Buy, ADD Two Maharatna Stocks, Shares Likely To Jump Up To 22%, Says HDFC Securities

Leading brokerage firm, HDFC Securities is bullish on GAIL (India) & Hindustan Petroleum Corporation Limited. Both the stocks are PSU Maharatna stocks from the Oil & Gas Sector under the Ministry of Petroleum & Natural Gas, Government Of India. Here are details of the stocks including the brokerage's comments:

GAIL (India) Limited

GAIL (India) Limited is India's leading natural gas company with diversified interests across the natural gas value chain of trading, transmission, LPG production & transmission, LNG re-gasification, petrochemicals, city gas, E&P, etc. It is a Large cap PSU Maharatna Company under the Ministry of Petroleum & Natural Gas. It has a market capitalisation of Rs 29,775.33 crore.

The stock last traded at Rs 90.55 per share on Monday, up 2.20 per cent from the previous close. With a target price of Rs 110 per share, HDFC Securities has assigned the stock a "Buy" rating to the stock. According to the given target price, the stock has the potential to gain 22% from its current level.

The stock in a week has given 0.82% negative return. Whereas, in the past 1 and 3 months, it has given 4.26% and 2.2% positive returns on investments, respectively. Over a year, the stock has fallen 10.35%. Whereas, in 3 years it gave a 2.82% positive return. In the past 5 years, it gave 21.86% negative returns.

The stock on 19 April 2022 recorded its 52 week high at Rs 354.80 and on 26 September 2022 its 52 week low at Rs 83, respectively.

HDFC Securities said, "Our BUY recommendation on GAIL with a target price of INR 110 is based on expansion in gas transmission volume over FY22-24E to 123mmscmd on the back of (1) an increase in domestic gas production and (2) completion of major pipelines in eastern and southern India. Q2FY23 EBITDA/APAT, at INR 18/15bn, came in below our estimates, impacted by weak-than-expected marketing volumes and margins and lower petchem production."

It added, "Our SOTP, at INR 110/sh, is based on 7x Mar-24E EV/e for the stable natural gas and LPG transmission business, 6x EV/e for the gas marketing business, 5x EV/e for the cyclical petchem and LPG/LHC business, INR 34 for investments. The stock is currently trading at 6.7x FY24E EPS."

Hindustan Petroleum Corporation Limited

Hindustan Petroleum Corporation Limited refines crude oil and manufactures petroleum and petroleum products. It is a Midcap PSU Maharatna Company with a market capitalisation of Rs 29,775.33 crore.

The stock on Monday last traded at Rs 209.90 per share, gaining 3.05% as compared to its previous close. HDFC Securities has rated the stock "ADD" with a target price of Rs 253 per share. With the given target price, the stock can give up to 21% potential gains.

In terms of returns on investments, the stock didn't perform well in the past 5 years. In a week, the stock gave 1.85% negative returns. In 1 and 3 months, it has given 3.96% and 16.27% negative returns, respectively. In the past 1 year, it gave 34.79% in 3 years 32.39% and in 5 years 52.8% negative returns, respectively.

The stock recorded its 52 week high on 15 November 2021 at Rs 354.80 and the 52 week low on 20 October 2022 at Rs 200.05, respectively.

HDFC Securities said, "Our ADD rating on Hindustan Petroleum Corporation (HPCL) with a price target of INR 253 is premised on (1) recovery in domestic demand for petroleum products and (2) robust refining margins over the coming 18 months. Q2FY23 EBITDA loss stood at INR 15bn, below our estimated loss, owing to lower crude throughput, weak marketing segment performance, and higher inventory loss. Reported GRM stood at USD 8.4/bbl (HSIE: USD 9.2/bbl)."

It added, "Our SOTP TP, at INR 253, is based on 5x Mar-24E EV/e for standalone refining, 6x Mar-24E EV/e for marketing business and pipeline business respectively, and INR 139/sh for other investments. The stock is currently trading at 4.6x on FY24E EPS."

 

Disclaimer

The stocks have been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.