Fuel price hikes unlikely to crush demand; still favor E&P stocks
China and India unlikely to fully liberalize prices and lift subsidies
Investors have expressed concerns over the sustainability of robust oil
demand growth (and current high prices) due to the recent cut in fuel
subsidies across Asia. In our view, the subsidy cuts in Asia are unlikely to
have any meaningful impact on global oil demand growth. We believe
China and India will continue to adopt a gradual approach to adjusting fuel
prices rather than removing subsidies completely and allowing domestic
fuel prices to align with market prices.
Pullback in select Asian E&P equities present good entry points
We believe the subsidy concerns are partially responsible (profit taking is
the other reason) for the underperformance of upstream oil equities. We
do not share the same concerns and affirm our structurally positive
outlook on oil prices. We believe investors should accumulate select Asian
E&P equities given their recent share price pullbacks.
We reiterate our Buy rating and maintain on our Conviction list CNOOC
(0883.HK, CEO), Cairn India (CAIL.BO), and INPEX (1605.T) with 12-month
target prices of HK$16.5/US$212 (DCF-based), Rs340 (NAV-based) and
¥1,690,000 (DCF-based), respectively. We also like Buy-rated CITIC
Resources (1205.HK) with a 12-month SOTP-based target price of HK$6.2.
Catalysts: Oil price, M&A and exploration success
In addition to the higher oil prices, we believe the stocks we favor have
specific M&A catalysts and/or above-average exploration potential. In our
view, an adjustment to China’s special oil income levy will also be a
positive catalyst for CNOOC and CITIC Resources.
Risks
Key risks include a sharp pullback in oil prices, any major project delays
and detrimental government measures.
[此贴子已经被wesker1999于2008-6-11 18:07:31编辑过]