Indian Oil Corporation - Q2FY21 Result Update - ICICI Securities

Indian Oil Corporation (IOC) reported Q2FY21 profits better our estimates on the profitability front due to inventory gains. Revenues increased 30.1% QoQ to Rs. 115749.4 crore, (our estimate: Rs. 100044.5 crore) as retail demand increased post lockdown. The quarter witnessed inventory gains of US$9.6/bbl leading to reported GRMs at US$8.6/bbl (our estimate: US$4/bbl) while core GRMs were at -US$1/bbl. Higher than anticipated refining inventory gains led to EBITDA at Rs. 9427.2 crore (up 71% QoQ) vs. our estimate of Rs. 7123.3 crore. The company benefited from forex gain as interest cost was lower than expected. Subsequently, reported PAT was at Rs. 6227.3 crore, up 225.9% QoQ (our estimate: Rs. 2404.2 crore).

Valuation & Outlook

Marketing sales have improved in the current quarter (Q3FY21E-TD). Petrol demand has registered 4% YoY growth while Diesel demand was higher by 2% YoY as per the management. With near normalcy situation, demand growth should be maintained. Sustained growth in demand and steady marketing margins will be necessary for marketing segment going ahead. IOC's crude throughput has also increased QoQ and was at 95% in October. However, we are neutral on IOC at the current juncture given the volatility in refining margins. We maintain HOLD on the stock with a target price of Rs. 85 (based on average of P/BV multiple: Rs. 99/share, P/E multiple: Rs. 71/share).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_IOC_Q2FY21.pdf

Shares of INDIAN OIL CORPORATION LTD. was last trading in BSE at Rs.78.1 as compared to the previous close of Rs. 79.55. The total number of shares traded during the day was 1269945 in over 4792 trades.

The stock hit an intraday high of Rs. 80.7 and intraday low of 77.65. The net turnover during the day was Rs. 99627520.

Source : Equity Bulls

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