Accumulate Oil India; target of 504: PLilladher

Prabhudas Lilladher is bullish on Oil India and has recommended accumulate rating on the stock with a target of Rs 504 in its November 7, 2012 research report.

“OIL India’s (OIL’s) Q2FY13 PAT at Rs9.55bn, down 16% YoY, mainly on higher subsidy burden in Q2FY12 (Rs20.8bn v/s 8.44bn in Q2FY12). EBITDA rose ~5% QoQ to ~Rs12.6bn due to higher gas sales during the quarter. Upstream subsidy burden, during the quarter, was at 40% (versus 31.5% in Q1FY13), averaging 35% in 1HFY13. 1H provisional subsidy numbers seems to suggest that sharing has been done at a discount of US$56/bbl. Other income remains a major contributor at ~Rs4bn, constituting ~28% of PBT. We do not read much out of the current quarterly performance pending clarity over the full year subsidy burden for the upstream companies (we are currently building in 40% subsidy share by upstream companies). We maintain our ‘Accumulate’ rating on the stock.”

“Crude oil production stood at 0.96MMT in line with our expectation of 0.95MMT. Production has remained largely stagnant for the last seven quarters. Natural gas production at 0.69BCM registered an increase of ~2% YoY. Net realization during the quarter stood at US$52.5/bbl, and ~US$53/bbl in 1H FY13, based on ~US$56/bbl upstream subsidy sharing in 1H Fy13. Oil’ share in the upstream subsidy stood at 13.6%, a tad higher than the 13.4% in FY12.”

“Triggers for the stock remain clarity on subsidy sharing mechanism along with remunerative deployment of cash. While the management guidance on the production increase over the next five year plan does not seems exciting. However, we believe stock offers downside protection with a favourable risk reward equation, the stock is currently trading at 8.0x FY2014E EPS, and an attractive dividend yield of ~4.5% at the CMP. We continue to maintain ‘Accumulate’ on the stock, with a target price of Rs504/share,” says Prabhudas Lilladher research report.  

Non-Institutions holding more than 90% in Indian cos  

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