Hold Indian Oil Corporation; target of Rs 156 Prabhudas Lilladher

Prabhudas Lilladher recommended hold rating on Indian Oil Corporation with a target price of Rs 156 in its research report dated October 29, 2024.

Broker Research

October 29, 2024 / 11:40 IST

Hold

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Prabhudas Lilladher's research report on Indian Oil Corporation

Indian Oil Corporation (IOCL) reported a weak Q2 with EBITDA of Rs37.7bn (down 56.3% QoQ, PLe: Rs85.5bn, BBGe: Rs94bn). Reported PAT came in at Rs1.8bn (down 93.2% QoQ, PLe: Rs30.4bn, BBGe: Rs31.4bn). There was an exceptional gain of Rs11.6bn for VAT Input Tax Credit. Adj loss stood at Rs9.8bn. Sequential decline in earnings was majorly due to lower GRMs. Capacity utilization stood at 94.5%. Reported GRM came in at US$1.6/bbl, while gross marketing margin stood at Rs5.8/ltr in Q2. The stock is currently trading at 1/1x FY25/26 P/BV. Although average Singapore GRM is ~US$3/bbl, we expect it to rebound to the long term average of US$5-7/bbl and build in a GRM of US$4.7/6/6/bbl for FY25/26/27E.

Outlook

On the marketing front, we build in a gross marketing margin of Rs 6/4.2/4.2/ltr for FY25/26/27E. We re-rate the stock from ‘Reduce’ to ‘Hold’ post correction in stock price with a TP of Rs156 based on 1x avg FY26-27E P/BV.

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