Prabhudas Lilladher's research report on Indian Oil Corporation
We lower our FY23/24/25E earnings estimate by 82.5%/+2.7%/+3.1% to factor in weak petchem performance (9MFY23 EBIT loss Rs4.7bn), lower Chennai petro results and higher cost. Indian Oil Corporation (IOCL) reported better than expected Q3 results with standalone EBITDA of Rs35.9bn (+83%QoQ; PLe Rs27.5bn) and PAT of Rs4.5bn (PLe –Rs7.5bn), due to lower marketing losses. Sharp correction in international diesel prices ~$115 from recent peak of USD170/bbl improved marketing segment’s profitability. Also, ban on import of Russian oil product from Feb-23 will support refining product spreads. Further, global recessionary pressure along with high interest rates will keep oil prices range bound, despite increased demand from China.
We believe OMCs are well placed to benefit from improving marketing and healthy refining profitability. Maintain ‘BUY’ at PT of Rs125 (Rs130) based on 7x EV/E FY24E.
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