OIL - Q4FY12 Result update - Centrum

Operationally stable performance; subsidy burden drags down Q4

OIL's operational performance was good yet higher subsidies (Rs28.7bn) during Q4 dragged down the performance with PAT of just Rs4.4bn (56.1% QoQ decline). Crude production went up marginally on a QoQ basis to 0.97mmt while gas production was lower 5.5% owing to lower off take from consumers. Although crude gross realisations were at US$119.7/bbl in Q4, higher subsidies led to net realisations of US$38.9/bbl.

Revenue decline due to lower net realisations: OIL reported 14.0% YoY and 30.4% QoQ decline in revenues at Rs18.0bn on the back of higher subsidy burden with subsequent impact on lowering net crude realisations. Gross realisations were healthy at US$119.7/bbl while net realisations came in at US$38.9/bbl.

Sequentially, crude production remains constant while natural gas production declines owing to lower demand: Crude production remained flattish sequentially at 0.97mmt while improving by 2.9% on a YoY basis. Gas production on the other hand declined by 5.5% QoQ to 0.64bcm owing to lower demand from consumers yet increasing by 6.5% YoY.

Dry well write offs remain flattish QoQ; other income declines: Dry well write offs remained largely stable QoQ at Rs1.6bn while depletion charge declined QoQ from Rs1.0bn to Rs0.8bn thus reducing DDA charges marginally. Other income declined by 9.8% QoQ at Rs3.4bn from Rs3.8bn in Q3 due to lower interest income. Higher subsidies led to 20.9% YoY and 56.1% QoQ decline in PAT at Rs4.4bn. However, for FY12 the company reported a sharp 19.4% jump in profitability at Rs34.5bn from Rs28.9bn in FY11.

Overseas acquisitions on agenda: Despite highest ever subsidy burden of Rs73.5bn, OIL reported superior performance for FY12 with sharp 19.4% jump in YoY profitability at Rs34.5bn. The company declared final dividend of Rs5/share over and above Rs14/share of interim dividend taking the total dividend for FY12 at Rs19/share (4%+ dividend yield). With cash+investments of over US$3bn, the company is well placed for any overseas acquisition. The management has already earmarked about Rs60-70bn for overseas acquisitions (probably in shale gas space). The company also rewarded shareholders with 3:2 bonus during FY12. OIL currently has cash+investments of about Rs225/share and thus the stock looks attractive at these levels. We believe any acquisition will act as a trigger for the stock. The stock is available at 8.5x and 7.0x our FY13E and FY14E EPS of Rs52.8 and Rs64.6. We maintain 'Buy' rating on the stock with a marginally revised price target of Rs581 (earlier Rs577).

Source : Equity Bulls

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