HDFC Securities is bullish on Oil India has recommended buy rating on the stock with a target price of Rs 234 in its research report dated May 28, 2019.
HDFC Securities' research report on Oil India
FY19, revenue was up 28.9%YoY to Rs 137.35bn owing to 33% jump in oil price realisation to Rs 4,783/bbl and NG realisation was up 14.9% YoY to USD3.1/mmbtu. Crude oil sales volumes were down 8% YoY to 3.06mmt. Q4FY19 crude oil sales volumes were 0.777 mmt (-6.6% YoY and -4.5% QoQ). Sales were low owing to planned shutdown of IOCL’s Guwahati refinery. Net oil realisation came in at Rs 4,353/bbl (+4.2% YoY and - 9.4% QoQ). For FY19, volumes were at 3.233 mmt (- 4.7% YoY). The refinery is now back in operation and started receiving crude from Oil India, thus volumes are restored. Gas sales volumes in Q4 were 0.620 bcm (+6.3 YoY and -4% QoQ). Gas realisation was up 13.7% YoY to USD 3.22/mmbtu. For the full year, volumes were 2.51 bcm (+3.9% YoY) and realisations at USD3.07/mmbtu. The company has made a one-time provision of Rs 10.26bn towards contribution to Employee Pension Scheme. It has been disclosed as an exceptional item in the P/L. As a result OIL reported a loss of Rs2.09 in 4Q. Adjusting for this one-off, the PAT stood at Rs4.79bn. Near-term outlook: OIL’s stock performance will move in tandem with the crude prices. We do not expect sharp fall in crude prices considering the talks between OPEC and Russian oil producers.
We agree that there are concerns over lack of production growth for OIL, however we think that the current valuations (3.8x FY21 EV/EBITDA and 6.5x FY21 PER) indicate strong pessimism.
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