Motilal Oswal's research report on Indian Oil Corporation
IOCL’s 4QFY24 EBITDA of INR 104b (down 27% YoY) was 26% below our estimate of INR 141b due to weaker-than-estimated reported GRM (USD8.4/ bbl in 4QFY24 vs. our estimate of USD15.0/bbl). The subdued result was also due to the continuing weak performance of the petrochemical division (EBIT loss of INR 4b). Core GRM in 4QFY24 came in at USD10.6/bbl; for FY25-26, we are building in GRMs of USD9/bbl. As such, we believe the refining segment’s performance will remain healthy given the robust oil demand.
Outlook
IOCL is set to commission various projects over the next two years, driving further growth. Refinery projects, currently under way, are expected to be completed as follows: Panipat refinery (25mmtpa) by Dec’25, Gujarat refinery (18mmtpa) by Oct’24, and Baruni refinery (9mmtpa) by Dec’24. SG GRM has declined to USD4.1/bbl in 1QFY25 to date (vs. USD7.3/bbl during 4QFY24). IOCL has the highest leverage in the refining segment among its peers and is most likely to be susceptible to changes in SG GRM. The stock trades at 12.4x consolidated FY26E EPS of INR13.6 and 1.1x FY26E P/B. We reiterate our BUY rating on the stock, valuing it at 1.3x FY26E P/B to arrive at our TP of INR 195.
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