If you fancy being a contrarian and going against popular opinion, Selan Exploration Technology provides that opportunity. The steep fall in the price of crude oil has torpedoed Selan’s prospects, at least in the short run. Brent crude oil prices declined 38.9% from US$115.0/bbl on 19 June 2014 to US$70.3/bbl on 3 December 2014, while Indian crude oil basket prices fell 37.4% from US$111.9/bbl to US$70.1/bbl over the same period.
However, the million dollar question is how long crude oil prices will remain subdued. Nobody knows the answer to the question except to make a vague guess that someday or the other, tables will be turned, as they have in the past.
Sharekhan has issued a research report in which it states that while the crude meltdown has dented earnings, the growth story is intact. Their bottom-line analysis is worth noting:
“We retain our bullish stance based on two reasons: First, purely on our confidence of the management’s ability to execute the set target of exponential jump in the production volumes over the next two to three years; and second, our view that the recent plunge in crude oil prices is not sustainable and the crude oil prices would eventually stabilise around $80-85 per barrel sooner than later. Consequently, we retain our Buy recommendation with a price target of Rs550.”
Dolly Khanna aka Rajiv Khanna, who holds 296,019 shares of Selan Exploration worth Rs. 11.75 Cr at the CMP of Rs. 397, will be hoping that Sharekhan’s analysis is correct.