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Turns ex-bonus today…

About the stock: Indian Oil Corporation (IOC) is India’s largest refining & marketing company with an installed refining capacity of ~70 MMT.

* IOC operates 32062 retail outlets as of end of FY21

* Petrol and diesel together historically constitute ~52% of marketing sales

IOC turns ex-bonus today:

* The company had made an announcement regarding bonus issue on May 17. Issue of bonus shares is in the ratio of 1:2 i.e. one new bonus equity share each for every two existing equity shares

* Ex-bonus date is today i.e. June 30 and record date for the same is July 1. Accordingly, the share price has been adjusted to opening price of | 73/share against closing price of | 110/share yesterday

* Hence, we revise our target price to | 85/share post this corporate action. We maintain our HOLD rating on the stock and value IOC at an average of P/E multiple: | 89/share and P/BV multiple: | 81/share

Key triggers for future price performance:

* Global product cracks sustaining at higher level

* Passing on higher retail prices of petrol & diesel to customers (due to higher crude oil costs)

* Pipeline segment profitability has been consistent over the last few years

* Consistent dividend payout

Rating Rationale

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