Reduce Indian Oil Corporation; target of Rs 151: Prabhudas Lilladher

Prabhudas Lilladher's research report on Indian Oil Corporation

Indian Oil Corporation’s (IOCL) Q4 EBITDA stood at Rs104.4 bn (down 33% QoQ, PLe: Rs145bn, cons est: Rs156bn) and PAT at Rs48.4 bn (down 40% QoQ, PLe: Rs66.9bn, cons est: Rs73.5bn). The weak set of results was primarily on account of lower refining margins although gross marketing margins remained moderate. Refining capacity utilization stood at 104.5%. IOCL declared a final dividend of Rs7/share. The stock is currently trading at 1.2x FY26 P/BV and 12.3x FY26 EPS.

Outlook

Factoring in structural weakness in GRMs and inability to pass on rise in fuel cost we anticipate GRMs at US$6/bbl for FY25/26E and gross marketing margin at Rs 4.2/ltr for FY25/26E. We rerate the stock from ‘Sell’ to ‘Reduce’ due to correction in stock price rating with a TP of Rs 151 based on 1x FY26E P/BV.