Indian Oil Stocks Plunge Following UBS Downgrade Amid Crude Price Surge

Original: IOCL, HPCL, BPCL tumble up to 9% on UBS downgrade amid crude surge; check targets

The Economic Times•Mar 9, 20263 min

In a Nutshell

Shares of Indian Oil Corporation (IOCL), Hindustan Petroleum Corporation (HPCL), and Bharat Petroleum Corporation (BPCL) fell up to 9% after UBS downgraded their ratings due to rising crude oil prices linked to geopolitical tensions. The brokerage revised target prices significantly, reflecting increased uncertainty in earnings for these state-run oil companies.

Key Points

01IOCL, HPCL, and BPCL shares dropped up to 9% following a UBS downgrade.
02Target prices were revised down to ₹175 for IOCL, ₹365 for BPCL, and ₹340 for HPCL.
03Rising crude oil prices and geopolitical tensions are impacting profit forecasts.
04Marketing margins for FY27 and FY28 are expected to decline significantly.
05Retail fuel prices in India have remained stable since May 2022, limiting companies' pricing flexibility.

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Full Summary

Shares of Indian Oil Corporation (IOCL), Hindustan Petroleum Corporation (HPCL), and Bharat Petroleum Corporation (BPCL) experienced declines of up to 9% on Monday following a downgrade by UBS. IOCL's shares fell to a low of ₹156, while HPCL and BPCL dropped to ₹370 and ₹323, respectively. UBS downgraded IOCL and BPCL to 'Neutral' and HPCL to 'Sell', citing rising uncertainty over earnings due to escalating crude oil prices amidst geopolitical tensions involving the US, Israel, and Iran. The brokerage revised target prices for IOCL to ₹175 (down from ₹190), BPCL to ₹365 (down from ₹425), and HPCL to ₹340 (down from ₹540). Analysts noted that higher crude prices adversely affect integrated refining and marketing margins, as retail fuel prices in India have remained unchanged since May 2022, limiting the companies' ability to pass on increased costs. UBS also highlighted that a $5 per barrel increase in crude prices could significantly erode marketing margins, leading to a downside risk for profits. Overall, the outlook for these companies remains challenging as they navigate rising costs and geopolitical uncertainties.