Indian Oil Corporation Ltd. share price target

25 June 2020 The company posted huge inventory loss of INR185b (refining at INR162b and marketing at INR23b) during the quarter. Adjusted EBITDA for inventory stood at INR214.1b (v/s INR74.0b in 4QFY19 and INR50.3b in 3QFY20). Reported EBITDA came in at INR29.3b and forex loss for the quarter was at INR27.2b. Higher interest cost was offset by higher other income. The company revalued its inventory at the end of the quarter and recorded an exceptional item of INR113b (of which INR80b was refining and INR33b was marketing); thus, PBT came in at loss of INR136.1b. IOCL stated that total inventory loss of INR185b also includes revaluation loss. IOCL has moved to a lower tax rate and re-measured its DTL. Reported PAT stood at loss of INR51.9b.

India's petroleum product consumption surged 47% MoM (21% YoY) to 14.6mmt in May'20 as fuels across segments exhibited resurgent growth in tandem with the Indian economy's emergence from the world's strictest lockdown.

IOCL announced that domestic petroleum product demand improved in May as staggered easing of the lockdown stemmed the decline in consumption to 30% YoY (from 46% YoY in April).

Crude prices witnessed a sharp decline in March due to spread of Covid-19 across the globe and Opec deal failure. A likely increase in oil output by both Saudi Arabia and Russia from Q1FY21E and lower demand are expected to lead to a sizeable oversupply in the oil market. Subsequent low oil prices are expected to significantly affect ONGC's profitability....

Upstream companies and RIL will also be hit from weakening global economy and lower oil and gas realization. Global crude oil prices have crashed to USD35/bbl on disagreement between OPEC and Russia on extent of production cuts in a weakening global economy. Higher production cuts over current levels of 2.1mbpd were expected to help balance oil markets. With no agreements, we expect oil prices to remain weak. The OMCs with high leverage to low crude oil prices are best placed especially HPCL and BPCL. Our sensitivity suggests OMC...

Indian Oil Corporation Ltd.'s net profit missed analyst estimates even as profit rose more than four times and its operational performance met estimates, aided by higher sales volume and inventory gains Indian Oil net sales fell 12% to Rs 123929.51 crore for the quarter ended December 2019 compared to corresponding previous year period. This included subsidy from the government of Rs 218.39 crore down 83% on a y-o-y basis. Excluding compensation from the government net sales of the company fell 11% to Rs 123711.12 crore....

We remain structurally positive owing to IOC's diversified business model and healthy FCF of Rs 690.7bn over FY21-22E. Our SOTP based target price is Rs 181 (5x Dec 21E EV/e for standalone refining, pipeline, petchem and 5.5x Dec 21E EV/e marketing and Rs 28/sh from other investments). Post an inline performance in Q3, we maintain BUY on IOC with a TP of Rs 181. IOC was able to maintain its market share and margins in the quarter while the performance of the refining business was commendable in the midst of the current scenario.

Indian Oil Corporation. Ltd is India's flagship national oil company. The company operates the largest and the widest network of petrol and diesel stations in the country. SERVOXpress has been launched recently as a one-stop shop for auto care services. IOC is currently forging ahead on a well laid-out road map through vertical integration- upstream into oil exploration and production (E&P;) and downstream into petrochemicalsand diversification into natural gas marketing, bio fuels, wind power projects, besides globalization of its downstream operations. The...

IOCL's Q3FY20 EBITDA at Rs 66bn (+84% YoY) was well above estimates.

Average crude oil prices in Q3FY20 remained flattish compared to Q2FY20. On account of stable costs as well as product prices, the core marketing margins remained steady during the quarter. The marketing segment did not report any inventory gains during the quarter. We expect marketing margins to be stable, going forward, as crude prices have declined in the current quarter (Q4FY20-TD). In terms of marketing sales, IOC reported marginal growth of 1.5% YoY to 21.9 MMT (marginally lower than our estimate) on account of lower-than-expected diesel sales. Going forward, we expect...