Pick Castrol; neutral on oil gas space: Pankaj Pandey

Pankaj Pandey, Head of Research at ICICIdirect recommends picking Castrol India with a target of Rs 611 but has a neutral view on oil & gas space.

Pankaj Pandey, Head of Research at ICICIdirect told CNBC-TV18, "We have a neutral view on the entire oil and gas space. Crude continues to be in free fall, in FY13 we had gross under-ecoveries of about Rs 1,60,000 crore which is expected to come down to about Rs 68,000 crore in FY16, the benefit is yet not known, how it will be shared between the upstream and downstream and the government. Till the time you don't have clarity, probably this sector might remain under pressure because I think that will be a big factor in terms of the earnings which is why we have a neutral view on this particular sector."

"However, we like Castrol India  which should benefit from the lower crude oil prices because we would expect the benefit of the crude oil derivative, which is base oil, would percolate in the bottomline of the company wherein we would expect that the gross margin for Castrol
should improve from about Rs 70 per litre to Rs 100 per litre. This is one of our new year picks and we have a target price of Rs 611 on this stock," he said.

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