HOEC Multibagger | share price target

HOEC multibagger

Hindustan Oil Exploration Multibagger : Is Hindustan Oil Exploration Company Limited, HOEC multibagger stock? is it right time to buy stock from oil and gas industry? What would be it’s share price target for long term, mid term or short term? Will you get return if bought for a long term investment? Let’s analyze and discuss these points.

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Is HOEC multibagger stock?

Let’s discuss about various aspects of the company and see if this is worth buying. As usual we will analyse past performance, current standing and future growth potential.

Key Parameters:

  • CMP: Rs 118
  • Market cap (RS Cr): 1548
  • P/E: 50
  • Book Value (Rs): 26
  • Industry P/E: 14.84
  • EPS (TTM):
  • Price/Book: 4.54

Source: MoneyControl

Company Background

In the 1980s, the Oil & Gas sector was Government monopolized with only two players in the market namely ONGC and OIL. Visionary Late Shri H.T. Parekh foresaw the need of private participation and incorporated HOEC in 1983.

During initial years HOEC offered all geophysical services and Seismic Data Acquisition services in India during this period with backup support from Prakla Seismos Ag of Hamburg.

HOEC gained a unique position as first ever Oil Company in private sector in India to have commenced oil exploration activities. HOEC was the only Indian company in private sector with organization, infrastructure and technical capabilities.

Under performance and then turnaround

Even the silver jubilee was nearing in 2015, HOEC was lagging well behind it’s competitors. During the year 2015 after detailed review of the portfolio the Board approved a turnaround strategy.

  • Sharply focus first on our onshore assets in Assam and Gujarat.
  • Build a strong geo-technical and operations team that could access and deploy technology.
  • Revive the offshore assets when oil prices turn better and or cost effective development options are identified.
  • Evaluate opportunities to participate in upcoming marginal filed bid round and also invest in natural value chain extension opportunity.
  • Realize the vision to rebuild HOEC as the finest oil and gas independent that beneficially transforms the value to every stakeholder.

Under their leadership, the Company has posted positive results after 10 quarters of negative results in first quarter of FY 2015-16.

Source: HOEC

Fundamentals and Earnings:

Let’s get a look at key financial numbers and see what do they indicate.

HOEC multibagger compound growth

Above figure shows company has gone through a turmoil. But three years return is better than 5 years and last 12 months performance are amazing (ttm). That is a clear sign the company is reviving.

HOEC multibagger Quarterly result

Above screenshot reaffirms that numbers are improving for company now.

Credit: Screener

Let’s look at the balance sheet next for HOEC multibagger stock.

HOEC multibagger Balance Sheet

Once again it shows FY13 to FY15 numbers are decreasing but then it has shown sign of strength.

Image Credit: Moneycontrol

Cash flow and Profitability ratios:

Let’s look at another two major fundamental factors on HOEC multibagger stock.

HOEC multibagger Cashflow

So we see finally positive cashflow for last two years.

Credit: Moneycontrol

Here is the key financial ratios over the period of time.

HOEC multibagger financial ratios

Credit: Moneycontrol

Current Valuation:

As you would have already figured it out this is case of turnaround story. In turnaound story high PE can be justifiable provided other factors are in support.

HOEC multibagger graph

During the first half of last one year stock was trading around 75. Then it moved to touch 153 and now trading at 118. There is no indication of sharp rise in price here.

Management:

It seems management and board have learnt their lesson in hard way and reviving the company at present.

Future outlook:

As stated many times earlier future outlook is the most important factor while deciding which stock to buy.

Company has given stellar earning recently and management is confident of great numbers in FY19.

As we ramp up the gas production from Assam, we expect from Q1 of next year, we will be producing full volume from Assam. Overall, can expect 3 times jump in volumes from Assam by next year, said Elango.

The company is also focusing on reviving its production from the offshore field in Kaveri offshore.

FY19 margin to be around 75 percent and expect FY19 revenue at around Rs 150 crore, he further mentioned.

Dirok Gas production ramp up on track;

  • Dirok gas sales ramped upto 10 mmscmd (restricted by 4” pipeline capacity)
  • Modular Gas Processing Plant and all facilities to be commissioned before 31 March 2018
  • Production expected to be 36mmscfd of gas and 1000 barrels of condensate from 6 wells by 1 April 2018
  • Gas price by 1 Apr 2018 expected to be above $ 3/mmbtu

Source: Mother of all sources, Investor Presentation.

Hoec Rakesh Jhunjhunwala

It is no wonder that if Rakesh Jhunjhunwala buys any stock the brand value of that stock gets a boost. The great news is Rakesh Jhunjhunwala Hindustan oil exploration are linked to each other . Recently ace investor Rakesh Jhunjhunwala has increased the stake to 3.78% from 1.57% earlier.

Risk:

Company doesn’t pay dividend so unlikely to attract big ticket investors.

It belongs to a sector where macro factors have huge impacts and thus can bring volatility anytime.

Promoter stake is almost negligible.

Conclusion:

It is expected oil and gas price to remain positive for the year 2018. Apart from all the expansion in pipeline macro factors will help company to increase it’s volume. There is a clear growth visibility for next 5 years for the company.

We are positive on this share at current price over a period of next 2 to 3 years time horizon.

Hope you find above HOEC multibagger post useful. Add a comment below or contact us if you have anything to share. If you feel this will help others then do share with your friends using below social media icons.

Don’t forget to visit Goldstone InfratechTata Elxsi and one penny stock analysis here.

tags: hindustan oil corporation ltd, hind oil exploration, hindustan oil industries

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