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In the area of stock market investing, one should stay more focused on mitigating possibilities of risk as compared to maximising gains but should keep looking for golden eggs which not only increase gaining chances but also reduces the extent of overall risk.

As far as the Indian stock markets are concerned, the headline indices Sensex and Nifty have surged 10-12% in the last one year with blue-chip shares such as Titan Company, Tech Mahindra, Bajaj Finance, Bajaj Finserv, HUL, TCS, RIL and Kotak Mahindra Bank returning 30-100%.

We take a look at a large-cap OMC (Oil Marketing Company) share that has just posted a 45% gain in the Q4 net profit and the company had declared a dividend of Rs 7 per equity share. According to a domestic brokerage firm, this stock can earn 40% return on invested money.

Shares of Mumbai-headquartered BPCL (Bharat Petroleum Corporation Ltd) on Tuesday reported a 45% rise in the standalone net profit to Rs 2,673.64 crore for the January-March period for the fiscal year 2018. Shares of BPCL have more than tripled the money in the last five years and has distributed dividends every year without fail since 2007. The stock of BPCL had risen 222% to Rs 405.35 from a share price level of Rs 125.62 as at 31 May 2013 on NSE. While considering the fourth-quarter results, BPCL recommended a final dividend of Rs 7 per equity share for FY18 which is in addition to the interim dividend of Rs 14 which was declared in February 2018.

The research and brokerage firm Motilal Oswal Securities has given a buy with a target price of Rs 568 which implies an upside of 40% from the current market price of Rs 405. “OMCs have seen a sharp correction in the recent past due to fear of price cap on auto fuels in light of upcoming elections and rising crude oil prices. However, post the Karnataka elections, OMCs have been gradually increasing retail prices. We believe that the sharp correction in the stock prices offers an attractive opportunity to add OMCs,” Motilal Oswal Securities said in a research report.

According to Motilal Oswal Securities, BPCL is expected to stabilize its Kochi expansion over the next few weeks, which should expand the Kochi refinery GRM (Gross Refining Margin) by ~$2/bbl. “BPCL is trading at 8.5x FY20E EPS of INR47.9 and 8.0x FY20E EV/EBTIDA. We value refining at 6x EV/EBITDA, marketing at 8x EV/EBITDA and pipeline at 7.5x EV/EBITDA. Reiterate buy with a target price of INR568,” Motilal Oswal Securities said further.

Disclaimer: Views and recommendations given in this section are the brokerage firms’ own and do not represent those of www.wealthbuilder.co.in Please consult your financial adviser before taking any position in the stock/s mentioned.

Last modified on Wednesday, 30 May 2018

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