February 03, 2017 / 16:58 IST
The government’s decision to deregulate diesel prices was a major positive for OMCs. It led to a decline in crude oil gross under-recoveries, with only kerosene and LPG prices under the regulatory regime. Also, the hike of 25 paise per month in kerosene prices and scheme of Direct Benefit Transfer (DBT) for LPG cylinders has led to lower gross underrecoveries.
OutlookGoing forward, steady petroleum sales volume and normalised marketing margins would augur well for the company over the next two years. Hence, we have a BUY recommendation on the stock with a target price of Rs 420 (based on average of P/BV multiple: Rs 397/share and P/E multiple: Rs 443/share).
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