Indian Oil Corporation Ltd. share price target

IOC reported an EBITDA of Rs 6.9bn, led by muted GRM of US$ 0.9/bbl on account of inventory losses. Crude prices fell by ~17% between July and September. IOC has the highest impact as its inventory days are almost double than other OMCs due to the location of its refineries. Interest cost remains low owing to 82% fall in gross under recovery. Net loss was Rs 3.3bn.

Indian Oil Corporation (IOCL)s 2QFY2016 revenue came in 2.4% ahead of our estimate at Rs85,385cr, led by a 5.8% yoy increase in product sales volumes to 19.07MMT as against 18.03MMT in 2QFY2015. Refining throughput increased 2.1% to 13.68MMT as against 13.41MMT in 2QFY2015, while total throughput increased 5% yoy to 19.98MMT as against 19.04MMT in 2QFY2015. Revenue however declined 24% yoy on account of lower price realisations. The EBITDA at Rs695cr was much lower than our expectation of Rs3,714cr, owing to lower than expected refining margins and high inventory losses. Refining margin at $0.9/bbl was much lower than our expectation and compared to $10.8/bbl as in 1QFY2016. This was largely on account of reduced spreads and adventitious loss of Rs1,197cr. We expect the impact from inventory losses to reduce going forward and profit to stabilise as crude prices stabilise at current levels. The commissioning of its state-of-the-art 15MMTPA coastal refinery at Paradip is expected to be fully operational in an integrated manner by Dec 2015. With its commissioning, IOCLs refining capacity is set to increase by ~23% to 80.7MMTPA from the current capacity of 65.7MMTPA. Outlook and valuation IOC is currently trading at an EV/EBITDA multiple of 5.4x its FY2017E...

IOC reported an EBITDA of Rs 101bn led by 6 years high GRM. Apart from the strong product spreads, we believe that IOC also benefited from the recovery in crude/product prices during April to Jun.

IOC reported an EBITDA of Rs 93bn in 4Q. Quarterly results are not comparable due to timing mismatch in subsidy payments and inventory & forex impact. Contrary to other OMCs, IOC registered a decline of 35% in EBITDA in FY15. The decline was mainly led by huge inventory losses owing to the sharp fall in crude prices. Inventory days for IOC is double than others at ~45 days due to the location of its refineries.

IOC reported an EBITDA loss of Rs 24.8bn vs. a loss of 3.4bn YoY. Results are not comparable due to (1) low net under recovery of Rs 0.1bn vs 16.3 (2) inventory loss of Rs 13.5bn vs gain of 9.2 (3) forex losses of Rs 3.1bn vs gain of 11.3. GRM was $ (7.7)/bbl led by inventory losses due to the sharp fall in crude prices.