ICICI Direct recommended hold rating on Indian Oil Corp with a target price of Rs 150 in its research report dated August August 01, 2019.
ICICI Direct's research report on Indian Oil Corp
Indian Oil Corporation (IOC) reported its Q1FY20 results that were above our estimates on the profitability front mainly on account of higher GRMs and better-than-expected performance in the marketing segment. Reported GRMs were at US$4.7/bbl, above our estimate of US$3.2/bbl during the quarter due to inventory gains of US$1.1/bbl vs. expected loss of US$0.3/bbl. Revenues increased 3.9% QoQ to Rs 150135.2 crore on account of higher average oil prices. On account of inventory gains and better marketing segment performance, EBITDA was at Rs 8350 crore (down 23.2% QoQ) above our estimate of Rs 5029.8 crore. On the profitability front, reported PAT was at Rs 3596.1 crore, above our estimate of Rs 1703.7 crore. The company is currently trading at ~6% dividend yield on FY20E earnings.
We are neutral on IOC at the current juncture given the volatility in global GRMs and uncertainty on the company’s ability to pass on costs to customers during high oil prices. IOC’s marketing margins and trend in refining margins will determine it’s near term performance. We have a HOLD recommendation on the stock with a target price of Rs 150.
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