Demand Rising, Buy This Oil Stock For 28.80% Upside, In 1 Year: Emkay Global

Brokerage firm Emkay Global recommended investors buying the stocks of Indian Oil (IOCL) for a 28.80% upside. The firm said, "We retain Buy on IOCL on the back of attractive valuations and a dividend yield of 7%-8%."

Target Price

The Current Market Price (CMP) of IOCL is Rs. 124. Emkay Global has estimated a Target Price for the stock at Rs. 160. The company is expected to offer a 28.80% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 124
Target Price	Rs. 160
1 year return	28.80%

Company performance

IOCL posted Q3FY22 standalone EBITDA/PAT of Rs. 94.1bn/Rs. 58.6bn, down 15%/8% QoQ. EBITDA missed our estimate by 43% due to low marketing income, which was affected by a one-time inventory loss resulting from a cut in auto-fuel excise duty in Nov'21. IOCL's Refinery utilization stood at 99% in Q3. Total marketing volumes beat by 5%, with domestic sales down 2% YoY vs. 4% for the industry. Based on BPCL's run rate, assuming Rs. 33bn of marketing inventory losses, IOCL's blended margin is estimated to decline by 23% QoQ to Rs. 5.3/kg. Gross debt (ex-lease liabilities) rose by 5% QoQ to Rs883.2bn. Other income increased 9% QoQ to Rs. 13.8bn.

Comments by Emkay Global

Emkay Global stated, "We raise FY22/FY23/FY24 EPS estimates by 17%/3%/3%, building in higher GRMs and other income in FY22, and roll over-valuations from Dec'23E to Mar'24E. Other expenditure rose by 22% YoY/17% QoQ to Rs. 107.2bn. IOCL has reported a provision write-back of Rs. 4.71bn separately. Employee costs were down 7% YoY/flat QoQ at Rs. 26.9bn. Interest costs, however, were flat QoQ at Rs. 9.79bn, while the forex loss was marginal Rs. 150mn. Pipeline volumes rose 11% QoQ/flat YoY at 21.8mmt. Key risks are adverse petroleum prices/margins/currency, project delays, and adverse policies and political scenario."

About the company

IndianOil, a diversified, integrated energy major has a presence in almost all the streams of oil, gas, petrochemicals, and alternative energy sources. Indian Oil reported a revenue of Rs. 5,14,890 crore from operations in 2020-21. It is far more than being the highest-ranked Indian Energy PSU (Rank 212) in Fortune's 'Global 500' listing and the vision to become 'A Globally Admired Company.' IndianOil has a group refining capacity of 80.55 MMTPA and over 15,000 KM of pipeline network dedicated to fuel India's economic rise.

(Also read:  Buy This Petroleum Stock For 34% Return, In 1 Year: Emkay Global)

Disclaimer

The above stock was picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.