What is the story about?
Brokerage firm UBS has turned cautious on India's oil marketing companies (OMCs), citing rising geopolitical risks and uncertainty around earnings visibility.
The brokerage has downgraded Indian Oil Corporation to 'Neutral' and cut its price target to ₹175 from ₹190 per share. Bharat Petroleum Corporation has also been downgraded to 'Neutral', with the target price reduced to ₹365 from ₹425.
Meanwhile, Hindustan Petroleum Corporation has been downgraded to 'Sell', with the price target lowered to ₹340 from ₹540.
UBS said geopolitical risks are once again clouding earnings visibility for OMCs and drew parallels with the volatility seen in 2022.
According to the brokerage, oil price risks are tilted to the upside, which could hurt companies with a higher exposure to fuel marketing. It added that a $5 per barrel increase in crude oil prices, if not passed on to consumers, could wipe out nearly half of the sector''s profits.
The brokerage has also revised its estimates, lowering FY27 and FY28 marketing margin forecasts by 43%-45% and 22%-26%, respectively. At the same time, it raised its FY27 and FY28 gross refining margin estimates by 30%-48% and 21%-39%.
Overall, these changes have led UBS to cut its FY27 profit estimates by 19% for Indian Oil Corporation, 15% for Bharat Petroleum Corporation and 46% for Hindustan Petroleum Corporation.
The brokerage's caution also comes amid emerging concerns over commercial LPG availability for restaurants and hotels.
While the Ministry of Petroleum and Natural Gas has said it has set up a panel to review LPG requirements for the sector, industry bodies have warned that restaurants may not have enough fuel to keep their kitchens running for long.
Restaurant associations in Bengaluru, Tamil Nadu, Maharashtra and Delhi say commercial LPG supply to eateries has effectively been halted in several areas and have written to the ministry seeking urgent intervention.
The National Restaurant Association of India has said restaurants currently have, at best, about a week's supply of LPG left. In its letter to the ministry, the association warned that the sector's heavy dependence on commercial LPG could force a large number of restaurants to shut if the disruption continues, and urged the government to ensure uninterrupted supply.
Industry bodies say the confusion began after a March 5 government order directing public sector oil marketing companies to prioritise domestic LPG supply.
According to the Federation of Hotel and Restaurant Associations of India, the wording of the directive has led to uncertainty at the distributor level, with some suppliers halting commercial LPG deliveries across cities.
In Bengaluru, the Bangalore Hotels Association has warned that hotels may start shutting operations from today, saying commercial LPG cylinder supply stopped from March 9 despite earlier assurances from oil companies that there would be no disruption for 70 days.
The brokerage has downgraded Indian Oil Corporation to 'Neutral' and cut its price target to ₹175 from ₹190 per share. Bharat Petroleum Corporation has also been downgraded to 'Neutral', with the target price reduced to ₹365 from ₹425.
Meanwhile, Hindustan Petroleum Corporation has been downgraded to 'Sell', with the price target lowered to ₹340 from ₹540.
UBS said geopolitical risks are once again clouding earnings visibility for OMCs and drew parallels with the volatility seen in 2022.
According to the brokerage, oil price risks are tilted to the upside, which could hurt companies with a higher exposure to fuel marketing. It added that a $5 per barrel increase in crude oil prices, if not passed on to consumers, could wipe out nearly half of the sector''s profits.
The brokerage has also revised its estimates, lowering FY27 and FY28 marketing margin forecasts by 43%-45% and 22%-26%, respectively. At the same time, it raised its FY27 and FY28 gross refining margin estimates by 30%-48% and 21%-39%.
Overall, these changes have led UBS to cut its FY27 profit estimates by 19% for Indian Oil Corporation, 15% for Bharat Petroleum Corporation and 46% for Hindustan Petroleum Corporation.
The brokerage's caution also comes amid emerging concerns over commercial LPG availability for restaurants and hotels.
While the Ministry of Petroleum and Natural Gas has said it has set up a panel to review LPG requirements for the sector, industry bodies have warned that restaurants may not have enough fuel to keep their kitchens running for long.
Restaurant associations in Bengaluru, Tamil Nadu, Maharashtra and Delhi say commercial LPG supply to eateries has effectively been halted in several areas and have written to the ministry seeking urgent intervention.
The National Restaurant Association of India has said restaurants currently have, at best, about a week's supply of LPG left. In its letter to the ministry, the association warned that the sector's heavy dependence on commercial LPG could force a large number of restaurants to shut if the disruption continues, and urged the government to ensure uninterrupted supply.
Industry bodies say the confusion began after a March 5 government order directing public sector oil marketing companies to prioritise domestic LPG supply.
According to the Federation of Hotel and Restaurant Associations of India, the wording of the directive has led to uncertainty at the distributor level, with some suppliers halting commercial LPG deliveries across cities.
In Bengaluru, the Bangalore Hotels Association has warned that hotels may start shutting operations from today, saying commercial LPG cylinder supply stopped from March 9 despite earlier assurances from oil companies that there would be no disruption for 70 days.
