CPCL hits over four-year high; zooms 164% in 7 weeks on strong earnings

Shares of Chennai Petroleum Corporation Limited (CPCL) hit an over four-year high of Rs 343.60, and were frozen at the 5 per cent upper circuit on the BSE in Friday’s intra-day trade. The stock has zoomed over 150 per cent in the past one-and-half month on the back of strong earnings. It trades at its highest level since April 2018, the previous record high was Rs 490 in November 2007.

Since April 1, in seven weeks, the stock of state-owned refineries & marketing company has surged 164 per cent, as compared to a 8 per cent decline in the S&P BSE Sensex. As of 11:10 am, a combined around 16.8 lakh equity shares had changed hands and there were pending buy orders for 140,000 shares on the NSE and BSE.

CPCL operates in downstream petroleum sector. It produces an array of value-added petroleum products.

In Q4FY22, CPCL reported four-fold jump in its consolidated net profit at Rs 1,002 crore as against Rs 242 crore in Q4FY21. Revenue from operations jumped 43 per cent year on year (YoY) to Rs 20,997 crore from Rs 14,705 crore in previous year quarter.

For the entire financial year 2021-22 (FY22), CPCL consolidated net profit jumped 426 per cent YoY to Rs 1,352 crore from Rs 257 crore in FY21. Revenue grew 43 per cent YoY to Rs 60,074 crore.

Meanwhile, on April 28, 2022, investor Dolly Khanna bought 1 million equity shares representing 0.67 per cent stake of CPCL worth of Rs 26.31 crore through open market purchase on the NSE. Dolly Khanna purchased shares at price of Rs 263.15, the bulk deal data shows. The name of the seller was not ascertained immediately.

The company plans to expand its refining capacity which will boost its earnings in the long term. The company has already received approval from the NITI Aayog for implementation of the CBR. Considering the strategic importance of CPCL’s refinery in the southern India, expansion plan and strong promoter back ground, analyst at Kotak Securities believe the financial performance to improve in the long term.

The expected demand for more crude oil will provide an opportunity to invest in new refining facilities and requires huge investment in the future. In order to meet the expected growing energy needs in India, especially in the State of Tamilnadu and in other states, CPCL is planning to set up a 9.0 MMTPA refinery at Nagapattinam in Cauvery Basin in Tamilnadu, the company's FY21 annual report stated.

Technical View

Bias: Positive

Target: Rs 375

Support: Rs 310

The stock after an interminnent correction in early May, has bounced back strongly as the weekly trend continued to remain bullish. In trades today, the stock is testing the higher-end of the Bollinger Band on the daily charts around Rs 340.

In case the stock closes above Rs 340, the next target as per the yearly Fibonacci chart is placed at Rs 351 followed by Rs 375. The weekly chart suggests that the stock is likely to trade with a positive bias as long as the stock holds above Rs 310. 

The momentum oscillators both on the daily and weekly charts are also in favour of the bulls.

(With inputs from Rex Cano)