Indian Oil Corporation Ltd. share price target

IOC's Q2FY21 result was a beat to our estimates owing to significantly higher inventory gains. Adjusting to this, result was below our forecast on the back of negative core GRM and lower than expected marketing profits. Reported GRM came at US$8.6bbl owing to inventory gain of Rs73bn (US$9.6/bbl) while core GRM stood at negative US$1/bbl. IOC's crude throughput declined 20% YoY to 14mmt while sales volume dipped 6% YoY to 18.9mmt. While Petchem EBITDA grew a robust 56% YoY to Rs12.1 bn on better polymer cracks, pipeline EBITDA saw a decline of 19% due to 20% lower volume. Overall the company expects capex of Rs210 bn in FY21 and expects 100% utilization from Q3FY21...

IOCL's Q2FY21 EBITDA of Rs 94bn (2.6x YoY) was above estimates.

Company debt further decreased on a QoQ basis to INR915b in 2QFY21 (from INR986b in 1QFY21 and INR1,165b in 4QFY20). India is seeing a significant increase in vehicular traffic movement, with gradual revival in domestic air travel as well. In Sep'20, petrol witnessed consumption growth of +3.3% (v/s -7.5% in Aug'20). Diesel still recorded decline of 6.0% YoY, although much lower than 20.7% in Aug'20. We continue to prefer IOCL, which, despite having annual capex of ~INR260b (the highest among the OMCs), is expected to report ~30% cumulative FCF yield over...

Depreciation rose 10% to Rs 2613.12 crore. PBT was down 42% to Rs 2983.38 crore. Tax expense decreased 54% to Rs 854.15 crore. PAT was down 35% to Rs 2129.23 crore. Considering share of profit or losses of associates and minority interest, net profit of the company reported 40% fall to Rs 2226.8 crore. Promoter shareholding remains unchanged at 51.5% at the end of June'20 quarter compared...

IOC's Q1FY21 result was lower than our expectations owing to higher inventory losses against expectation of gains and lower than expected volume. IOC's crude throughput declined 25.2% YoY to 12.9mmt (vs IDBIest of 13.8mmt) while sales volume dipped 27% YoY to 16.5mmt (IDBIest 17.4mmt). Robust profit at marketing division was offset by huge loss at refining and sharp decline in profit of the pipeline business. Reported GRM came at a negative US$1.98/bbl whereas normalized GRM was US$4.3/bbl (inventory loss of US$6.8/bbl). The company highlighted that Q2FY21 should witness an inventory gains as average cost of oil is US$32.6/bbl. We largely keep our estimates and target...

Hike in retail prices support marketing margins Global oil prices fell to multi-year lows in April due to a sharp reduction in demand. With increase in demand following a resumption of economic activities, oil prices recovered. Brent crude oil prices on a closing basis increased by US$19.4/bbl QoQ to US$40.9/bbl. IOC reported marketing inventory gain of | 1392 crore. Core marketing margins were stable during the quarter as the company increased petrol & diesel prices post excise duty hike. IOC's marketing sales de-grew 29.2% YoY to 15.2 MMT (our estimate:...

Indian Oil net sales fell 6% to Rs 118007.32 crore for the quarter ended Mar20 compared to corresponding previous year period. This included subsidy from the government of Rs 133.37 crore down 77% on a y-o-y basis. Excluding compensation from the government net sales of the...

A sharp reduction in oil demand owing to Covid-19 outbreak resulted in a significant drop in crude oil prices. As a result, average Brent crude oil prices declined by US$12/bbl QoQ to US$50.6/bbl with closing Brent price at US$21.5/bbl. On account of the same, the company reported marketing inventory loss of | 2291 crore. However, core marketing margins were relatively steady during the quarter. IOC's marketing sales de-grew 4.5% YoY to 20.7 MMT (our estimate: 19 MMT) on account of lower diesel sales. Going forward, considering the extended lockdown in Q1FY21E, we expect...

IOC's Q4FY20 result was impacted negatively by higher inventory losses (Rs184.8 bn) and higher forex loss (Rs27.2 bn). Further, marketing and petchem EBITDA was a drag to profits owing to lower marketing margins, lower volume and lower polymer delta. Reported GRM came at a negative US$9.6/bbl whereas normalised GRM reported by IOC was US$2.2/bbl (inventory loss of US$17.9/bbl). Refinery utilisation has already reached to nearly 90% in first three weeks of June (40% in Apr and ~62% in May) and management expect it to normalise within a month. We expect GRM of US$3/bbl and US$4/bbl in FY21 and FY22 respectively while marketing margin to remain stable on a...