Company Update : IOCL Ltd By Motilal Oswal Financial Services Ltd
Robust refining and marketing performance leads to outperformance vs. estimates
* IOCL’s 4QFY25 EBITDA was a 110% beat on the estimate, driven by higher-than-estimated GRM (USD8/bbl) as well as marketing margins (INR5.9/lit). With the tax rate coming in below estimates, the resultant PAT stood 5x above the estimate at INR72.6b.
* In 4Q, LPG under-recovery amounted to INR55b (similar QoQ). Effective 8 th Apr’25, the price of LPG cylinders has been hiked by INR50 for both subsidized and non-subsidized users. On the same date, the government also raised excise duty on both Petrol (MS) and Diesel (HSD) by INR2/lit.
* Singapore’s GRM averaged USD3.7/bbl in Apr’25 (vs. USD3.2/bbl in 4QFY25). We have a bearish stance on refining for FY26-1HFY28 amid strong ~2.5-3mb/d net refinery capacity additions globally over CY24- 26, coupled with demand concerns stemming from rising trade tensions and the possibilities of a global macro-economic slowdown. Even after excise duty hikes, current MS/HSD marketing margins continue to average above INR10/lit.
* IOCL currently trades at 1x one-year forward P/B, at par with its 10- year average P/B. We have a Buy rating on IOCL.
* Reported GRM came in sharply above our estimate at USD8/bbl; refining inventory gains stood at USD2.6/bbl during the quarter.
* Marketing margin stood at INR5.9/lit, 25% above estimates.
* Marketing and refining throughput came in line with our estimate.
* However, the petchem segment’s EBIT loss stood at INR2.1b (vs. EBIT loss of INR1.5b in 3QFY25).
* EBITDA was 110% above our estimate at INR135.7b (up 27% YoY).
* Additionally, an LPG under-recovery of INR55b was booked in 4Q (INR54.6b in 3Q).
* Reported PAT came in at INR72.6b (our est. of INR12.1b).
* Tax rate, other income, and interest expense came in below our estimates.
* As of Mar’25, IOCL had a cumulative negative net buffer of INR199.3b due to the under-recovery on LPG cylinders (INR143.3b as of Dec’24).
* In FY25, net sales were similar YoY at INR7.6t, while EBITDA/APAT declined 50%/72% YoY to INR356b/INR111b.
* The Board has recommended a final dividend of INR3/sh (FV INR10/sh).
* Moreover, an upward revision of INR29.5b has been approved for Barauni Refinery expansion projects (from 6mmtpa to 9mmtpa). The revised capex now amounts to INR167.24b.
* The Board has also approved an additional equity investment of INR10.9b in its wholly owned subsidiary, Terra Clean Limited, for setting up an additional 4.3 GW RE capacity, over and above the already approved 1 GW RE capacity. This brings the total equity investment in Terra Clean Limited to ~23.9b
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