Accumulate Oil India; target of Rs 573: Emkay

Emkay Global Financial Services is bullish on Oil India and has recommended accumulate rating on the stock with a target of Rs 573 in its August 8, 2012 research report.

“Oil India, despite the lower volumes net sales increased by 8.8% YoY to Rs.24.3bn mainly on account of rupee deprecation by 21% to 54 ($/INR). However net realizations declined by 10.2% to $53.85/bbl as compared to $59.55/bbl in 1QFY12. EBIDTA for the quarter increased by 6.3% YoY to Rs.12bn as against Rs.11.3bn. Higher growth in EBITDA was mainly on the back of lower other expenditure and one time penalty of Rs.870mn for minimum work program (MWP) on NELP block in Q1FY12. Other expenditure declined by 50.5% YoY to Rs.1.2bn. The growth in EBITDA is reflected at the PAT level which grew by 9.5% YoY to Rs.9.3bn.”

“During the quarter sales volume declined by 3.3% to 1.42mmt mainly on the back of maintenance shutdown at Numaligarh Refinery. The gross under-recovery for the quarter stood at Rs478bn, out of this the total upstream share at stood at Rs.150bn (31.3% of the total under-recovery). Among the upstream share OIL India’s share stood at around 13.3% to Rs.20.1bn”

“Currently, the stock is trading at FY14 P/E multiple of 7.5x. OIL's payout ratio is about 34% which translates into a dividend yield of about 4% at CMP. The strong cash position of $2.5bn supports company’s plan to acquire producing oil & gas assets in overseas market. Any success on overseas acquisition coupled with likely reforms in the domestic E&P business are key triggers for the company as these efforts would substantially improve its net crude oil realization. We maintain accumulate with TP of Rs.573 at EV/EBIDTA 5x FY14E,” says Emkay Global Financial Services research report.

Non-Institutions holding more than 90% in Indian cos

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