Buy Oil India; target of Rs 767: ICICI Securities

ICICI Securities's research report on Oil India

Oil India’s (OIL)’s adjusted EBITDA/PAT of INR 25.4bn/ INR 20.3bn jumped 8/13% YoY, with FY24 standalone EBITDA/PAT of INR 99/79bn (EBITDA flat YoY/PAT +16% YoY), respectively. Sharply higher other income and lower tax rate helped boost net earnings in Q4FY24. Operationally, metrics remained strong, with 6%/3% YoY improvement in oil/gas output and an estimated ~USD 29/bbl GRM (incl USD 15-16/bbl of excise benefit) for NRL driving a 17% YoY jump in consol PAT for the quarter. Higher share of dividend income in earnings also helped in keeping tax rates to <20% in Q4. Net realisations of USD 78.8/bbl were the highest in 7 quarters. With aggressive production growth, 3x expansion in NRL capacity and improving leverage, OIL remains on a strong footing for FY25-27E (we introduce FY27E EPS estimates of INR 105.6/sh with this note). Maintain BUY.

Outlook

We value OIL using SoTP methodology with: 1) DCF used for upstream oil & gas business; 2) EV/EBITDA for subsidiary NRL; 3) EV/boe for smaller overseas stakes in Mozambique and Russia; and 4) IOCL investment valued at CMP. This delivers a fair value of INR 767 (from INR 575), a material 18% upside from CMP. The stock trades at valuation of 8.3x FY26E EPS and ~6.1x FY26E EV/EBITDA. Even at our target price, implied P/E works out to 9.9 x FY26E EPS and EV/EBITDA works out to 7.2x FY26E, which we think is attractive. Reiterate BUY.