KR Choksey is bullish on Indian Oil Corporation has recommended buy rating on the stock with a target price of Rs 185 in its research report dated May 21, 2019.
KR Choksey's research report on Indian Oil Corporation
Revenues came in at INR 1,262.1 bn, up 7.6% YoY declining QoQ by 9.8% due to lower throughput QoQ of 17.35 MMT (18.9 MMT in QFY19 and 17.2 MMT in Q4FY18). Gross margins improved significantly QoQ (+870 bps) to 17.7% (-155 bps YoY) on the back of inventory gains of INR 5.95 bn as against inventory losses of INR 49.5 bn in Q3FY19. GRM for the quarter came at 4.09/bbl v/s $9.12/bbl in Q4FY18 due to weak light and middle distillate spreads. Employee expenses increased by 32.3% QOQ (-1.4% YoY) due to one-time contribution for super-annuation benefit scheme, while other expenses also increased by 25.8% QoQ, although it was negated to some extent by forex gains of INR 8.4 bn as v/s forex losses of INR 6.7 bn in Q4FY19 leading to an operational performance with OPM at 8.6% (-73 bps YoY, +604 bps QoQ). EBITDA stood at INR 108.7 bn (-0.9% YoY, +201.3% QoQ). Finance cost increased by 46.7% QoQ (-0.4% YoY) while other income increased by 139.1% QoQ (+327% YoY) leading to PAT at INR 61.0 bn with NPM of 4.8% (+38 bps YoY, +432 bps QoQ). The board has declared a final dividend of INR 1/share on a FV of INR 10.
We maintain our EV/EBITDA-based multiple target price of INR 185 (potential upside – 17.8%). We maintain BUY rating on the stock.
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