Indian Oil Corporation Ltd. share price target

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...

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

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...

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...

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)....

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...