The share price of Oil India rose on June 6 after brokerage firm Kotak Institutional Equities upgraded the stock to “add” and raised its fair value target to Rs 285, implying an upside of 13.5 percent from June 3 close.
At 10.02 am, the shares of Oil India were up 4.1 percent at Rs 261.20 on the National Stock Exchange.
The upgrade in the rating is driven by the change in the brokerage firm’s assumption of crude oil prices in the current and next financial year.
Kotak Equities has raised its 2022-23 target for average Brent crude to $105 a barrel from $90. It has also raised its forecast for 2023-24 to $90 a barrel from $70.
The brokerage firm also expects domestic natural gas prices to average $8.9 per mmBtu in 2022-23 as against $2.6 per mmBtu in 2021-22, given the sharp jump in global prices triggered by massive supply shortages.
In light of the changed view on the dynamics of the oil market, Kotak Equities has raised its operating profit estimates for Oil India by 71 percent for 2022-23 and 83 percent for 2023-24, as it expects the company to benefit from higher oil and gas prices.
“We upgrade Oil India to add with a fair value of Rs 285 given elevated oil prices will sustain for longer, driven by unyielding geopolitical issues, a tight supply situation and declining global inventories,” the brokerage firm said in a note.
Also read: OPEC mulls excluding Russia from oil-production deal
In the quarter ended March, Oil India’s revenues spiked 20 percent sequentially to Rs 4,480 crore, while its operating profit soared 68 percent on-quarter.
Global crude prices have managed to shrug off recent increase in output by members of the Organization of Petroleum Exporting Countries as traders focus on the revival in demand from China and other Asian countries.
Brent crude oil futures were up 0.7 percent at $120.6 at 10.02 am in Asian trading.
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