Oil India (Q4 FY13) – BUY - IIFL

CMP Rs579, Target Rs638, Upside 10.2%

- OIL India (OINL) reported its net sales for the quarter at Rs24.7bn up 37.2% yoy. The sales were below our estimates mainly due to lower than expected crude oil and natural gas sales volumes.

- Crude net realizations at US$55.4/bbl were higher 42.4% yoy and 5.4% qoq in dollar terms. Depreciation of rupee against the US$ (7.7% yoy) further helped the realizations on a yoy basis. Notably the net realizations looked higher on back of higher subsidy per bbl accounted in Q4 FY12. The subsidy burden borne by OINL in the quarter was Rs18.5bn down 35.6% yoy. OINL's contribution in the upstream share was at 12.5% as compared to 15.9% in Q4 FY12 and 12.9% in Q3 FY13. For the full year the subsidy burden on OINL increased by 7.4% to Rs78.9bn. OINL's contribution in the upstream share was 13.2% vis-à-vis 13.4% in FY12.

- Crude oil sales volumes declined by 9.3% yoy and 4.8% on qoq basis. Gas sales volumes improved by 2.6% yoy but declined 4.7% qoq. Total oil + OEG volumes declined by 5.2% on yoy basis and 4.7% on qoq basis.

- OPM for the quarter came in at 39.5% as compared to 26.2% in Q4 FY12. The yoy surge was on account of abnormally high subsidy burden in Q4 FY12 resulting in lower revenues. Statutory levies were higher by 80bps yoy as a percentage of net sales owing to the higher cess burden (Rs4,500/tonne cess from Q1FY13 onwards). Depreciation charges were higher by 27.3% yoy on back of higher depletion and dry well expenditure. This was partially offset by 9.9% increase in other income led by higher interest income.

- We maintain our BUY rating on the stock considering a steep discount to global peers on EV/BoE basis.

Source : Equity Bulls

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