Buy IOCL; target of Rs 157: Motilal Oswal
Motilal Oswal is bullish on IOCL recommended buy rating on the stock with a target price of Rs 157 in its research report dated July 31, 2021.
August 06, 2021 / 01:47 PM IST
An Edelweiss research report for Q4FY21 says road tonnage continued to improve, evident in e-way bill generation (up 6% QoQ) and improved core trucking rentals. “We estimate tonnage would increase by three–five percent for truckers. Asset-light plays Mahindra Logistics and TCI Express remain our preferred picks due to their ability to scale up/down as the environment demands,” the report said. Edelweiss is bullish on Blue Dart Express due to the pandemic-induced boom in e-commerce and its leaner cost structure. It has retained a ‘buy’ call on Mahindra Logistics, TCI Express and Blue Dart Express.
Motilal Oswal's research report on IOCL
IOCL reported a beat on our estimates, led by higher-than-estimated reported GRM (USD6.6/bbl), marketing margins (INR6.2/lit), and marketing sales volumes (-6% QoQ – despite the second COVID wave led lockdowns). Thus, EBITDA stood at INR111b (+65% est., +102% YoY, -18% QoQ), with PAT at INR59b (+211% YoY, -32% QoQ). SG GRM is averaging higher MoM at USD2.9/bbl in July (v/s USD2/bbl in 1QFY22), the highest ever since the COVID outbreak in Feb'20. Recovery is entirely driven by higher demand for gasoline (margins at USD10.1; +USD3 MoM); while ATF and gasoil margins remain the same MoM at USD4.3/4.7. With the total phasing out of the COVID lockdowns and closure of refinery complexes (est ~3mnbopd over the next 2–3 years), the refining margin would return to its long-term average (of USD5–6/bbl).
IOCL has traded at a huge discount in the recent past decade owing to its capex cycle and CPSE-led liquidity. We value it at 1.1x Sep’23 PBV, to arrive at TP of INR157. Maintain Buy.
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