Sharekhan's research report on Indian Oil Corporation
Q1FY23 net loss of Rs. 1993 crore was much higher than ours/street’s estimates on a larger-than-expected marketing loss and weak performance of petchem segment (EBIT fell 53% q-o-q) offsetting best-ever refining performance. Large negative auto fuel marketing margin continued to dent marketing performance and offset benefit of all-time high reported GRM of $32/ bbl. Volume performance was mixed as refinery throughput/marketing volumes rose 4%/6% q-o-q, while petchem volumes plunged by 17% q-o-q. We believe that H2FY23 would factor in the worst for OMCs and gradual petrol/diesel prices hikes hike coupled with likely normalisation of refining margins would drive an earnings recovery in H2FY23-FY24.
We maintain a Buy on IOCL with a revised PT of Rs. 82 (lowered PT to reflects a cut in PE multiple given a sharp fall in refining margins) on inexpensive valuation of 4.2x/0.7x FY24E EPS/BV and FY24E dividend yield of 12%.
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