Accumulate Oil India; target of Rs 596: PLilladher

Prabhudas Lilladher is bullish on Oil India and has recommended accumulate rating on the stock with a target of Rs 596 in its February 13, 2013 research report.
 
“OIL India’s (OIL’s) Q3FY13 PAT stood at Rs9.4bn, down 7 percent YoY, on higher subsidy burden (Rs19.5bn v/s 18.53bn in Q2FY12) and ~4 percent YoY decline in crude production. EBITDA declined by ~3 percent QoQ to ~Rs12.3bn. Upstream subsidy burden, during the quarter, stood at 38.7 percent (v/s 40 percent in Q2FY13), averaging 36 percent in 9MFY13. 9M provisional subsidy numbers have been done using a discount of US$56/bbl on upstream crude oil production.”
 
“Owing to continued blockages and strikerelated issues, crude oil production continued to disappoint, declining 4 percent YoY to 0.921 mt below our expectation of 0.94MMT. Production has remained largely stagnant for the last seven quarters. Management is guiding for a modest revival in FY14 to ~3.98 mt, ~5 percent growth over FY13. Natural gas production was flat YoY, FY13 production expected to be flat, guidance of ~3 percent growth in FY14. OINL plans to incur a capex of ~Rs30.7bn in FY13 (~80 percent spent in 9MFY13), ramping up to ~Rs34.2bn in FY14. The company expects to conduct exploratory drilling in KG (April 2013) and Mizoram (rig order to be placed shortly) fields in FY14. Also, the company mentioned the submission of non-binding bids for two acquisitions, which are likely to materialize in FY14.”
 
“As a consequence of the recent steps taken by the government, we expect system under-recoveries to reduce to Rs982bn, a decline of 40 percent YoY. Thus, we expect OIL’s net realization to inch-up to US$60.5/bbl versus ~US$50/bbl in FY13. We expect a significant fillip to earnings in FY14, growing by ~27 percent. The stock is attractively valued at the CMP, trading at 8x 1 year forward P/E, ~13 percent discount to its historical average. We maintain .Accumulate. on the stock, with a target price of Rs596/share,” says Prabhudas Lilladher research report.

Public holding more than 90% in Indian cos 

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More