The Indian Oil Corporation (IOC) stock is one stock that many brokerages are betting on including the likes of Motilal Oswal, Emkay Global and Sharekhan. In fact, the price targets on the stock are pretty robust from all of these brokerage houses.
Price targets on IOC by different brokerages?
|Current market price||Target price|
|Sharekhan||Rs 106||Rs 125|
|Motilal Oswal||Rs 106||Rs 157|
|Emkay Global||Rs 106||Rs 135|
All the three brokerages are showing a bullish bias towards the stock of Indian Oil Corporation. While we have covered already what Sharekhan and Motilal Oswal have to say on the stock, let's see some of the reasons for bullishness by all the three top broking firms in the country.
Sharekhan and Motilal Oswal have a buy on the stock
Sharekhan says that the big triggers for the stock is the BPCL divestment, and the attractive dividend yield of 10%. In fact, the brokerage also says that pipeline monetization could also act as a big trigger for the stock.
However, Motilal Oswal is the most bullish on the stock in terms of price targets of IOC among the three brokerages and has suggested to buy the same for a solid upside of 52% from the current market price of Rs 106. According to the firm, IOC reported a beat on its estimates, led by higher-than-estimated reported gross refining margins and marketing sales volumes, the brokerage has said. The brokerage said that it values Indian Oil at 1.1 times Sep'23 price to book value, to arrive at price target of Rs 157 and maintains a Buy.
Emkay Global says to buy the stock for target of Rs 135
According to Emkay Global, the management expects GRMs to be better as demand picks up. Refinery utilization in July was 90%, while the LPG receivables outstanding from the Govt is nil now. The IOC-Petronas joint venture is looking to expand into multiple areas, including transport fuels.
Emkay Global says it values Indian Oil on a SoTP basis with a 6 times blended target Sep'23E EV/EBITDA for the standalone business (unchanged) and investments at a 30% holding company discount to face value.
Several new projects
IOC is looking at new areas including Aluminum Air Battery (JV with Israel based Phinergy), hydrogen, used cooking oils and CBG.
According to Emkay Global, Phinergy Battery can be significant.
"The technology is there and if successful they would set up a factory in India. IOCL is also focused on fuel cells. Indian Oil was invited to join World Hydrogen Council," the brokerage has said.
The company is planning (at a nascent stage now) a green hydrogen plant in Mathura refinery to run on windmill-based power. It will also run hydrogen-powered buses in Gujarat refinery area and Delhi-Agra, etc. It is looking to monetize two hydrogen plants at the Gujarat refinery this fiscal and five more after that.
"Other new energy projects include two ethanol plants (in Panipat, etc., 2G/3G) of Rs 7 billion capital expenditure each. Out of 5,000 CBG plants announced by Govt, Indian Oil has given offtake interest for 1,100. Each plant will cost Rs 500 million, but IOC is not involved in capex and it will only have offtake (agreement)," Emkay Global has said.
All in all, looking at valuations, dividend yields, solid track record and an impeccable retail fuel network, IOC remains a good pick.
The above stocks are based on the report of Motilal Oswal, Emkay Global, Sharekhan. Investing in stocks is risky and investors should do their own research. The author, the brokerage firms or Greynium Information Technologies are not responsible for any losses incurred due to a decision based on the above article. Investors should hence exercise due caution as are at record peaks. Please consult a professional advisor.