BPCL continue to outperform: Motilal Oswal

Rajat Rajgharia, Motilal Oswal Securities told CNBC-TV18, "Somewhere in this entire environment of pessimism or uncertainty, this one big reform is somewhere getting missed out. Last seven-eight years, every year when we do our global road shows, investors have been worried about this oil subsidy. Rating agencies have been worried about this oil subsidy. The central bank has been worried about this oil subsidy. This problem of last six-seven years seems to have been firmly handled now in the last five months."

He further added, "The diesel under recovery which had reached almost a peak of Rs 15-17 is now down to Rs 2.50. Rs 2.50 is basically either you can say another USD 5 of oil price cut or another three-four rounds of diesel price increases. So this big problem is now over."
"On the LPG, once we move to the direct transfer of cash, hopefully that would also prevent leakages. So, under recovery which used to be Rs 1.5-2 lakh crore, we are talking about a number which could well stabilise between Rs 50,000-60,000 crore which would almost be negligible when you look at the overall size of the gross domestic product (GDP)."
"I think ONGC, Oil India, some of these companies which have been sadly bearing the brunt of this entire under recovery can see a massive re-rating even from here. They have seen outperformance in the market over the last six months but their absolute return has still not provided any big return for people over the last many years. I think that return is in the pipeline as oil stabilises at USD 100. These stocks will earn so much of cash that the dividend yields even at today’s prices could well be closer to four percent for them. If gas price hike happens, there is some added catalyst."
"Amongst the oil marketing companies, I think Bharat Petroleum Corporation (BPCL) is something which becomes a combination of both - improvement in their balance sheet because of the lower losses on the domestic side and continued upgrade that you would see on their exploration and production (E&P) exploration on the offshore side. So that’s a stock which has been outperforming, will continue. I think this entire energy pack which over the last five-six years has been a big under performer to the market looks at to regain some part of leadership over the years to come."