Buy Oil India; target of Rs 720: Motilal Oswal

Motilal Oswal's report on Oil India

"Oil India reported 2QFY15 EBITDA at INR7b (v/s adj. est INR8.5b; -47% YoY, -37% QoQ). Quarterly results are not indicator of full year results due to ad-hoc subsidy. While the adj. net sales was marginally lower than est at INR20.8b (adj. est INR21.8b; -23% YoY, -17% QoQ); EBITDA was significantly lower due to higher other expenditure."

"To watchout for subsidy sharing rationalization and production trend. Upside risk to our estimates remain from lower subsidy sharing and further benefit from likely LPG reforms. We value OINL at INR720/sh based on average of three methodologies: P/E of 10x FY16E, 5x FY16E EV/EBITDA and DCF (WACC of 12%). The stock trades attractively at 7.7x FY16E EPS of INR77.3 and has an implied dividend yield of 4-5%. Buy the stock with a target price of Rs 720", says Motilal Oswal research report.

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