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.
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.
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