Buy Oil India; target of Rs 580: ICICI Securities

ICICI Securities's research report on Oil India

OIL India delivered a relatively muted Q3, with a 4%/23% YoY decline in standalone EBITDA/PAT to INR 22.6/INR 12.2bn, missing I-Sec’s estimates of INR 25.9/INR 16.2bn. Higher forex loss, lower other income and marginally lower gas realisations dragged earnings in Q3. Consol. EBITDA/PAT of INR 26.8/INR 14.6bn also declined sharply by 22%/44% with NRL seeing a USD 10.7/bbl YoY dip in net GRMs (net of inventory losses and excise duty benefit) to USD 2.1/bbl for Q3. Oil + gas output of 1.7mtoe grew 1% YoY, with stronger growth ahead, driven by: 1) NRL expansion by 6mt, creating ~1,5_mmscmd demand; 2) commissioning of the IGGL pipeline, opening up multiple avenues of gas demand; and 3) aggressive drilling across seven identified areas, which should deliver stronger oil and gas output growth. We moderate our NRL/production estimates, reiterate BUY.

Outlook

The company will likely deliver an EPS CAGR of 25% over FY25–27E, with RoE/RoCE potentially expanding by 350–420bps by FY27E (vs. FY25E) and dividend yield of 5.3 % (average FY25–27E). Reiterate BUY with a revised TP of INR 580, 36% upside to CMP.