Why Oil And Gas PSUs Merit A Higher Multiple? Yes Securities' Analysis

Yes Securities Report

A deeper probe into the public sector space have led us to a remarkable revelation. Oil and gas stocks have consistently traded lower vis-a-vis their PSU counterparts despite a robust rally soaring on significant positives like higher dividends and stronger cash flows. since oil and gas players exude discernible stability led by an ascendent profitability and reduced government intervention, they are low on risk and high on reward, and hence ripe candidates to achieve a higher multiple.

As the z score method unfolds an upside in valuation multiples, we have upgraded key stocks as follows: Oil India Ltd., GAIL India Ltd., Gujarat State Petronet Ltd. (Add to Buy); Oil and Natural Gas Ltd. (Neutral to Buy); Petronet LNG Ltd. ('Sell' to 'Neutral).

The only downgrade is Mahanagar Gas Ltd. (Add to Neutral) following a sharp stock price rally.

Our top picks are BPCL, Oil India, HPCL, Chennai Petroleum Corporation Ltd. and ONGC.

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