Published on 17/12/2018 10:40:05 AM | Source: Motilal Oswal Securities Ltd

Buy Oil India Ltd For Target Rs.263.00 - Motilal Oswal

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EBITDA growth (albeit in-line) restricted by higher other expenditure

*  Revenue increased 51% YoY (+10% QoQ) to INR37.4b, marginally ahead of our estimate of INR35.7b, led by better-than-expected crude oil production and sales. Crude oil sales/production ratio stood at 97% (our estimate: 98%), while realization came in at USD73.4/bbl (our estimate: USD73.7; +47% YoY, +2% QoQ). EBITDA growth was restricted to 46% YoY (+5% QoQ) (at INR14.7b – in line with our estimate of INR14.7b) due to higher other expenditure of USD9.4/boe (our estimate: USD6.8; 2QFY18: USD4.6; 1QFY19: USD8.8). Other expenditure inched up due to (a) provisions of ~INR1.2b (2QFY18: INR15.1m) and (b) insurance, rent and sundry expenditure of INR2.71b (2QFY18: INR73.8m). PAT of INR8.6b (+33% YoY, +23% QoQ) came in below our estimate of INR9.7b due to lower other income of INR2.9b (our estimate: INR4b; -13% YoY, +127% QoQ).


*  Gross realization was impacted by rising crude oil prices. Production of crude oil stood at 0.86mmt (flat YoY, +1% QoQ) and of gas at 0.7bcm (-9% YoY, +4% QoQ). Total production declined 4% YoY (+3% QoQ) to 1.55mmtoe. Sales of oil stood at 0.83mmt (-1% YoY, +2% QoQ) and of gas at 0.65bcm (+2% YoY, +8% QoQ). Total sales were flat YoY (+5% QoQ) at 1.48mmtoe.


Valuation and view :

We model Brent price at ~USD75/70 bbl and INR/USD at 70.7/73.4 for FY19/20. We expect EPS of INR32.1/30.8 in FY19/20. We believe USD60-70/bbl should not be a concern for return of subsidy regime. Rising gas price would be a positive for the stock. Our SOTP-based fair value stands at INR263 (incl. investment value of IN94). We value OINL at 8x FY20E adj. EPS of INR30.8, and add investments of INR94 in IOCL, NRL and BCPL. The stock trades at 6.5x FY20E EPS of INR30.8. Dividend yield is attractive at ~6%. Maintain Buy


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