Buy Oil India; target of Rs 230: HDFC Securities

November 18
18:25 2019

HDFC Securities’ research report on Oil India

OIL reported net revenue of Rs 32.14bn, down 14.2% YoY due to 16.2% decreased in crude oil realisation to Rs 4,317/bbl, 1.8% fall in crude oil sales volumes offset by 23% jump in Gas realisation to USD 3.57/mmbtu. EBITDA was down 15.7/8.2% YoY/QoQ to Rs 12.43bn while APAT fell 27.2% to Rs 6.27bn given a 13.6% jump in depreciation and depletion cost to Rs 4.15bn. Oil price realisation was USD 61.3/bbl (-16.5/-7.6% YoY/QoQ). Gas price realisation was USD 3.57/mmbtu, +23.0/0.4% YoY/QoQ. Oil sales volume was 0.82mmt, -1.8/+4.6% YoY/QoQ while Gas volume was 0.66bcm, +2.5/+7.8%. There was no subsidy burden in 2Q. We expect crude oil and natural gas production volumes to increase at 3.0% and 2.0% CAGR over FY19-22E. The surge in oil supply from US coupled with fall in global oil demand owing to trade war between US-China will result in subdued oil prices in the near term. Thus, we expect oil realisation to fall from USD 66.33/bbl in 1Q to USD 61/bbl in FY21.


We maintain BUY on OIL post an inline performance in 2QFY20. Though concerns over lack of production growth still persist, we think that the current valuations (2.8/2.1x FY21/22 EV/EBITDA and 5.2/5.0x FY21/22 PER) indicate strong pessimism.

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