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Why Equinomics' Chokkalingam remains bullish on a PSU stock

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G Chokkalingam of Equinomics Research told CNBC-TV18 he remains bullish on Oil India, a public sector company he has been tracking since 1992. In his vew, the PSU basket provides a "phenomenal multibagger opportunity" once every 5-8 years. 

Why Equinomics' Chokkalingam remains bullish on a PSU stock
A state-run oil & gas company's stock has nearly doubled investors' money in the past 12 months. Its return exceeds that of the headline Nifty50 index by nearly five times.
The stock of state-run hydrocarbon exploration and production company Oil India Ltd (OIL) has also outperformed the public sector enterprise basket.
G Chokkalingam, Founder and MD at Equinomics Research, told CNBC-TV18 he is tracking the PSU since 1992. In his view, the PSU basket provides a 'phenomenal multibagger opportunity" once every 5-8 years.
Value investor Chokkalingam said the stock is still some 50 percent away from the peak of 3-4 years, despite having jumped 100 percent from the bottom.
Giving the rationale behind his bullishness on the stock, he said:
  • Oil India is likely to benefit from rising crude oil prices, which are up 56 percent on-year
  • Multiple benefits for shareholders; the company returns as much as 90 percent of profit as a dividend to shareholders
  • The company maintains a very high dividend
  • It rewards shareholders with bonus issues once in three years

  • EXPLAINED

    Besides, Oil India has a stake of about 69 percent in Assam's Numaligarh Refinery Limited (NRL), which is expanding its capacity by three-time to nine million tonnes, he said. "The financial closure also has happened already and the stock is trading only at a 5 PE despite the benefit of the oil theme," he said.
    Chokkalingam believes that global oil prices can even touch the $100 per barrel quite soon. He sees Oil India as a defensive bet in case of a further fall in the market. "One may try to get the benefit out of rising oil prices through Oil India," he said. 
    The company's recently generated cash will also come in handy for rewarding shareholders, he said, recommending a 'strong buy' on the stock.
    As of Monday's closing price, it is still about 19 percent away from a 52-week high of Rs 267.7, touched in October 2021.
    Here's how the PSU stock has performed in the past year: 
    Stock/indexReturn (%)
    Nifty5020.4
    Nifty PSE42.8
    Nifty CPSE49.2
    Oil India94.3
    Here's how Oil India shares have fared in the past five years:
    New age bet 
    Chokkalingam belongs to the club of market experts sceptical on new-age company stocks.
    Speaking on Zomato, he said: "I may be wrong but I don't find the value in this stock. Unless that is a critical profit growth in the next two years and the PE shrinks significantly, I will not touch this kind of stock."
    His remarks come at a time when new age business stocks in India are mirroring the trend on the Nasdaq, where investors have lost appetite for highly valued tech companies.


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