Sharekhan's research report on Oil India
Q3FY2021 adjusted operating profit of Rs. 406 crore (down 44.9% q-o-q) substantially lagged estimates due to higher operating cost and a rise in provisions. Adjusted PAT at Rs. 397 crore (up 6.3% q-o-q) aided by higher other income and tax gains. Operational performance was better than expected with oil/gas sales volume at 0.72mmt/0.59bcm, flat/up 6% q-o-q and 3.4%/6.4% ahead of our estimates. Oil realisation stood at $44.1/bbl (up 3.2% q-o-q),slightly below or estimate of $45.3/bbl. Gas business would continue making losses until there are APM gas pricing reforms and recent rally in crude oil prices may not hold if OPEC+ member countries roll back production cuts. Volatile oil/gas prices and weak production profile makes earnings recovery fragile.
Hence, we maintain a Hold rating on Oil India with a revised PT of Rs.130 given limited upside potential and weak earnings profile. At CMP, the stock trades at 6.5x FY2022E EPS and 5.4x FY2023E EPS.
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