IIFL Institutional Equities, a part of the IIFL Group, one of the leading players in the Indian financial services space, in a recent report on Oil sector said, Government will likely increase prices of regulated petroleum products after the presidential elections in July.
According to IIFL report, Assuming a price increase of Rs3/litre in diesel, ONGC’s FY13ii EPS would increase by Rs2.5 (8.1%) from our current estimates. A price increase of Rs50/cylinder in LPG would boost ONGC’s EPS by Rs0.7 (2.3%).
IIFL said, “We believe upstream companies will be key beneficiaries of such price increases since downstream companies are likely to report regulated profit (8-12% ROE).”
Thus, ONGC’s FY13ii EPS would increase 10% from the current levels, if government increases prices of both diesel and LPG. In such a scenario, we see 10% upside to the ONGC stock and maintain ADD rating, brokerage added.
The report was published by IIFL’s Institutional Equities Research desk.