Buy IOCL; target of Rs 95: Motilal Oswal

Motilal Oswal's research report on IOCL

IOCL reported an EBITDA of INR19.6b (-82% YoY) ahead of our estimate of an operating loss of INR90b. The beat in EBITDA was fueled by strong reported GRM at USD19.2/ bbl (v/s our estimate of USD8.9/ bbl and USD31.8/bbl in 1QFY23). In the refining segment, throughput came in at 16.1mmt (+5% YoY), broadly in line with our estimate (of 17mmt). In the marketing segment, domestic sales volumes stood at 19.9mmt (in line with our estimate of 19.1mmt; v/s 21.3mmt/17.1mmt in 1QFY23/2QFY22). However, OMCs are estimated to have generated losses of INR1.2/INR12.4 per liter on petrol/diesel, respectively, in 2QFY23.

Outlook

IOCL is likely to benefit the most among its peers from an uptick in refining margin, further supported by robust petchem margin. We value the stock at 0.9x FY24E P/BV to arrive at our target price of INR95. Maintain BUY.