Energy and Power share price target

After volatile month of Jun'19, Brent Crude oil price remained flattish in July'19 to average at US$64/bbl and is now hovering around US$59/bbl. OPEC production also remained flattish at 30mbpd as lower production from Iran and Saudi Arabia continues. Non-OPEC production grew marginally by 0.6% MoM to 62.3mbpd for the month of Jun'19 owing to higher production from U.S. U.S Crude oil inventory declined 5.7% MoM at 449mn bbls for the month of July'19. Singapore Gross Refining margin (GRM) improved significantly to average at US$6.9/bbl from US$3.2/bbl in Jun'19 owing to improved crack spreads of all petroleum products in the range of 17%-24% on MoM basis. Gasoline crack spreads improved significantly to US$7/bbl from US$2.2/bbl in Jun'19. U.S Refinery utilization remained flattish at 93.8% for the month of July'19. Arab Light-Arab Heavy differential also remained flattish at US$2.0/bbl whereas INR improved MoM to average at Rs68.8/US$ in the month of July'19. On Natural Gas space, LNG prices remained flattish to average at US$4.2/mmbtu in July'19 owing to subdued demand from Japan and rapid rise in new...

Government has hiked the special additional excise duty and road & infra cess on petrol and diesel by Re1/ltr each in the Union Budget 2019-20, we expect Gross Marketing Margin (GMM) of OMCs to decline to Rs2-Rs3/ltr in short term, which will be further offset by the recent surge in GRMs. We continue to maintain our positive outlook on GAIL and PLNG, also we prefer downstream companies over upstream companies....

Singapore Gross Refining margin (GRM) declined 29% MoM to average at US$3.0/bbl for the month of May'19 owing to lower crack spreads from Naphtha and Gasoline partially offset by Jet Kero and Gasoil. US refinery utilization improved slightly by 1.7% MoM to average at 90.1% for the month of May'19. Arab Light-Arab Heavy differential remained flat MoM at US$1.7/bbl whereas INR also remained flat MoM to average at Rs69.8/US$ in the month of May'19. On Natural Gas space, LNG prices rose marginally by 1% MoM to average at US$4.9/mmbtu in May'19 on the back of lower demand from China and Japan and rapid rise in new liquefaction capacity. Domestically, petroleum products sales declined by 5.5% MoM and improved 0.4% YoY to 17.8mmt in April'19 mainly due to 16% MoM dip in LPG, 14.1% in Petrol and 9% in ATF. PNGRB has finally issued the long awaited tariff orders for their HVJ/DVPL, Mumbai regional network and First phase of JHDBPL pipeline. While tariff orders were below street expectations of 12%-14%, it was in-line to our estimates. The tariff orders cover an estimated 92% of overall volumes of GAIL. We remain positive on structural...

We like the co for its industry leading op margin and return ratios, driven by leadership presence (rising market share) in the lucrative NE region. STRCEM is adding 2mn MT split GU in Siliguri (by Dec'19, Rs 4bn capex), and 0.2mn MT clinker in Meghalaya (by Sep'19). STRCEM will also add 2mn MT clinker in Meghalaya by FY22 (brown-field with 13 MW WHRS, Rs 8bn capex). All these expansions can be done through internal accruals in our view. We thus ascribe STRCEM premium valuations, valuing it 10x FY21E EBITDA (implies EV/MT of USD184). We recommend BUY on Star Cement (STRCEM) with a TP of Rs 150 (10x FY21E EBITDA). We ascribe premium valuations to the stock owing to STRCEMs sustainable leadership in the lucrative NE region, which in turn drives STRCEMs highest unitary EBITDA (almost 2x industry!) and return ratios in the industry.

Brent Crude oil price rose further 7.2% MoM in April'19 to average US$71.2/bbl on the back of the news of US decision to withdraw the waiver to purchase crude from Iran. OPEC production remained flattish MoM to 30.3mbpd (Lowest since 2016) in April'19 as lower production from Saudi Arabia and Iran was offset by increased production from Libya in Apr'19. Non-OPEC production remained flattish MoM to 61.9mbpd for the month of Mar'19. US Crude oil inventory improved by 3.3% MoM at 461mn bbls for the month of April'19 reflecting demand slowdown. Singapore Gross Refining margin (GRM) declined slightly by 6% MoM to average at US$4.2/bbl for the month of April'19 owing to lower crack spreads for Jet Kero and Gasoil partially offset by higher Gasoline crack spreads. US refinery utilization improved marginally by 1% Mom to average at 88.6% for the month of April'19. Arab LightArab Heavy differential improved significantly by 22% MoM to US$1.7/bbl whereas INR remained flattish MoM to average at Rs69.4/US$ in the month of April'19. On Natural Gas space, LNG prices continue to soften further by 5% MoM to average US$4.8/mmbtu in April'19 on the back of lower demand from China and Japan and rising concern on demand growth. Chinese demand declined to 4.1mmt in Mar'19 compared to 4.4mmt in Feb'19. Domestically, petroleum products sales increased by...

Singapore Gross Refining margin (GRM) increased significantly by 67% MoM in Mar'19 and averaged at US$4.5/bbl mainly due to improved crack spreads for all the products while Gasoline margin improved the most. US refinery utilization remained flattish and averaged at 87.7% for the month of Mar'19.Arab Light-Arab Heavy differential declined by 18% MoM to US$1.4/bbl whereas INR appreciated by 2.5% MoM at Rs69.5/US$ in the month of Mar'19. On Natural Gas space, LNG prices have softened further by 18% MoM to average US$5.0/mmbtu in Mar'19 owing to lower demand from China and India and rapid rise in new liquefaction capacity. International Gas Union (IGU) has recently come out with LNG report where they highlighted that almost 101mtpa of new liquefaction capacity is under implementation or sanctioned. Further, it expects new liquefaction capacity to outgrow the incremental demand which would put pressure on LNG prices in near to medium term and expects LNG prices to remain weak. Domestically, petroleum products sales declined marginally by 5% MoM and improved by 4% YoY to 17.4mmt in Feb'19 owing to 34% YoY rise in Naphtha, 22% in LDO and 13.8% in LPG....

The Central Electricity Regulatory Commission (CERC) has notified the final power tariff regulation 2019 with minor changes compared to draft power tariff regulations. The regulation aims to promote efficiencies like reduction in regulated equity of conventional power sector in India, with the proposed return on...

Singapore Gross Refining margin (GRM) is continuing its southward journey and making a 9-year low to US$2.4/bbl, down 17% MoM in Jan'19 owing to significant decline in crack spreads across products mainly Jet Kero, FO and Gasoline. US refinery utilization also declined marginally by 1.8% MoM to average 93.4% in the month of Jan'19. Arab Light-Arab Heavy differential declined further by 32% MoM to US$1.3/bbl whereas INR remained flattish at Rs70.7/US$ in the month of Jan'19. In Natural Gas space, LNG prices have softened further by 9% MoM to average US$7.8/mmbtu in Jan'19 as concern on economic slowdown is weighing upon. We expect Spot LNG prices to soft a bit more post winter season though strong demand from China is supporting the price. However, as almost ~92mtpa of new liquefaction capacity is under implementation mainly from Australia and US in medium and long term which would keep LNG prices low. Domestically, petroleum products sales improved by 4.5% YoY and 7.3% MoM to 18.5mmt in Dec'18 owing to 13.9% YoY rise in Naphtha, 5.6% in LPG, and 5% growth in FO. We keep our positive view on gas sector and maintain GAIL and Petronet LNG as our top picks. We had upgraded RIL to BUY from HOLD post Q3FY19 result and the stock is...

by Elekore Power in New Delhi on January 17-18, 2019. During the conference, our discussions with the key members suggested that power demand over the next 10 years will rise at a CAGR of about 4.5% to reach 256GW as...

Despite lower OPEC production, Brent Crude oil price softens further by 13.8% MoM to average US$56.5/bbl in Dec'18 on the back of rising concern on oil demand growth. OPEC production declined 1.5% MoM to 32.6mbpd mainly led by lower production from Iran, Libya and Saudi Arabia. OPEC and other large oil producers including Russia agreed in Dec'18 to cut their crude output by ~1.2+mbpd from Jan'19 to halt a decline in oil prices. From January onwards, we expect OPEC production to come down led by Saudi Arabia which may support oil prices in near term. Non-OPEC production remained almost flattish MoM to 60mbpd for the month of Nov'18. US Crude oil inventory remained flattish at 441mn bbls for the month of Dec'18. Singapore Gross Refining margin (GRM) declined to 9-year low in Dec'18 to average US$2.9/bbl from US$4.7/bbl in Nov'18 owing to significant decline in crack spreads in gasoline, gasoil and Jet Kero. US refinery utilization improved by 2.6% MoM to average 95.2% in the month of Dec'18. Arab Light-Arab Heavy differential declined further by 21% MoM to US$1.9/bbl whereas INR appreciated by 1.5% MoM to Rs70.7/US$ in the month of Dec'18....