Reiterate 'Sell' on OMCs with potential downside of 24%-28%: Goldman Sachs
Goldman Sachs is of the view that the recommendations of Kirit Parikh report are too aggressive to be implemented in current form. It has reiterated sell recommendation on oil marketing companies.
By ET Bureau |
MUMBAI: Goldman Sachs is of the view that the recommendations of Kirit Parikh report are too aggressive to be implemented in current form. It has reiterated sell recommendation on oil marketing companies.
Kirit Parekh Committee on fuel prices has suggested the government to deregulate gasoline and diesel prices, increase kerosene price by Rs6/litre and LPG prices by Rs100/cylinder.
“We note that these suggestions are largely in line with the recommendations of earlier committees instituted by the government on the same issue, which were never implemented. While we await government action on this report, we believe the suggestions are likely too aggressive to be implemented in current form, given inflation concerns, implementation issues and political considerations. A one-time hike in gasoline and diesel prices is all that might happen, in our view.
We reiterate Sell on the OMCs with potential downside of 24%-28% to our 12-m TPs, all based on 6X FY11E EBITDA. HPCL is on our Conviction list, as we believe it has: 1) the highest earnings leverage to under-recoveries and 2) lowest returns in medium term,” said the report.
Kirit Parekh Committee on fuel prices has suggested the government to deregulate gasoline and diesel prices, increase kerosene price by Rs6/litre and LPG prices by Rs100/cylinder.
“We note that these suggestions are largely in line with the recommendations of earlier committees instituted by the government on the same issue, which were never implemented. While we await government action on this report, we believe the suggestions are likely too aggressive to be implemented in current form, given inflation concerns, implementation issues and political considerations. A one-time hike in gasoline and diesel prices is all that might happen, in our view.
We reiterate Sell on the OMCs with potential downside of 24%-28% to our 12-m TPs, all based on 6X FY11E EBITDA. HPCL is on our Conviction list, as we believe it has: 1) the highest earnings leverage to under-recoveries and 2) lowest returns in medium term,” said the report.
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