Buy Essar Oil (Dec02, 08)

Co name: Essar Oil Reco: Buy
CMP: Rs 71
Target Price: Rs 80 (1-3 months), Rs 120 (6-12 months)
Best Buy: Dip around Rs 60 (Accumulate at this Level)

Investment Rational:
1. Comapany has registered turnaround in their sales and profit as well in the last two quarters Q1 & Q2 of this year. And, the refinary margins of the company is expected to go upin coming quarters.
2. Essar Oil's fund-raising is also weighing on the stock. The company is spending US$ 6 billion to expand its refining capacity in Gujarat to 6.80 lakh barrels per day by 2010. It hopes to raise US$ 3.5 billion in 12-year, rupee-denominated loans underwritten by SBI, ICICI Bank and IDBI Bank. It will also raise US$ 1.5 billion in foreign currency loan from Standard Chartered and ICICI Bank. That's why the stock has seen this much low level.
At the same time, Recently, Essar Oil signed a product sale, purchase and infrastructure-sharing MoU with Indian Oil Corporation. It had earlier signed similar pacts with other two PSU oil companies: HPCL and BPCL. Essar Oil now has MoUs or agreements covering close to seven million tonnes of its refinery products.

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