Rising crude prices get Oil India a re-rating; analysts see 55 per cent upside

Gradual but rapid rise in crude oil prices and petroleum products may have put strain on the foreheads of Indian policymakers, but there is one section on Dalal Street who is not complaining.

Oil explorers are set to gain from the swift climb in the global crude prices and some of them have already started getting re-rating from analysts. Oil India, which came out with its earnings on Monday, is one such stock.

ICICI Securities, India’s largest traditional brokerage firm, sees the stock climbing nearly 55 per cent in the next one year from current levels. The brokerage raised FY22-FY23 EPS estimates by 17 per cent and target price by 13 per cent.

“To factor in the improved oil and gas price outlook, we have raised FY22-FY23 Brent estimate to $67.5-65/bbl from $60/bbl earlier and gas price to $2.6-4.25/mmbtu. Current share price reflects long-term Brent price of just $46/bbl. We estimate FY22 EPS to be up 54 per cent YoY,” said Vidyadhar Ginde, an analyst at ICICI Securities.

The crude price estimate by ICICI Securities seems to be consevative. BofA Global Research raised its Brent crude price forecasts for this year and next, saying that tighter oil supply and demand balances in 2022 could push oil briefly to $100 per barrel.

The bank raised its Brent crude oil price forecast to $68 per barrel from $63 earlier. In 2022, it expects Brent to average $75 per barrel versus its earlier estimate of $60. If this comes true, the stock price could get another re-rating.