1OMCs Rally Higher as Morgan Stanley Forecasts Continued Growth

  • OMCs surged 5-7% on NSE: IOCL up 6.27%, HPCL 5.23%, BPCL 6.12%.
  • Morgan Stanley forecasts growth potential despite recent stock price increases.
  • Valuation metrics: IOCL at 1.2x P/BV, BPCL near historical averages, HPCL near +1SD.
  • India’s fast-growing fuel demand and stable energy market contribute to optimism.
  • SOE reforms impacting India’s market; similar trends seen in China, Singapore, Korea.
  • Recent performance: IOCL up 39%, HPCL 24%, BPCL 34% in the last month.


Introduction :

Morgan Stanley’s latest analysis revealed that Indian Oil Corporation (IOCL), Hindustan Petroleum Corporation Limited (HPCL), and Bharat Petroleum Corporation Limited (BPCL) still have significant growth potential, notwithstanding recent stock price increases.

OMCs Surge on NSE :

On February 6, oil marketing companies (OMCs) saw a significant increase in their stock prices on the National Stock Exchange (NSE). IOCL shares closed 6.27 percent higher, HPCL shares jumped 5.23 percent, and BPCL shares increased 6.12 percent.

Morgan Stanley’s optimistic outlook :

According to Morgan Stanley, these OMCs’ multiples are being re-rated as investors reassess their long-term growth potential. The business highlighted important valuation metrics: IOCL trades at a one-year forward P/BV of 1.2x, 19% below +1 standard deviation (SD); BPCL trades at 1.5x, close to historical averages; and HPCL trades at 1.5x, near +1SD.

Market dynamics :

According to Morgan Stanley, India is one of the world’s fastest-growing markets for gasoline demand. With better clarity on global fuel demand in the medium term and high demand for internal combustion engine vehicles, the picture appears to be encouraging. Furthermore, hardware enhancements by refiners that began before to COVID-19 are now converting into higher earnings in a less volatile energy market.

Reflections on SOE Reforms :

According to the survey, State-Owned Enterprise (SOE) reforms, which have spurred re-ratings in China, Singapore, and Korea, are now having an impact on the Indian market.

Recent performance :

Over the last month, IOCL has increased by 39%, HPCL by 24%, and BPCL by 34%. Despite these huge gains, Morgan Stanley believes there is still possibility for growth in these companies.

Conclusion :

In conclusion, Morgan Stanley’s new analysis indicates that Indian OMCs continue to hold promise for investors. With favourable market dynamics, greater earnings visibility, and continuing reforms, IOCL, HPCL, and BPCL may present good investment opportunities in the near future.

Leave a comment