Oil India Ltd. share price target

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...

Oil India Limited's (Oil India) Q1FY2020 PAT (adjusted for IND-AS 116) at Rs. 624 crore (down 11.3% y-o-y; down 23.8% q-o-q) was below our estimate due to: 1) lower-than-expected net oil realisation at $66.3/bbl; 2) miss in oil sales volume at 0.8mmt (down 1.6% y-o-y); and 3) lower-than-expected gas sales volume at 0.6bcm (up 2.7% y-o-y). Post the sharp correction in the stock price, Oil India is trading at attractive valuation of 5.6x its FY2021E EPS and offers strong dividend yield of 7-8%. Hence, we maintain our Buy rating on the...

Upstream companies were out of flavor despite realising market price for crude oil, mainly on account of the subsidy sharing with OMCs. We expect oil prices to remain muted owing to the robust supply from US Shale. This is despite production cuts from OPEC and non-OPEC countries. Thus, there is no concern over the subsidy sharing. OIL generates OCF yield of almost 30% and divided yield of ~8.5% over FY20/21E. The current valuations are contextually lower at 2.3x FY21E EV/EBITDA and 4.8x FY21 PER. Our TP is Rs 225/sh (6x Jun-21E standalone + Rs 84 from investments). Maintain BUY. We maintain BUY on Oil India post an in-line 1QFY20. Although we do agree that there are concerns over lack of production growth for OIL, we think that the current valuations (2.3x FY21 EV/EBITDA and 4.7x FY21 PER) indicate strong pessimism.

Oil India's (OINL) Q1 FY20 earnings at Rs 6.3bn (-11% YoY) was above estimates.

Lower other expenditure; total sales remain flat 1QFY20 revenue was flat YoY at INR33.7b (in line with est.). EBITDA was 6% higher than est. at INR13.5b (-4% YoY), due to lower total expenditure at USD7.1/boe (v/s USD8.8/boe in 1QFY19 and USD8.9/boe in 4QFY19). PAT was 11% lower YoY at INR6.2b (v/s gain of INR7.0b in 1QFY19 and loss of INR2.0b in 4QFY19, due to one-off exceptional item)....

Upstream companies were out of flavor despite realizing market price for crude oil, mainly on account of lower provisioning of budgetary support in FY19 (Rs 248bn). The subsidy sharing concern allayed when the Govt. committed to settle Rs 430bn of subsidy from its own pocket. Moreover, we expect the oil prices to remain muted owing to the robust supply from US Shale, despite production cut from OPEC and non-OPEC countries. Hence, given that (1) >80% revenue comes from crude oil, (2) There is no overhang of subsidy sharing, upstream companies should be re-rated. Our TP is Rs 234/sh (6x Mar-21E standalone + Rs 90 from investments). Maintain BUY. We agree that there are concerns over lack of production growth for OIL, however we think that the current valuations (3.8x FY21 EV/EBITDA and 6.5x FY21 PER) indicate strong pessimism.

Oil India Limited (OIL) is the second largest hydrocarbon exploration and production Indian public sector company with its operational headquarters in Duliajan, Assam, India.

Our TP is Rs 227/sh (6x Dec-20E standalone + Rs 82 from investments). Maintain BUY. OILs stock price has underperformed (-35%) the broader market (+4%) since Jan-18 (1) In the anticipation of subsidy sharing in a rising oil price environment and (2) Lower allocation of petroleum subsidy in the FY19 budget. The current stock price factors in the subsidy burden on the domestic Exploration and Production (E&P;) companies.