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Earnings miss on higher opex; despite better crude volume and realisation

Oil India’s 4QFY25 standalone EBITDA at INR 21.3bn was lower than JMFe/consensus of INR 24.8bn/ INR 22.7bn due to: a) higher other expense at INR 8.4bn (vs JMFe and historical average run-rate of ~INR 5bn); b) higher contract cost at INR 6.1bn (vs JMFe of INR 4.8bn and INR 5.1bn in 3QFY25). This is despite crude sales volume was 4% above JMFe (though production in-line) and crude realisation also tad higher. NRL’s 4QFY25 GRM was strong at USD 9.3/bbl (before excise duty benefit), resulted in significantly higher EBITDA at INR 10bn. Consolidated EBITDA was also lower at INR 28.6bn in 4QFY25 (vs INR 28.1bn in 3QFY25) despite higher EBITDA from NRL. Consolidated FY25 EPS is INR 40.3/share. We maintain BUY (unchanged TP of INR 500) based on our Brent crude price assumption of USD 70/bbl (while CMP is discounting ~USD 60/bbl of net crude realisation). Further, Oil India’s earnings is likely to grow at a robust ~16% CAGR over the next 3-5 years driven by: a) sharp 20-30% output growth in next 2-3 years aided by commissioning of Indradhanush gas pipeline; and b) expansion of NRL refinery from 3mmtpa to 9mmtpa. At CMP, Oil India trades at 6.3x FY27E EPS and 1.1x FY27E BV.

* Standalone EBITDA lower than JMFe/consensus due to higher other expense and contract cost, despite crude sales volume 4% above JMFe & tad higher realisation: Oil India’s 4QFY25 standalone EBITDA at INR 21.3bn was lower than JMFe/consensus of INR 24.8bn/ INR 22.7bn due to: a) higher other expense at INR 8.4bn (vs JMFe and historical average run-rate of ~INR 5bn); b) higher contract cost at INR 6.1bn (vs JMFe of INR 4.8bn and INR 5.1bn in 3QFY25). This is despite crude sales volume was 4% above JMFe (though production in-line) and crude realisation also tad higher. Hence, PAT at INR 15.9bn, was also lower than JMFe/consensus of INR 17.1bn/INR 16.4bn) aided by lower other income (at INR 6.6bn vs JMFe of INR 8bn). Standalone 4QFY25 EPS is INR 9.8/share; while FY25 EPS is INR 37.6/share. Consolidated EBITDA was also lower QoQ at INR 28.6bn in 4QFY25 (vs INR 28.1bn in 3QFY25) despite higher EBITDA from NRL. Consolidated PAT was also lower at INR 13.1bn. Consolidated FY25 EPS is INR 40.3/share. The board approved final dividend of INR 1.5/share; this takes total FY25 dividend to INR 11.5/share (or ~31% payout on FY25 standalone EPS of ~INR 37.6/share) vs dividend of INR 10.5/share paid in FY24 (31% payout of FY24 standalone EPS).

* Crude sales volume 4% above JMFe (though production in-line) while crude realisation also tad higher; gas sales volume and realisation in-line: In 4QFY25, crude sales volume was 4% above JMFe (at 0.85mmt, up 2.8% QoQ and up 1% YoY) though crude production was largely in-line with JMFe (at 0.844mmt, down 2.8% QoQ and down 0.5% YoY) as sales as % of production rose to 100.5% vs historical 97-99%. Further, computed net crude realisation was slightly higher at USD 72.0/bbl vs JMFe of USD 71.8/bbl. However, gas sales volume was largely in-line with JMFe (at 0.67bcm, down 2.5% QoQ but up 2.3% YoY) as gas production was also in-line with JMFe (at 0.84bcm, down 2.8% QoQ and down 0.5% YoY). Domestic gas realisation was also in-line at USD 6.7/mmbtu.

* NRL’s 4QFY25 GRM strong at USD 9.3/bbl (before excise duty benefit), resulted in significantly higher EBITDA at INR 10bn: NRL’s GRM (before excise duty benefit) was significantly above JMFe at USD 9.3/bbl in 4QFY25 (vs. USD 2.1/bbl in 3QFY25); crude throughput was in-line at 810tmt or 108% utilisation (and vs. 808tmt in 3QFY25). Hence, NRL’s EBITDA was significantly higher at INR 10bn in 4QFY25 vs JMFe of INR 6.3bn (and vs. INR 6.6bn in 3QFY25); hence, PAT was also significantly higher at INR 6.2bn vs JMFe of INR 3.7bn (and vs. INR 3.9bn in 3QFY25).

* Maintain BUY on expectation of crude stabilising ~USD 70/bbl and CMP discounting ~USD60/bbl: We have cut our FY26 and FY27 EBITDA by 1-2%, accounting for 4QFY25 results; however, our TP remains unchanged at INR 500, aided by an increase in the value of listed investments (which is valued at CMP less 20% holding discount). We reiterate BUY (unchanged TP of INR 500) based on our Brent crude price assumption of USD 70/bbl (while CMP is discounting ~USD 60/bbl of net crude realisation). Further, Oil India’s earnings is likely to grow at a robust ~13% CAGR over the next 3-5 years driven by: a) sharp 20-30% output growth in next 2-3 years aided by commissioning of Indradhanush gas pipeline; and b) expansion of NRL refinery from 3mmtpa to 9mmtpa (given the management guidance of excise duty benefits continuing for the expanded capacity as well). Every USD 7/bbl rise/fall in net crude realisation results in increase/decrease in our EPS and valuation by ~8-9% — Exhibit 8-9. Further, Oil India is also a robust dividend play (4-5%). At CMP, Oil India trades at 6.3x FY27E EPS and 1.1x FY27E BV.

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