Indian Oil Corporation - Q2FY21 First Cut - ICICI Securities

CMP - Rs. 80, Market Cap - Rs. 74890 crore

Indian Oil Corp (IOC) reported Q2FY21 profits were better than our estimates on account of higher refining inventory gains. On the operational front, the refining segment remains weak whereas the marketing segment was largely in line with expectations. In the refining segment, reported GRMs came in at US$ 8.6/bbl, uplifted by inventory gain of US$ 9.6/bbl. Marketing sales at 17.7 MMT were in line with our estimates. EBITDA stood at Rs. 9427.2 crore, above our estimate of Rs. 7123.3 crore mainly due to refining inventory gains. Subsequently, reported PAT stood at Rs. 6227.3 crore vs. our estimate of Rs. 2404.2 crore.

Q2FY21 Earnings Summary

- IOC's topline increased 30.1% QoQ to Rs. 115749.4 crore (our estimate: Rs. 100044.5 crore). Marketing sales at 17.7 MMT were in line with our estimate and up 16.1% QoQ as retail demand increased post lockdown. Marketing segment reported inventory gains of Rs. 76 crore during the quarter

- IOC achieved crude throughput of 14 MMT in Q2FY21, up 8% QoQ in line with estimates. Reported GRMs came in at US$ 8.6/bbl above our estimate of US$ 4/bbl. GRMs were benefitted by inventory gain of US$ 9.6/bbl while core GRMs were weak at US$ -1/bbl

- EBITDA stood at Rs. 9427.2 crore (up 71% QoQ), supported by refining segment gains and was above our estimate of Rs. 7123.3 crore. As a result of forex gains, the company reported lower than expected interest cost while other income was higher than anticipated at Rs. 1537.4 crore (our estimate: Rs. 743.2 crore). Subsequently, reported PAT stood at Rs. 6227.3 crore, up 225.9% QoQ (our estimate: Rs. 2404.2 crore)

Fuel demand has improved QoQ during Q2FY21 in Unlock phases. In the first fortnight of October, both Petrol and Diesel demand registered growth YoY. Marketing margins in Q2FY21 are lower compared to Q1FY21 level but remain steady. Due to subdued product spreads, core GRMs are still weak and affecting the core refining performance. Improvement in GRMs and sustained growth in fuel demand will be important for IOC's performance in the near term.

We will be coming out with a detailed report soon.

Shares of INDIAN OIL CORPORATION LTD. was last trading in BSE at Rs.79.55 as compared to the previous close of Rs. 78.45. The total number of shares traded during the day was 2673770 in over 10953 trades.

The stock hit an intraday high of Rs. 81.9 and intraday low of 78.95. The net turnover during the day was Rs. 214839278.

Source : Equity Bulls

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