Indian Oil Corporation Ltd. share price target

Marketing margin recovered significantly in Q4FY18 which we expect to remain under pressure in H1FY19. However, recent fall in price already factoring the worst situation, which is overdone. We maintain our BUY with same TP of Rs202. Key Highlights and Investment Rationale Strong Volume growth and inventory gains boosted result Revenue was up 17% YoY to Rs 1.17 tr, EBITDA increased 10.9% YoY to Rs 110 bn while PAT grew 40.2% YoY to Rs 52.2 bn. Company's crude throughput increased marginally by 0.4% YoY to 17.2mmt while sales volume increased 6.9% YoY to...

Indian Oil's reported revenue from operations was Rs.1,36,733 crore in Q4FY18 as compared to Rs.1,30,865 crore and Rs.1,22,322 crore in the previous quarter of 2017-18 and corresponding quarter of 2016-17 respectively. Profit for the last quarter of 2017-18 is Rs.5,218 crore as compared to Rs.7,883 crore and Rs.3,721 crore in the previous quarter of 2017-18 and corresponding quarter of 2016-17 respectively. The Board of Directors recommended a final dividend of 20% (Rs.2 per share). This is in addition to pre-bonus Interim Dividend of 190% (Rs.19 per share) paid during the year. For the last quarter of 2017-18, IndianOil's product sales volumes, including exports, was...

Our SOTP target reduce to Rs 224 (5.0x Mar-20E EV/e for standalone refining, pipeline, marketing and petchem, and Rs 47/sh from investments). Maintain BUY. IOCs 4QFY18 EBITDA came in at Rs 110.21bn, down 16.9% QoQ. This has been attributed to 26% QoQ fall in GRM to USD 9.1/bbl. The blended gross marketing margin was up 29.3% to USD 9.9/bbl (or Rs 4.02/lit). APAT stood at Rs 52.18bn, down 33.8% QoQ owing to lower other income at Rs 2.48bn (-81.7% QoQ) and higher interest cost at Rs 13bn (+98.9% QoQ).

23 May 2018 v/s our estimate of USD5.6/bbl and SG GRM of USD7/bbl. Reported GRM was USD9.1/bbl due to inventory gain of USD3/bbl (INR24b). Refining throughput was 17.2mmt (flat YoY, -6% QoQ) and capacity utilization was 100.5%. Paradip Refinery was shut in March, which impacted GRMs. While domestic sales of refined products grew 6% YoY (flat QoQ) to 19.7mmt, better than expected marketing margins boosted marketing segment performance. Marketing inventory gains were INR9.9b v/s INR9.6b in 3QFY18 and INR9.1b in 4QFY17. Implied gross marketing margin including inventory was up 16% YoY and 27% QoQ.

Crude throughput increased 11% YoY to 18.2mmt due to higher utilization from Paradip refinery while sales volume rose 7% to 22.8mmt. The company reported inventory gains of Rs63 bn and reported GRM of US$12.3/bbl in Q3FY18 (normalised GRM of US$7.6/bbl, adjusting to inventory gains & Refinery gate price). We are rolling over our valuation on FY20 which gives a new TP of Rs494 from...

The reported revenue from operations of Indian Oil was Rs. 1,10,666.93 crore in Q3 17-18 as compared to Rs. 93,101.85 crore in the corresponding quarter of FY 16-17. Profit for the third quarter of FY 17-18 was at Rs. 7,883.22 crore as compared to profit of Rs. 3,994.91 crore in the corresponding quarter of FY 16-17. For the third quarter of FY 17-18, Indian Oil's product sales volumes, including exports, was 22.810 million tonnes. The refining throughput was 18.232 million tonnes in Q3 FY 17-18 and the throughput of the Corporation's countrywide pipelines network was 22.417 million tonnes during the same period. The gross refining margin (GRM) for the third quarter of FY 17-18 was...

Maintain BUY. IOCs 3QFY18 EBITDA came in at Rs 132bn, up 66.9% YoY and 80% QoQ. This has been attributed to 60.6% YoY and 185% QoQ jump in GRM to USD12.3/bbl, 11.2% YoY increase in crude throughput at 18.2mmt. Sequentially, the blended gross marketing margin was down 8.5% to USD7.6/bbl (or Rs3.1/lit) largely attributed to the lack of adequate increase in auto fuel prices during the state elections. APAT was Rs 78.8bn, up 97% YoY and 113% QoQ owing to higher other income at Rs13.5bn (+71% YoY, +130% QoQ).

Reported GRM at USD 8/bl was lower vs. estimate of USD 10/bl. Clean-GRM (excl. inventory gain) at USD 7/bl declined USD 0.7/bl QoQ despite benchmark Singapore GRM up USD 2/bl. Clean-GRM was at discount to Singapore GRM after being at premium in last 2 quarters

Our SOTP target is Rs 498 (5.0x Sep 19E EV/e for standalone refining and the pipeline, 7.0x EV/e for marketing and petchem, and Rs 97/sh from investments). Maintain BUY. IOCs 2QFY18 EBITDA came in at Rs 73.73bn, up 27.7% YoY and 42% QoQ. This has been attributed to 44.6% jump in core GRM to USD7/bbl, 6% YoY increase in marketing volumes at 20.9 mnT, and 6% YoY increase in the marketing margin at USD8.3/bbl. APAT was Rs 36.96bn, up 18.4% YoY and 38.6% QoQ.

Q1FY18 PAT at Rs 45.5 bn benefited from one-off income of Rs 28 bn towards reversal of provision made earlier for entry-tax dispute with Haryana Government. Adj-PAT at Rs 27 bn was sharply lower than our estimate of Rs 40 bn.