Your hunger for petrol, diesel and other petroleum products helped oil marketing majors Indian Oil Corporation(IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation(HPCL) to reward equity investors wonderfully over the past five years.

The trinity multiplied investor wealth between November 2012 and November 2017, with HPCL gaining the most at 523 per cent, followed by BPCL at 355 per cent and IOC at 201 per cent.

During the years, net profit of BPCL, HPCL and IOC rose to Rs 7,585 crore, Rs 4,675 crore and Rs 12,031 crore in FY17 from Rs 781 crore, Rs 175 crore and Rs 4,226 crore, respectively in FY12.

Some of these stocks have been in news recently amid talk of possible merger with top public sector energy players to create a mega oil giant in the country.

A deal is in the works between energy explorer ONGC and oil marketeer HPCL, and a merger is likely by March, 2018.

“We have a 15 million tonnes refinery in Mangalore, but we’ve no retail presence. HPCL has huge retail presence with over 14,400 outlets, but does not have enough refining capacity. There is a perfect business sense in merger with HCPL,” Shashi Shanker, Chairman and Managing Director of ONGC, said recently.

For the quarter ended September 30, 2017, HPCL reported a 147.5 per cent jump in profit at Rs 1,735 crore. The oil marketing firm had logged Rs 701.32 crore profit for the same period last financial year.

However, brokerage Nirmal Bang Securities has a ‘sell’ rating on HPCL with a target price of Rs 321.

A likely decline in GRM, increase in capex over the next five years and the rise in interest costs will cap earnings for the company, the brokerage said in a research note. With low earnings growth and a decline in RoE and RoCE, the stock will get de-rated, it said.

BPCL is said to be exploring a merger with GAIL (India), India’s largest gas distributor, and Oil India. It posted 80.6 per cent year-on-year rise in September quarter profit at Rs 2,357.40 crore on 19.3 per cent sales growth at Rs 53,325.20 crore.

Motilal Oswal Financial Services expects BPCL to benefit from the stabilisation of the Kochi refinery and projects capacity utilisation to reach over 90 per cent by Q4 of FY18, while GRM should expand by $2 a barrel.

IOC reported an 18 per cent growth in second quarter profit on the back of higher refining margin and inventory gains. Net profit for the July-September quarter stood at Rs 3,696 crore, which was 18.4 per cent higher than Rs 3,121 crore reported for the year-ago period.IOC reported weaker-than-expected earnings for Q2 of FY18 with core Ebitda 9 per cent below estimate due to a temporary refinery shutdown, brokerage Edelweiss said in a note.

While reported GRM disappointed at $8 a barrel (estimate $9.9 a barrel), plant shutdowns impacted petchem and pipeline revenues.

“We remain upbeat on IOC on account of the ongoing rampup of the highly profitable Paradip refinery, which will enhance profitability. The Rs 1.8 lakh crore value-accretive capex over the next seven years will be funded via internal accruals,” Edelweiss said.

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