HDFC Securities is bullish on Oil India has recommended buy rating on the stock with a target price of Rs 225 in its research report dated August 13, 2019.
HDFC Securities' research report on Oil India
OIL reported net revenue of Rs 33.73bn, up 9.3% QoQ owing to 4.6% increased in crude oil sales volumes and 6.0% jumped in crude oil realisation. EBITDA increased 25% QoQ to Rs 13.53bn while APAT increased 30.3% to Rs 6.25 bn. Oil price realisation was USD 66.3/bbl (-7.9/+7.4% YoY/ QoQ). Gas price realisation was USD 3.6/mmbtu, +21.6/10.6% YoY/QoQ. Oil sales volume was up 0.2/4.6% YoY/QoQ to 0.81mmt. Gas sales volume was 0.61bcm, +2.7/-1.1% YoY/QoQ. There was no subsidy burden in the quarter. Crude oil and natural gas production volumes will increase at 3.0% and 2.0% CAGR over FY19-22E. The surge in oil supply from US coupled with fall in global oil demand owing to trade war between US-China will result in subdued oil prices in the near term. Thus, we expect oil realisation to fall from USD 66.33/bbl in 1Q to USD 61/bbl in FY21.
We maintain BUY on Oil India post an in-line 1QFY20. Although we do agree that there are concerns over lack of production growth for OIL, we think that the current valuations (2.3x FY21 EV/EBITDA and 4.7x FY21 PER) indicate strong pessimism.
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