Oil India - Increase in net oil price realisation drivesnet profit; maintain Reduce - BRICS

OINL's net profit grew 72% yoy to Rs7.64bn (vs. our estimate of Rs8.26bn) in Q4FY13, due to an increase of 42% yoy in net oil price realisation to US$55/bbl (in line with our estimate). We raise our DCF-based target price by 6% to Rs533 (from Rs499), as we rollover to Q4FY14 estimates and to factor in higher than estimated cash on OINL's balance sheet. The stock trades at a P/E of 8.7x FY14 and 7.8x FY15 estimates and at a premium of 10.3% to our DCF-based target price of Rs533. We maintain our Reduce rating on OINL.

Profit up 72% yoy; net oil price realisation up 42% yoy; oil production declines 10% yoy;

OINL's net profit grew 72% yoy to Rs7.64bn (vs. our estimate of Rs8.26bn), due to increase of 42% yoy in net oil price realisation in USD terms to US$55/bbl (in line with our estimate) and 53.4% yoy in Rupee terms to Rs3,003/bbl. Subsidy discount declined 35.6% yoy to Rs18.5bn and DD&A costs were up 27% yoy to Rs2.39bn, while statutory levies rose 41% yoy to Rs7.31bn, on account of increase of 42% yoy in cess to Rs4.08bn. Oil production was down 9.7% yoy to 0.872mmt, while natural gas production was up 1.4% yoy to 0.648bcm.

Production from BCPL expected by Q4FY14; overseas projects exploration in progress

The mechanical completion of the Brahmaputra Cracker and Polymer Limited (BCPL) plant is expected by August 2013 and the plant is likely to commence production from January 2014. Initially, the company will supply about 0.3mmscmd of gas to BCPL, which will be ramped up to 1.5mmscmd in FY15. Heavy oil discovery has been reported in RJ-ONN-2004/2 to DGH and the government and 3D seismic survey is being carried out. Production from Carabobo is being ramped up gradually. The company has drilled two wells in the Gabon block (SHAKTI FT-2000). Both these wells were unsuccessful, as a result of which, the company had to write-off Rs580mn. Currently, a third well is also being drilled. In Libya, the company has made a light oil discovery in block 2/1,2&4 and its 3D seismic data acquisition is in progress.

Stock discounts long-term oil price of US$60/bbl; maintain Reduce

We are raising our 12-month DCF-based target price for OINL by 6% to Rs533, as we rollover to Q4FY14 estimates and to factor in the higher than estimated cash of Rs121bn (vs. our estimate of Rs81bn) on the company's balance sheet. The current market price discounts a long-term net oil price realisation of US$60/bbl, which is higher than our estimate of US$57/bbl. OINL trades at a P/E of 8.7x FY14 and 7.8x FY15 estimates and at a premium of 10.3% to our DCF-based target price of Rs533. We maintain our Reduce rating on OINL.

Source : Equity Bulls

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