Chennai Petroleum: Buy This Multibagger Stock

Stock Idea; Chennai Petroleum Corporation Limited (CPCL)

CMP:    352.35 INR (As on 22nd Feb, 2017)                                     Target price : INR 510*

Chennai Petroleum.

Chennai Petroleum is one of the best stocks in refineries sector trading at a very low PE. This is a buy for a number of other reasons. Chennai Petroleum is a company that is into crude oil refining.

About the company

Chennai Petroleum Corporation Limited (CPCL) is an Indian state-owned oil and gas corporation headquartered in Chennai, India. Formed as a joint venture between Government of India, AMOCO and National Iranian Oil Company (NIOC), it was formerly known as Madras Refineries Limited (MRL). Chennai Petroleum is a public sector undertaking (PSU) and categorized as Miniratna-I.

Product portfolio;

The main products of the Chennai Petroleum are;

• LPG,
• High Speed Diesel,
• Motor Spirit,
• Bitumen,
• Lube Base Stocks,
• Superior Kerosene,
• Aviation Turbine Fuel,
• Naphtha,
• Paraffin Wax,
• Hexane,
• Petrochemical Feed Stocks and
• Fuel Oil.

Fundamentals;

Mar'17
(In Rs Cr)

Total Share Capital	1,149.00
Net Worth	4,441.10
Total Debt	4,497.72
Net Block	3,882.83
Investments	140.00
Total Assets	8,938.81

Valuation;

MARKET CAP (RS CR):    5,427.08

EPS (TTM):             60.81

P/E :                        5.99

INDUSTRY P/E:          9.56

BOOK VALUE (RS):   222.53

PRICE/BOOK:            1.64

DIV (%):                      210.00%

DIV YIELD.(%):         5.76%

FACE VALUE (RS):   10.00

Why Chennai Petroleum is a multibagger stock?

Chennai Petroleum is a multibagger stock which has risen from Rs. 51.75 in October, 2013 to Rs. 480 in October, 2017 i.e. it delivered more than 800% profit in just 4 years. Chennai Petroleum witnessed a fantastic years even in 2017-18 and the same trend is expected to continue.

The company has already reported an EPS of Rs 50 in the last three quarters of FY 2017-18.  An another Rs 15 to 18 EPS is expected in the fourth quarter, if it is then the twelve month trailing  (TTM) EPS will come around Rs 65 to 68. Hence at a current price of Rs 353 the stock of Chennai Petroleum is trading around P/E multiple of 5 only and at this price valuation is mouth watering. 

Chennai Petroleum is one of the best stocks in refineries sector trading at a very low PE. This is a buy for a number of other reasons. Chennai Petroleum is a company that is into crude oil refining. As long as crude oil prices remain subdued there is a complete scope for the stock price to rally. The company has also known for excellent dividend yield track record it recently declared a stupendous dividend of Rs 21 per share accounting for a tax free dividend yield of Rs. 5.75 % at current share price of Rs 353. 

Technical;

 On yearly chart the stock of Chennai petroleum is trading at Rs. 353 (as of 21th feb, 2018), it has support at Rs. 339 which is it’s 52 week low price too. On the top line it has made high of Rs. 480. Hence as a rule of thumb it is a buy at current price with a target of 475-480 (35% upside) with a stop loss of Rs. 335-340. Risk reward ratio is highly favorable in this stock.

Threats;

Chennai Petroleum is a company that is in crude oil refining business and therefore heavily depended on crude prices.

  

Other factors related to Chennai Petroleum

Mutual Funds Holding (As of 20^th Feb, 2018)

SCHEME	NO. OF SHARES
Aditya Birla Sun Life Bal. 95 Fund (G)	1,963,018
Aditya Birla Sun Life Pure Value Fund (G)	1,389,428
Aditya Birla Sun Life Small and Midcap Fund	681,710
Aditya Birla Sun Life Frontline Equity Fund	313,295

*Broker’s View;

KR Choksey in it's research report said that they expect Chennai Petroleum to fetch an EPS of INR 68.48 for FY18E, INR 107.05 for FY19E and INR 124.95 for FY20E. While at  CMP of INR 426, the stock is trading at 3.98x of its FY19E earnings and at 3.41x of its FY20E earnings. We recommend a BUY rating with a target price of INR 510. find detail report on chennai petro here here>>>