Buy Indian Oil Corporation; target of Rs 207 Prabhudas Lilladher

Prabhudas Lilladher's research report on Indian Oil Corporation

We maintain our FY20/21E earnings. During Q4, core performance for IOCL improved led by better marketing performance. Benign crude price outlook given rising US supplies and weak global macros is likely to keep marketing margins buoyant. Oil prices likely to remain benign, as rising US supplies cushions the impact of supply disruptions of over 3mbpd. Weak global macros and US-China trade dispute will prevent crude prices flare-up. Also, completion of Central elections is likely to ease policy overhang. Maintain ACCUMULATE.

Outlook

For FY19, EBIDTA was at Rs338.2bn (-15%YoY) due to lower inventory gains of Rs41.7bn (Rs67.6bn in FY18) and weak GRMs of US$5.4/bbl vs US$8.5/bbl in FY18. PAT for FY19 was at Rs169bn (-21%YoY).