Reduce Indian Oil Corporation; target of Rs 50: Prabhudas Lilladher

Prabhudas Lilladher's research report on Indian Oil Corporation

We maintain our FY23/24E IOCL’s earnings estimate. IOCL reported better than expected Q2 results with standalone EBITDA of Rs19.6bn (+44%QoQ; PLe -Rs 158bn) and PAT of –Rs2.7bn (PLe –Rs198bn), due to receipt of one time grant of Rs108bn towards LPG under recovery for H1FY23. Also lower than expected inventory loss cushioned Q2 performance vs our expectation of Rs160bn loss. We believe OMCs earnings will be hit by sharp jump in diesel marketing losses (current diesel loss at Rs10/litre) given low inventory, gas to oil switch (led by high spot LNG prices) and drop in Russian exports, despite improvement in refining profitability.

Outlook

We maintain ‘’REDUCE” rating given high crude price volatility with PT of Rs50 (unchanged). Any sharp correction in crude prices will be an upside risk to our estimates.