the growth prospects of Parabolic Drugs. We understand that they have confirmed order book from various international pharma companies to grow sales by about 40% and net profits should also increase in a similar range. Continue reading →
Orbit Corp, a permanent member of our portfolio, has posted a strong consolidated earnings in Q4FY2010, which is largely in line with our estimates. The net profit stood at Rs20 crore in Q4FY210 as compared to Rs1.6 crore in Q4FY2009. However, the revenues grew by only 8.7% year on year (yoy) to Rs86.5 crore, which was below our estimates. The shortfall in the top line growth was offset by a higher than expected operating profit margin (OPM) and a continued write-back in tax due to minimum alternate tax (MAT) credit entitlement. Continue reading →
- By Dr. D. Subbarao, Governor of RBI (Reserve Bank of India)
1. The Monetary Policy for 2010-11 is set against a rather complex economic backdrop. Although the situation is more reassuring than it was a quarter ago, uncertainty about the shape and pace of global recovery persists. Private spending in advanced economies continues to be constrained and inflation remains generally subdued making it likely that fiscal and monetary stimuli in these economies will continue for an extended period. Emerging market economies (EMEs) are significantly ahead on the recovery curve, but some of them are also facing inflationary pressures. Continue reading →
