Prabhudas Lilladhar Has Given Buy Call To This Navratna Stock For 18% Gains, Stock Near 52 Week High

A leading brokerage firm, the Prabhudas Lilladhar in its recently published report has given a buy rating to the stocks of Oil India Ltd for 18% gains for a target price of Rs 344/share. At an inflection point- as major oil and gas projects along with NRL expansion to come on stream by FY25E. Higher oil and gas realisations and strong GRMs to drive earnings.

Oil India Ltd - Stock Overview

Today, the shares of Oil India Limited's opened at Rs 279, currently trading at Rs 293.50, after gaining 5.23% from the previous close. According to the brokerage's target price of Rs 850 and CMP of Rs 293.50, the stock has a 18% upside potential. The stocks of the Oil India have gained nearly 104% in the last 1 year, making it one of the gainers. Similarly, in the last 1 month, it has gained more than 25%. The stock's 52-week low was Rs 139.40, and its 52-week high was Rs 295, which it touched on touched today, 7 June 2022.

Oil India had invested USD990mn in Russian oil and gas fields in CY16. Till FY22 end, the company received USD660mn in dividends from those investments. The company has not seen any drop in production as higher discounts will be offset by commensurate increase in realizations.

 

Strong volume growth along with higher realisation

Oil India has aggressive growth plans as it expects 30% increase in oil volumes to 4MTPA by FY25E, with the commencement of brownfield expansion projects in Assam. Gas volumes will rise to 5bcm from the current 3bcm, as the new gas pipeline in North East is commissioned. Gas evaluation challenge has led to lower production for Oil India, however, the start of the Indradhanush gas pipeline grid by FY25E (which connects eight states in North East) will boost gas demand fed by higher volumes from the Bagjan fields.

Numaligarh Refinery Limited- a prized asset

Numaligarh Refinery is a highly complex refinery with Nelson complexity of 9.2. Also, Oil India's diesel and petrol volume accounted for 69%/15% of product slate and will benefit from a sharp up move in product spreads currently. In FY22, Numaligarh Refinery (Oil India has 69.6% stake) posted EBIDTA/PAT of Rs50.5bn/Rs35.6bn with a growth of 16% YoY/17% YoY. NRL remains a prized asset, as it retains 50% of excise on fuel sales. FY22 core GRMs were at USD14.3/bbl vs USD4.0/bbl in FY21, while additional excise benefits were at Rs35bn or USD24.7/bbl vs USD36/bbl in FY21. The lower excise benefit was due to a cut in duty rates in November 21. At current excise rates, peak excise earnings will be at Rs80bn p.a, on the expanded capacity as per the company and has no sunset clause.

Capex Plans of Oil India

Oil India spent Rs 42.8bn on Capex in FY22 and expects similar Capex in FY23E. Exploration drilling is to account for 24% of FY23E Capex, while capital equipment will account for 35% of Capex.

Brokerage Suggests 'Buy' for a Target Price of Rs 344

Brokerage in the report has stated, "Management guided strong volume growth FY25E o be a watershed year, driven by commissioning of major oil and gas expansion along with Numaligarh Refinery's expansion projects."

"Oil India is well placed to benefit from rising oil and gas prices and high GRMs and FY25E EBIDTA can increase to Rs 210bn (FY22-Rs105bn) on higher volumes. We maintain our estimates and retain 'BUY' with a target price of Rs344 based on 3.5x EV/E FY24E," the brokerage has said.

About Company - Oil India Ltd

Oil India Limited was incorporated on 18th February 1959. It is a Navratna Company, a state-owned enterprise of the Government of India, under the administrative control of the Ministry of Petroleum and Natural Gas and is the second-largest national oil and gas company in India. Oil India Limited is a fully integrated Exploration & Production company in the upstream sector, with origin dating back to the glorious year of oil discovery in India.

The Authorized Share Capital of the Company is Rs. 2,000 Crore. The Issued, Subscribed and Paid Share Capital of the Company is Rs. 1,084.41 Crore comprising Rs 108.44 crore shares of Rs. 10 each. At present, the Government of India, the Promoter of the Company is holding 56.66% of the total Issued & Paid-up Capital of the Company. The balance 43.34% of the Equity capital is held by the Public and others including Bodies Corporate, Mutual Funds, Banks, FPIs, Resident Individuals etc. OIL is the first oil & gas company to list its bonds on International Securities Market, London Stock Exchange in 2019.

Disclaimer

The stock has been picked from the brokerage report of Prabhudas Lilladhar. 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. Goodreturns.in advises users to check with certified experts before taking any investment decisions.