Maharatna PSU oil and gas giant, Indian Oil Corporation (IOCL) witnessed huge buying sentiment on Thursday, so much so that its share price rallied by at least 3.2% hitting an intraday high of Rs 174.50 apiece. The bull run comes despite Indian Oil missing its EBITDA estimates in Q4FY24 due to weaker refining on the back of inventory losses. However, the positives were that IOCL's marketing business stayed steady, and post-election cycle, this will improve further. Also, IOCL has declared a hefty dividend of Rs 7 per share or 70%. Post Q4, IOCL is recommended to buy/add by 5 brokerages with the highest target price at Rs 205.
IOCL Share Price:
On BSE, at the time of writing, IOCL's share price is at Rs 172.95 apiece, up by 2.4% with a market cap of Rs 2,44,368.03 crore. The stock has touched an intraday high of Rs 174.50 apiece with gains of 3.2% so far in the trading session.
IOCL's 52-week high and low are at Rs 196.80 apiece and Rs 81.40 apiece respectively.
YTD, IOCL shares are up by 33%, while in a year, the stock zoomed by 111%.
IOCL Dividend, Other Rewards:
The largest OMC has recommended a final dividend of 70% for the year 2023-24 i.e. Rs. 7.00 per equity share of the face value of Rs.10/- each on the paid-up share capital, subject to the approval of the shareholders at the ensuing Annual General Meeting (AGM) of the Company.
In its filing, IOCL said, "The final dividend would be paid within 30 days from the date of declaration at the AGM. The record date for payment of the final dividend would be fixed and intimated in due course.
Earlier, for FY24, the company delivered dividends up to 50% amounting to Rs 5 per share. The total dividend payout for FY24 will be up to 120% amounting to Rs 12 per share, which will be the highest payout by IOCL ever.
In FY23 and FY22, IOCL paid final dividends each of 30% (Rs 3 per share) and 24% (Rs 2.4 per share) respectively.
As per Trendlyne data, IOCL has delivered as much as 38 dividends since August 2001.
On the current market price, it has a dividend yield of 4.60%.
Among other corporate actions, IOCL has also delivered bonus shares. Since 2003, IOCL has distributed an additional 5 shares on existing shares in terminals. The first bonus issue was 1:2 in August 2003, followed by 1:1 bonus issue each in October 2009, October 2016, and March 2018. The last bonus issue was in July 2022 at 1:2.
IOCL Earnings:
IOCL's earnings declined across major parameters in Q4FY24. Consolidated PAT was down to Rs 5,487.92 crore, from Rs 10,841.23 crore in Q4FY23 and Rs 9,224.85 crore in Q3FY24, Meanwhile, consolidated revenue stood at Rs 2,23,649.85 crore, as against Rs 2,30,711.56 crore in Q4FY23 and Rs 2,26,892.08 crore un Q3FY24.
Average Gross Refining Margin (GRM) for the year April- March 2024 is $12.05 per bbl (April- March 2023: $19.52 per bbl). The core GRM or the current price GRM for the year April - March 2024 after offsetting inventory loss/ gain comes to $11.44 per bbl.
Nonetheless, IOCL also revealed that it announced a historic financial performance for the fiscal year 2023-24, marking a significant milestone in the company's over six-decade-long journey. Demonstrating an exceptional year, India recorded a net profit of 239,619 crores, the highest ever in the company's history and over four-fold increase from the net profit of 8,242 crores in the previous year.
This remarkable achievement is supported by a stellar operational performance across business verticals. The company achieved its highest-ever sales volume reaching 97.551 million tonnes of products. Its refining throughput soared to 73.308 million tonnes, coupled with a throughput of 98.626 million tonnes achieved through an extensive 19,500+ km pipelines network across the nation, it said.
Looking ahead, Indian Oil aims to strengthen EV mobility infrastructure by setting up of charging points and battery-swapping facilities at its fuel stations. The company has also signed a binding term sheet with Panasonic Group company for formation of a JV for manufacturing cells in India. This venture will meet the expanding demand for Lithium-ion for mobility applications and energy storage systems in India.
These investments are aimed at diversifying the company's energy mix and supporting India's green energy transition. Setting new benchmarks of excellence, IndianOil remains dedicated to delivering comprehensive energy solutions that propel the nation forward, the company said.
BUY/SELL IOCL Share Price:
In its research note, Motilal Oswal aid that IOCL is set to commission various projects over the next two years, driving further growth. Refinery projects, currently under way, are expected to be completed as follows: Panipat refinery (25mmtpa) by Dec'25, Gujarat refinery (18mmtpa) by Oct'24, and Baruni refinery (9mmtpa) by Dec'24.
IOCL has the highest leverage in the refining segment among its peers and is most likely to be susceptible to changes in SG GRM, as per Motilal.
Accordingly, Motilal's note said, "The stock trades at 12.4x consolidated FY26E EPS of INR13.6 and 1.1x FY26E P/B. We reiterate our BUY rating on the stock, valuing it at 1.3x FY26E P/B to arrive at our TP of INR195."
Moreover, Emkay Global has advised investors to add this stock for post-election gains.
Emkay's note said, "IOCL's SA adj. EBITDA missed estimates by 27% at Rs107.5bn in Q4FY24, due to weaker refining on the back of inventory losses (~USD2.0/bbl vs. nil est.), as well as core GRM coming in at USD10.6/bbl vs. USD13.0 (Emkay est.). Marketing segment posted steady performance, despite Rs10.2bn negative LPG buffer with seemingly better core marketing margin (inv. loss not known) partly offset by higher opex."
Emkay added, "Domestic sales grew 3% YoY, while diesel was down 5% (vs. industry's +4%). Petchem EBIT losses expanded to Rs4bn vs. Rs2bn QoQ, due to weak deltas. Net debt grew 10% QoQ to Rs1.09trn, but bettering our estimate. Post-election cycle, we expect OMCs' marketing business to improve as price action resumes, supporting healthy margins."
Hence, on the valuation, Emkay said, "We slightly tweak FY25-26E EPS by 2-3% each and revise Mar-25E TP by 13% to Rs180/sh; retain ADD."
In addition, CITI has maintained BUY on IOCL for the highest target of Rs 205 per share with a positive outlook. Also, holding a positive outlook, Nuvama suggested buying IOCL shares for the target of Rs 195 apiece.
On the other hand, Kotak Institutional Equities has recommended SELL, and Prabhudas Lilladher has suggested REDUCE rating on IOCL shares.
Kotak's note said, "OMCs are currently incurring under-recoveries on both petrol and diesel, while we expect OMCs to be able to recoup marketing margins on auto fuels post-general elections, we lower our FY2025E auto fuel marketing margin assumption to Rs3/l (from Rs3.5/l earlier) on likely losses in 1QFY25. As a result, our FY2025E EBITDA is lower by 9%. Our FY2026E marketing margin assumptions remain unchanged at Rs3.5/l, but our EBITDA is lower by marginal ~2% on higher opex."
Thereby, Kotak added, "Driven by a marginal cut in EBITDA and higher debt estimate, we lower our FV for IOC to Rs105 (Rs115 earlier). Our biggest concern on OMCs, has been the lack of pricing power on retail fuels. We reiterate SELL on IOC."
Finally, Prabhudas Lilladher's note said, "The stock is currently trading at 1.2x FY26 P/BV and 12.3x FY26 EPS. Factoring in structural weakness in GRMs and inability to pass on rise in fuel cost we anticipate GRMs at US$6/bbl for FY25/26E and gross marketing margin at Rs 4.2/ltr for FY25/26E. We rerate the stock from 'Sell' to 'Reduce' due to correction in stock price rating with a TP of Rs 151 based on 1x FY26E P/BV."
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.
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