Oil India Ltd. share price target

Oil India's (OINL) Q3FY20 earnings disappointed at Rs 4bn (67% YoY).

We reiterate our BUY rating on the stock given the sequential recovery in crude prices and expected GRM improvements over the next few quarters, with a revised target price of Rs. 135 based on SOTP. Revenue under pressure as crude prices remain soft In Q3FY20, revenue fell 9.6% YoY to Rs. 144,820cr (+9.4% QoQ) due to low throughput on account of shutdown of refineries for BS-VI upgradation. As a result domestic utilization of pipelines remained at only 88.7% (vs. 92.2% in Q2FY20). Amongst segments, Petrochemical witnessed steep declines of 24.0% YoY to 4,152cr, followed...

Benign crude prices is positive and will support marketing profits. We lower our FY20-22 earnings estimates to factor in lower refining margins. During Q3, core performance for IOCL was weak due to weak refining performance. While benign crude oil prices is likely to support marketing margins in medium term, refining scenario has worsened with muted demand...

Q2FY20 standalone revenue dropped 14.2% YoY as crude oil revenue continued to decline 20.5% YoY, offset to some extent due to the increase in natural gas revenue (+27.2% YoY). Crude oil sales volumes declined 4.9% YoY coupled with weak crude oil price realization (-16.5% YoY). However, natural gas production and sales volume increased by 1.8% YoY and 4.3% YoY respectively. EBITDA margin tapered by ~70bps YoY to 38.7%, while EBITDA...

We expect oil prices to remain muted owing to robust supply from US Shale, despite production cut from OPEC and non-OPEC countries. Thus, concerns over subsidy sharing are overrated. Upstream companies were undesirable despite realising market price for crude oil, mainly on account of the subsidy sharing with OMCs. OIL will generate OCF yield of almost 30% and divided yield of 7.5% over FY20/21E. The current valuations are contextually low at 2.8/2.1x FY21/22E EV/EBITDA and 5.2/5.0x FY21/22 PER. Our TP is Rs 230/sh (6x Sep-21E standalone + Rs 85 from investments). Maintain BUY. We maintain BUY on OIL post an inline performance in 2QFY20. Though concerns over lack of production growth still persist, we think that the current valuations (2.8/2.1x FY21/22 EV/EBITDA and 5.2/5.0x FY21/22 PER) indicate strong pessimism.

Oil India's (OINL) Q2 FY20 earnings at Rs 6.2bn (-27% YoY) was below estimates.

10 November 2019 2QFY20 revenue was 5% higher than est. at INR32.1b (-14% YoY), led by higher gas sale and higher than expected net realization. EBITDA was 12% lower than est. at INR12.4b (-16% YoY) due to higher employee cost (+37% YoY, +21% QoQ). Till 1HFY20, a total provisioning of INR4.4b has been made toward pay revision of Unionized Employees due from Jan17. Total other expenditure was lower at USD5.9/boe v/s USD9.4/boe in 2QFY19. PBT for the quarter was down 23% YoY to INR9.7b, led by higher depreciation cost of INR4.2b.

IMO2020 rules to support marketing and refining margins going forward. We lower our FY20E earnings estimates to factor in lower than expected H1 performance. During Q2, core performance for IOCL was weak; however, we expect operational performance to improve going forward. Benign crude price outlook given rising US supplies and weak global macros is likely to keep marketing margins buoyant. Also, implementation of IMO2020 will...

EBITDA fell 31.7% YoY and normalized Gross Refining Margin (GRM) stood at USD 2.27/bbl vs. Singapore benchmark GRM of USD 3.50/bbl. PAT dropped 47.4% YoY owing to lower margins on petroleum product, abnormally low cracks of petrochemical products, higher base effect in Q1FY19 (inventory gains of ~Rs. 7,800cr last year) and lease accounting adjustments during the quarter post adoption of IAS 116. While management remains focused on strengthening the Balance Sheet by reducing debt, uncertainties remain on commodity prices and...

Q1FY20 standalone revenue remained largely stable (-0.5% YoY) as crude oil revenue dropped 6.0% YoY, more-than-offsetting the 30.4% YoY growth in natural gas revenue. Crude oil sales volumes declined 1.6% YoY along with drop in crude oil...