ICICI Direct recommended hold rating on Indian Oil Corporation with a target price of Rs 170 in its research report dated May 21, 2019.
ICICI Direct's research report on Indian Oil Corporation
Indian Oil Corporation (IOC) reported its Q4FY19 results that were above our estimates on the profitability front mainly on account of a better-than-expected performance in the marketing segment. However, reported GRMs disappointed and were at US$4.1/bbl below our estimate of US$6.8 /bbl during the quarter on a weak operational performance. Revenues declined 9.8% QoQ to Rs 144472.3 crore on account of lower throughput as well as average oil prices. On account of healthy numbers from the marketing segment, EBITDA increased to Rs 10877.6 crore above our estimate of Rs 8315.1 crore. On the profitability front, reported PAT was at Rs 6099.3 crore above our estimate of Rs 4185.3 crore. The company is currently trading at a dividend yield of ~6% taking into account dividend of FY19.
We are neutral on IOC at the current juncture given the volatility in oil prices and intention of the new government to pass on costs to consumers when oil prices are high. IOC’s ability to maintain normal marketing margins and trend in refining margins will determine its near term performance. We have a HOLD recommendation on the stock with a target price of Rs 170 (based on average of P/BV multiple: Rs 164/share and P/E multiple: Rs 176/share).
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