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IDBI Capital
Indian Oil (Buy)
Target: ₹113
CMP: ₹103.65
Indian Oil Corporation’s Q3-FY21 result was a beat to our estimates owing to robust performance from marketing and petrochemicals business. The company also reported inventory gains of ₹2,630 crore (₹920 crore for refinery and ₹1,710 crore for marketing).
While core GRM came slightly below expectation at $1/bbl (IDBI estimated $1.5/bbl), marketing EBITDA/mt increased 33 per cent and petrochem EBITDA/mt doubled y-o-y to $335. Volume across segment rebounded to pre-covid levels where ATF is yet to catch up while Petrochem volume grew 25 per cent y-o-y.
As announced in the Budget 2021-22, IOC plans to monetize its few pipeline (total: 14864km) through InvIT but refrain to lose control on it.
Factoring higher marketing margin and up cycle in petrochem, we raise FY22/FY23 EBITDA estimates by 11 per cent/9 per cent. Further, lower interest cost owing to declining debt level would further support PAT.
We raise our target price to ₹113 from ₹87 earlier and upgrade the stock to Buy from Accumulate.
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