BPCL share should be bought around Rs 438 with stop loss of Rs 421: Sumeet Bagadia
Sumeet Bagadia, Executive Director of Choice Broking has recommended BPCL to investors. He said that BPCL should be bought around Rs 438 – Rs 438 with stop loss of Rs 421 and target of Rs 460 – Rs 474. He said on the daily chart, BPCL has formed a Symmetrical Triangle pattern and sustained near to the breakout point
BPCL share price closed today as Rs 438, up Rs 10 or 2.35%. BPCL share price moved up from Rs 420 to Rs 438 in 1 week or over 4%. Sumeet Bagadia, Executive Director of Choice Broking has recommended BPCL to investors. He said that BPCL should be bought around Rs 438 – Rs 438 with stop loss of Rs 421 and target of Rs 460 – Rs 474. He said on the daily chart, BPCL has formed a Symmetrical Triangle pattern and sustained near to the breakout point.
Moreover, the price has shown some correction from the higher levels as it has found the resistance at upper Bollinger Band formation, which may drive the prices lower until its test of support at the middle band. Furthermore, on the downside there is an immediate support around 406 levels where 100 days Moving Averages and Middle band support is intact, which could be a reversal zone for the counter. So based on the above mixed structure, Sumeet is expecting a buy on dips strategy in BPCL stock for the near term.
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ICICI Securities resumed their coverage on BPCL with BUY rating and target price of Rs 544/share (27% upside). ICICI Securities target price of Rs 544 assumes successful bid price in privatisation of Rs 609/share (8x FY22E EV/EBITDA) on 56% of investors’ holding and Rs 462 /share (6x FY22E EV/EBITDA) on balance. ICICI Securities estimated FY22E core GRM recovering to US$3.5/bbl from US$1.5/bbl in 9MFY21, but net marketing margin fell to Rs2.5/l from Rs3.07/l in FY21E. ICICI Securities expect global demand recovery and refinery closures to drive GRM recovery. Net marketing margin is Rs 0.09/l now, but ICICI Securities are hopeful of price hikes/excise cut boosting net margin to Rs 2.5/l.
ICICI Securities says that recovery in global oil demand from lows and snowstorms that led to plunge in US refinery utilisation to 56-76% from 83% and product inventories have boosted GRM. Petrol cracks are at 5-quarter high but diesel cracks are well below pre-covid levels. Second wave of covid reversed demand recovery especially in Europe and jet fuel demand is still sharply below pre-covid levels. However, ICICI Securities are optimistic that further demand recovery driven by vaccine rollout and global refinery closures (1.5m b/d to be shut and another 1.4m b/d may shut) will boost global refinery utilisation from 38-year low of 72.4% to 77.4% in CY21E and drive up GRM.
ICICI Securities is bullish on BPCL due to:
1) Healthy auto fuel marketing margin being crucial to success of BPCL’s privatisation
2) FY22E budget excise estimate leaves room to cut excise duty by Rs8.5/l
3) This government’s track record.
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