Buy Oil India: target of Rs 250: Sharekhan
Sharekhan is bullish on Oil India has recommended buy rating on the stock with a target price of Rs 250 in its research report dated September 15, 2021.
September 16, 2021 / 02:25 PM IST
"India’s specialty chemicals industry is a decadal growth opportunity and it is still not too late to participate in the value creation process. We prefer CRAMS/CSM players Navin Fluorine (Navin) and PI Industries (PI) as they provide long-term earnings visibility. We also like UPL due to robust growth outlook and reducing debt concerns and SRF due to rising contribution from the chemicals business," JM Financial research report.
Sharekhan's research report on Oil India
Oil India Limited’s (OIL) business fundamentals have turned positive with Brent oil prices at ~$74/bbl and a sharp rise in international gas prices. We expect standalone PAT to clock a CAGR of 34% and RoE to improve to 11.3% over FY21-24E. Increase in Numaligarh Refinery Ltd (NRL) stake is earnings accretive as GRMs would remain strong given excise duty benefit and 3x expansion in refinery capacity to create long-term value for OIL. The management expects combined oil & gas production to grow by 6-7% annually in the long term, but we believe majority of production growth to be back-ended and model an oil/gas production CAGR of 2%/4% over FY21-24E. Robust earnings recovery and dividend yield of ~6% makes risk-reward favourable.
Hence, we upgrade OIL to Buy from Hold with a revised SoTP-based PT of Rs. 250. OIL is trading at 3.7x its FY23E EPS (including earnings contribution from NRL).
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