Maharatna oil and gas giant, Oil India is set to reward investors with double treats. Firstly, the company has declared bonus shares with a 1:2 ratio after 6 years, while it will also pay a hefty dividend of Rs 3.75 per share. The record dates for these two corporate actions are yet to be announced. Brokerage JM Financial has maintained BUY on Oil India as it plays on a sustained high crude price scenario and strong earnings growth from NRL.
Oil India Share Price:
This oil producer's stock price touched a new 52-week high of Rs 674.50 apiece on May 22 before correcting and ending in the red zone. The stock ended at Rs 656.70 apiece, down by 1.08% on Wednesday with a market cap of Rs 71,212.89 crore.
YTD, the stock has surged by 74%, while in a year the stock is up by 144%.
Oil India Bonus Issue:
After 6 years of gap, PSU giant, Oil India is back with free additional shares. Oil India suggested a bonus issue in the ratio of 1:2 which means that Oil India will issue a free 1 share on every 2 existing shares held by investors.
For the same, Oil India has fixed Tuesday, 02nd July 2024 as the Record Date to determine the eligibility of shareholders to receive bonus shares. Further, the company plans to dispatch the bonus shares on or before July 18, 2024.
The bonus issue will be executed from the company's free reserves to Rs 542.20 crore.
Oil India has already rewarded its investors with up to 5 additional shares free of cost in over 12 years. The last time the company delivered the bonus issue was 1:2 in March 2018. Before this, Oil India paid bonus shares of 1:3 in January 2017, and or 3:2 in March 2012.
Oil India Dividend:
Apart from the bonus issue, Oil India's board recommended a final dividend of Rs 3.75 per share having a face value of Rs 10 each (pre-bonus), which translates into a final dividend of Rs. 2.50 per equity share having a face value of Rs. 10/- each (post-bonus) for the financial year 2023-24.
The record date for the final dividend will be announced in due course.
Also, the final dividend is in addition to the Interim Dividend of Rs. 3.50/- (pre-bonus) and the second Interim Dividend of Rs. 8.50/- (pre-bonus) paid for the financial year 2023-24.
Oil India Earnings:
On the strength of sound operating performance reflected in the highest ever O+OEG production of 6.54 MMTOE, the company registered the highest ever EBIDTA of Rs 11,643.30 crore for FY24. The company also recorded the highest-ever profit after tax for Q4 FY24 at Rs 2,028.83, an increase of 13.45% over Q4 FY23.
The PAT of the company for FY 2023-24 decreased to Rs 5,551.85 crore vis-à-vis Rs 6,810.40 crore for FY 2022-23 due to the provisions made for statutory compliances.
BUY Oil India:
In its research note, JM Financial said, "We have raised FY24-25 consolidated EBITDA estimate by 5-7% factoring in 2-3% increase in crude and gas sales volume; however, conservatively, our FY26 gas output is still significantly lower at 3.7bcm vs. management guidance of 5bcm while FY26 crude output is still lower at 3.7mmt vs. management guidance of 4.2mmt."
Further, it added, "Our TP has been revised to INR 725 (from INR 650) based on unchanged 6x FY26 PE for Standalone E&P business and 7.5x FY26 PE for NRL."
Accordingly, JM's note said, "We maintain BUY as CMP is discounting ~USD 65/bbl of net crude realisation while our TP is based on net crude realisation of USD 70/bbl; further Oil India's earnings growth over the next 3-5 years is likely to be aided by 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 5/bbl rise/fall in net crude realisation results in an increase/decrease in our EPS and valuation by 4-6%. Further, Oil India is also a robust dividend play (4-5%). At CMP, Oil India trades at 8.0x FY26E EPS and 1.1x FY26E BV," JM's note finally said.
Disclaimer: The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on the stock mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.
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