Motilal Oswal's research report on Oil India
Oil India (OINL) reported lower-than-estimated EBITDA at INR24b (+20% YoY) in 4QFY23 due to higher-than-expected employee benefits and other operating expenses. Oil sales volumes were in line with our estimates at 0.77mmt, while gas sales volumes were 9% below our estimates at 0.59bcm. Net oil realization, after accounting for the impact of windfall tax, came in at USD76.1/bbl for the quarter. Although the Brent price has cooled-off from its peak of ~USD120/bbl in Jun’22 to ~USD80/bbl in 1QFY24, we expect the crude price to remain elevated at ~USD90/bbl during FY24-FY25 amid ongoing geopolitical concerns and active production management by OPEC+. Although the levy of windfall tax by the Center with a fortnightly revision raised concerns on realizations of upstream companies, the govt has adjusted windfall taxes in line with crude oil fluctuations. Our estimate suggests that the govt is allowing a post-windfall realization of USD68-81/bbl and we expect it to remain at ~USD70/bbl for FY24-25. The implementation of the Kirit Parikh Committee’s recommendations from Apr’23 has provided much-needed respite to upstream companies, as they had to sell gas below the cost of production for quite a long time. We build in gas price assumptions of USD6.5/mmBtu for FY24-FY25E.
Outlook
The stock currently trades at a P/E multiple of 6.2x FY24E EPS. We value the stock at 6x FY25E standalone adj. EPS of INR34 and add investments to arrive at our TP of INR330. Maintain BUY.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.