Hold Indian Oil Corporation; target of Rs 124: Prabhudas Lilladher

Prabhudas Lilladher's research report on Indian Oil Corporation

Indian Oil Corporation (IOCL) reported an EBITDA of Rs71.2bn, up 88.6% QoQ (PLe: Rs96.1bn, BBGe: Rs119bn). Adj PAT came in at Rs21.9bn (against adj loss of Rs9.8bn in Q2, PLe: Rs36.1bn, BBGe: Rs67.9bn). There was an exceptional gain of Rs6.8bn for VAT input tax credit. Reported GRM came in at US$2.95/bbl, up 87% QoQ (Ple: US$2.9/bbl). GMM stood at Rs7.1/ltr (PLe:Rs6.4/ltr). In Q4- TD, average Singapore GRM has declined to below US$2.5/bbl amid decline in product cracks, and gross margin on petrol/diesel too has moderated to Rs10.8/6.4/ltr.

Outlook

However, we expect it to rebound to the long-term average of US$5-7/bbl in the medium term, and build in a GRM of US$4/6/6/bbl for FY25/26/27E. On the marketing front, we build in a GMM of Rs5.4/4.3/4.3/ltr for FY25/26/27E. We maintain ‘HOLD’ rating on the stock with a TP of Rs124 based on 0.8x avg FY27E P/BV.