Indian Oil Corporation Ltd. share price target

We are structurally positive on IOC, owing to its diversified business model and healthy FCF (Rs 285bn) over FY21-22E. Our SOTP based target price of Rs 190 (5x Jun 21E EV/e for standalone refining, pipeline, petchem and 5.5x Jun 21E EV/e marketing and Rs 28/sh from other investments). We maintain BUY on IOC with a TP of Rs 190 as the 1Q performance exceeded our estimates. As International Maritime Organisations (IMO) regulations kick in from Jan-20, we expect middle distillate margins to improve further and in turn GRMs.

FY19. Profit for the first quarter of FY20 is Rs. 3738 crore as compared to Rs. 7092 crore in the corresponding quarter of FY19. The variation is majorly on account of lower inventory gain during the quarter. Gross Refining Margins (GRM) for Q1 19-20 is $4.69/bbl as compared to...

Reported 1QFY20 EBITDA of INR82.6b (-43% YoY, -18% QoQ) was 5% below our estimate. Adjusting for settlement of old dispute for sales tax/VAT in the state of Maharashtra and other one-offs, EBITDA stood at INR64.0b (-2% YoY, -13% QoQ) v/s our estimate of INR80.7b. The miss was mainly due to higher-than-expected costs and the poorer-than-expected petrochem performance. PAT fell 47% YoY (-41% QoQ) to INR36b due to higher interest cost (+46% YoY to INR15.1b). Forex gain was at INR0.9b (v/s loss of INR18.1b in 1QFY19 and gain of INR8.4b in 4QFY19). Total inventory gain stood at INR12.3b (refining at...

IOCL's Q1FY20 EBITDA at Rs 76.6bn (ex-inventory gains) was marginally below estimates.

GRMs to improve from lower levels due to IMO regulations Reported GRMs during the quarter were at US$4.7/bbl above our estimate of US$3.2/bbl during the quarter on account of inventory gains of US$1.1/bbl vs. expected loss of US$ 0.3/bbl. The company's core GRMs remained weak at US$3.6/bbl, in line with our estimates. Benchmark Singapore GRMs have improved in current quarter (Q2FY20-TD) at US$6-7/bbl with improved product spreads. IOC operational efficiencies will play a key role in deciding IOC's performance in coming quarters. We estimate GRM at US$5.7/bbl and...

IOCL's Q1FY20 results were largely in-line to our forecast on all fronts. Revenue was up 1.6% YoY to Rs1.3 tr whereas EBITDA/PAT declined by 33.6%/47.4% YoY to Rs83.5bn/Rs35.9bn. The decline in net profit was mainly due to higher interest and depreciation expense which grew by 46.4% and 17.7% YoY respectively. Reported GRM...

Key highlights from our meeting with the Indian Oil Corp (IOCL) management: (a) cyclical business margins look challenging, as IOCL gears up for IMO regulations, (b) marketing margin volatility to continue as management aims to maintain/gain market share, and (c) capex intensity to remain high on refining expansion/upgrades. Among OMCs, we find IOCL's refining segment best placed to take advantage of IMO regulations,...

We are structurally positive on IOC, owing to its diversified business model, and healthy free cash flows (Rs 285bn) over FY20-21E. Our SOTP based target price of Rs 190 (5x Mar 21E EV/e for standalone refining, pipeline, petchem and 5.5x Mar 21E EV/e marketing and Rs 31/sh from other investments). With an improvement in GRMs in sight coupled with restoration in marketing margins as elections have concluded, we remain positive on IOC and maintain BUY.

IOCL's Q4FY19 result came above our forecast on all fronts led by higher than expected marketing profits, inventory gain and forex gains. Revenue was up 7.5% YoY to Rs1.3tr. While EBITDA was marginally down 1.3% YoY to Rs108.7 bn, PAT was up 16.9% YoY due to higher other income which increased to Rs10.6bn in Q4FY19 vs. Rs2.4bn in Q4FY18. Reported GRM stood at US$4.1/bbl in Q4FY19 while core GRM stood at US$3.0/bbl. Ennore LNG terminal commissioned in March'19 and started LNG supply to Manali refinery and other anchor customers. We introduce FY21 financials while keeping FY20E largerly unchanged. We roll over our TP to FY21E which gives a new TP of Rs160 (6x...

Weak global GRMs to impact refining business performance Reported GRMs during the quarter were at US$4.1/bbl, below our estimate of US$6.8/bbl despite inventory gain of US$2/bbl. The company reported weak core GRMs at US$2.1/bbl on account of a weak operational performance. The benchmark Singapore GRMs are remaining weak in the current quarter as well (Q1FY20-TD) at US$4/bbl with weak product spreads. Hence, operational efficiencies will play a key role in deciding IOC's performance in coming quarters. We estimate GRM at US$5.9/bbl and...

Better-than-expected marketing margins result in a beat 4QFY19 EBITDA (adj. for inventory and one-offs) stood at INR74b (-10% YoY, 40% QoQ) due to lower-than-expected core GRM and refining throughput. EBITDA was ~45% above our estimate, primarily led by better marketing performance. PAT was 63% above our estimate at INR61b (+17% YoY), owing to higher other income and lower tax rate. Interest cost was higher at INR12.4b (-5% YoY, +47% QoQ). Forex gain was at INR8.4b (v/s loss of INR6.8b in 4QFY18 and gain of INR21b in 3QFY19). Total inventory gain stood at INR26b in 4QFY19 (our est. INR25b)....

Indian Oil reported revenue from operations of of Rs 605924 crore for the Financial Year 18-19 as compared to Rs 506428 crore in corresponding Financial Year 17-18. The Net Profit for the financial year ended 31st March 2019 is lower at Rs 16,894 crore as compared to Rs 21,346 crores during the corresponding year mainly on account of exchange losses and lower...

Our SOTP based target price of Rs 155 (4x Dec 20E EV/e for standalone refining, 4.5x for marketing and pipeline and Rs 28/sh from other investments). IOCs 3QFY19 EBITDA and PAT came in at Rs 36.11bn and Rs 7.17bn, down 72.9% and 90.9% YoY primarily owing to Rs 107.44bn inventory losses. Adjusting for inventory losses and forex gains, core EBITDA was Rs 122.70bn. Operationally it was very strong quarter with core GRM (excluding inventory losses of USD 7.9/bbl) at USD 9/bbl vs USD 3.6/bbl in 2Q.

Indian Oil Corporation Ltd's Q3FY19 results beat the estimates. Indian Oil net sales rose 28% to Rs 139752.72 crore for the quarter ended December 2018 compared to corresponding previous year period. This included subsidy from the government of Rs 1263.77 crore up 51% on a y-o-y basis. Excluding compensation from the government net sales of the company rose 28% to Rs 141016.49 crore. OPM of the company stood at 2.5% compared to 12.9% in the corresponding previous year...

IOCL's Q3FY19 result came above our forecast on all front led by lower than expected inventory loss, forex gains and higher core GRMs. While revenue was up 26.5% YoY to Rs1.4tr, EBITDA/PAT were down 72.8%/90.9% YoY to Rs3.6bn/Rs0.7bn mainly driven by inventory losses and lower petchem profits. The company's crude throughput increased 4% YoY to 18.9mmt while sales volume remained flattish YoY at 22.8mmt. Reported GRM stood at US$1.2/bbl in Q3FY19 while core GRM stood at US$5.2/bbl. We are...

Indian Oil (IOCL) reported EBITDA/PAT of Rs15.3bn/7.2bn for Q3FY19, impacted by heavy inventory losses of Rs107bn though earnings were better than our estimates, driven by strong core performance. Core EBITDA/PAT/EPS were Rs123bn/67bn/Rs7.1. IOCL reported GRM of US$1.2/bbl though core number was a whopping US$9.2, driven by price lag impact ($5.1/bbl adjusted core GRM) and lower F&L; costs. Marketing margin also expanded by 8% qoq to Rs5/kg. Petchem earnings, however, fell ~40% qoq. volatility, marketing pricing power should be steady after elections. We cut our FY20/21...

Company Background - Indian Oil Corporation Ltd. (IOC), India's flagship national oil company and downstream petroleum major, was incorporated on 1959 as Indian Oil Company. The company was renamed as Indian Oil Corporation in 1964 following the merger of Indian Refineries (established 1958) with it. IOC's core business has been refining, transportation and marketing of petroleum products. In line with India's growing energy demand, the Company has over the years expanded its operations across the hydrocarbon value chain...

IOCL reported below-estimated Q2FY19 earnings at Rs 32.5bn (12.2% YoY, 52.5% QoQ) due to (a) weak refining earnings on low GRMs of US$ 6.8/bbl (US$ 3.5 ex-inventory) and high operating costs (US$ 3/bbl, +18.4% QoQ), and (b) below-expected petchem EBITDA of US$ 338/mt. Earnings outperformance in the marketing and pipeline businesses saved the day. We roll over to Sep'19 (from Mar'19), leading to a target price change to...

IOCL's Q2FY19 results were a miss to our estimates owing to dismal performance from refinery segment and higher forex loss. Revenue increased 45.8% YoY to Rs1.3tr on the back of higher sales volume. EBITDA/PAT were down 8.3%/12.1% YoY to Rs6.7bn/Rs32bn mainly driven by lower refinery profits. The company's crude throughput/sales volume increased 10.7%/3.4% YoY to 17.8/21.6mmt. Calculated core GRM stood at US$3.5/bbl (reported US$6.8/bbl) vs US$6.9/bbl. We are marginally raising our estimates by 3-4% for FY19 and FY20 as raising rupee exchange rate to Rs70/US$ for H2FY19 and FY20 from earlier Rs68/US$. Therefore, we raise our...

Downgrade to Neutral from BUY with SOTP based target price of Rs 153 (4x Sep 20E EV/e for standalone refining, marketing and pipeline and Rs 44/sh from other investments). IOCs 2QFY19 EBITDA came in at Rs 68.74bn, down 6.8% YoY. This is majorly attributable to a 14.9% YoY fall in the reported GRM (USD 6.8/bbl) and an increase in opex to Rs 115.96bn (vs Rs 75.31bn in Q2FY18, +54% YoY). This was partially offset by an increase in the blended gross marketing margin (+18.4% YoY) that came to Rs 3.74/ltr. Marketing volumes were up 3.4% YoY to 21.6mmt. APAT stood at Rs 33.22bn, down 10.1% YoY.