Buy Oil India target of Rs 165: Sharekhan

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Sharekhan's research report on Oil India

Q3FY20 adjusted PAT of Rs. 401 crore (down 67.5% y-o-y) was substantially below our estimates due to a sharp miss in oil & gas sales volume, lower-than-expected other income and a higher-than-expected effective income tax rate. A sharp decline of 11% y-o-y in oil sales volume to 0.7 mmt and a fall of 7.4% y-o-y in gas sales volume to 0.6 bcm as production was affected by protests in Assam; net oil realisation stood at $63/bbl (marginally ahead of our estimate). We have cut our FY2020-FY2021 earnings estimates by 13%-23% to factor lower oil & gas realisation and sales volume.

Outlook

We maintain our Buy rating on Oil India with a revised SoTP-based PT of Rs. 165 given an attractive valuation of 6.1x its FY22E EPS (29% discount to historical average one-year forward PE multiple) and a high dividend yield of 7-8%.

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