Indian Oil Corporation - March 2013 Results Preview - Motilal Oswal

- Similar to prior quarters, profitability of OMCs (BPCL, HPCL, IOC) would depend more on subsidy sharing, which is ad-hoc, than on business fundamentals. Government's subsidy compensation typically comes with a delay.

- 4QFY13 gross under-recovery is down 5% QoQ due to the impact of diesel reforms and lower LPG subsidies.

- In 9MFY13, IOCL's PAT loss stood at INR95.1b as it had to bear a net under-recovery of INR132b. Similar to FY12, we model OMCs' subsidy sharing at nil for FY13E and hence model INR132b over-recovery for 4QFY13E.

- For subsidy sharing on annual basis, we model OMCs' sharing at nil, upstream sharing at 40% and government sharing at balance 60% in FY13E/FY14E/FY15E.

- We peg the refinery throughput at 14.2mmt for 4QFY13E v/s 14.1mmt in 4QFY12 and 14.2mmt in 3QFY13.

- We expect IOCL to report a profit of INR155b in 4QFY13E, thereby taking full year PAT to INR60b v/s INR40b in FY12.

- IOCL trades attractively at 0.9x FY15E book value and 7.2x FY15E EPS. Buy.

Source : Equity Bulls

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