Buy Oil India; target of Rs 574: LKP

LKP's research report on Oil India (OIL)

"OIL's Q3FY14 operating profit of Rs 11.7bn was lower than our estimate of Rs 13.5bn on account of lower crude oil sales during the quarter. Net revenue for the quarter stood at Rs 26bn (yoy +8 percent qoq -3.9 percent). OIL's subsidy burden for the quarter decreased by 2.7 percent sequentially to Rs 21.7bn while its net realization declined marginally by 0.4 percent qoq to $52.1/bbl. During the quarter crude oil volumes was affected due to local issues. Resultant, crude oil production declined by 2.5 percent sequentially to 0.881mmt (yoy -2.9 percent) while crude oil sales declined by 3.5 percent qoq to 0.882mmt. Gas sales during the quarter increased by 2.8 percent qoq to 0.545bcm (yoy +1.7 percent). OIL's operating profit for the quarter declined sequentially by 12.1 percent sequentially to Rs 11.7bn. Dry well expense of Rs 368mn during the quarter was significantly lower than Rs 2.78bn in previous quarter. During the quarter interest cost of Rs 330mn consisted of one time upfront fees payment on $250mn ECB borrowing. OIL's net profit of Rs 9bn was lower than our estimate of Rs 10.1bn. We maintain our BUY rating on OIL with a revised price target of Rs 574. At the CMP, the stock is trading at 7.2x and 3x FY15e EPS and EBITDA respectively," says LKP research report.

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