Macquarie initiates coverage on PSU oil companies

Mumbai: Macquarie initiated coverage on Indian public sector refining and marketing companies on Monday , with its top preference being Indian Oil Corp, followed by Bharat Petroleum and Hindustan Petroleum. It cited a constructive outlook on Asia refining margins till 2020, positive structural trends in the Indian oil sector despite de-monetisation-led decline and a possible rise in marketing margins as triggers for its coverage.

Indian Oil rose 0.50% to Rs 424.50 on Monday, while Bharat Petroleum and Hindustan Petroleum fell 0.64% to Rs 726.20 and 0.14% to Rs 558.30, respectively.

On the earnings outlook for all three companies, the brokerage said clean earnings, adjusted for inventory impacts had increased by 2.3 times in the past three years. It said the performance was helped by refinery capacity expansions, an improvement in refining margins, and a declining debt burden. Over the next three years, Macquarie expects a 1.5 times aggregate clean ear nings growth from all three companies driven by further capacity expansions.