The Hindu Business Line : Cheaper valuation attracts interest in standalone refinery stocks

THE stocks of standalone refineries such as Kochi Refineries, Chennai Petroleum and Bongaigaon Refinery today attracted immense interest from a section of investors on major bourses.

"The main reason for the renewed attraction appeared to be on account of their relatively cheaper valuation in the market compared to the stocks of integrated oil companies like HPCL, BPCL or IOCL. The refinery margins have been showing a robust growth in the last few quarters. It has, perhaps dawned on the market players that getting benefits of the growth in margins, the standalone refinery stocks are best plays rather than the composite oil players," commented Mr Ketan Thacker of Anagram Stockbroking.

These three stocks are currently trading at around half the valuations of the counters of oil majors. According to analysts, the current (fourth quarter) margins available for the domestic refiners are the best this fiscal.

The present rerating of oil sector stocks by leading domestic broking houses, institutions and overseas funds have also fuelled the interest in the refinery stocks. All the three stock had several block deals.

Kochi Refinery, which has been included in the FTSE All World Asia-Pacific (ex Japan) Index early this month, also proved to an additional investment trigger, particularly for the FIIs.

Kochi Refinery stock was up 10.8 per cent today. At today's closing price of Rs 201, its 52-week high, the stock traded at 3.9 times its trailing four-quarter EPS of Rs 19.80. The counter's traded volume on the BSE and the NSE was 15.9 lakh and 29 lakh shares respectively. There were 50 block trades on the NSE involving a total of 9.36 lakh shares.

The Chennai Petro counter was up 6.2 per cent and the Bongaigaon stock was up 2 per cent. Bongaigaon attracted around 55 block deals involving 8.62 lakh shares.

Chennai Petro today traded at 4.1 times its trailing four-quarter EPS Rs 27.20. It recorded 50 block deals involving 9.32 lakh shares. The stock also scaled its 52-week high.

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