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IDBI Capital
Oil India (Accumulate)
Target: ₹97.55
CMP: ₹97.70
Oil India (OIL) has reported a mixed-bag in Q1-FY21 where EBITDA was ahead of our forecast led by lower then estimated other expenses while net profit was below expectations driven by higher then estimated DDA expense. The company reported an exceptional cost of ₹93.3 crore on the account of expense incurred to control the fire of Baghjan oil well. Consequently, the company reported net loss of ₹250 crore, higher than estimates.
Revenue was down 48.3 per cent y-o-y to ₹1,740 crore owing to 8.1 per cent/8.6 per cent y-o-y decline in oil/gas sales volume and 54 per cent/29 per cent y-o-y drop in oil/gas realisation in Q1-FY21. We expect oil production to fall by 2 per cent in FY21 and flattish growth in FY22 due to natural decline.
Gas volume is estimated to dip by 5 per cent for FY21 before reaching to FY20 levels in FY22 on the back of Baghjan fire, flood and Covid-19.
We forecast crude oil price (Brent) to average to 40/bbl and $50/bbl in FY21 and FY22 vs $60.9/bbl in FY20. We value it’s core business at ₹55 (4.5x EV/EBITDA) and ₹58 for investments in IOC, NRL and Russian business by giving 50 per cent holding discount.
Thus we retain our target price at ₹113, downgrading to Accumulate from Buy earlier.
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