Nomura maintains buy rating on IOC, sees target at Rs 390

Moneycontrol Bureau

Nomura has maintained a buy rating on Indian Oil Corporation (IOC) with a target of Rs 390 per share post March quarter earnings. The brokerage says that despite oil marketing companies (OMCs) remaining in financial distress, it is still positive on the sector. 

"In our view, the investment climate has not looked this good since mid-2010. The government is taking incrementally positive actions, such as raising diesel prices each month, limiting cooking fuel volumes and taking early steps toward direct cash transfer of subsidy. Valuations remain reasonable, in our view, but one false step from government could compress multiples again," it explains in a note.

IOC's fourth quarter results beat analyst estimates by a wide margin. Sales grew 11 percent to Rs 1.28 lakh crore from Rs 1.15 lakh crore in the December quarter. Net profit also jumped more than four times from Rs 3332 crore to Rs 14512 crore.

It's gross revenue margin (GRM) was at USD 2.39 in Q4 as opposed to USD 2.26 per barrel in the same period the previous year.

Nomura adds that IOC's total debt as of March 2013 declined to Rs 80900 crore from Rs 94900 crore at December end, mainly due to receipt pending cash compensation from government.