Sharekhan is bullish on Oil India has recommended buy rating on the stock with a target price of Rs 250 in its research report dated September 15, 2021.
Broker Research
September 16, 2021 / 02:25 PM IST
“India’s specialty chemicals industry is a decadal growth opportunity and it is still not too late to participate in the value creation process. We prefer CRAMS/CSM players Navin Fluorine (Navin) and PI Industries (PI) as they provide long-term earnings visibility. We also like UPL due to robust growth outlook and reducing debt concerns and SRF due to rising contribution from the chemicals business,” JM Financial research report.
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Sharekhan’s research report on Oil India
Oil India Limited’s (OIL) business fundamentals have turned positive with Brent oil prices at ~$ 74/bbl and a sharp rise in international gas prices. We expect standalone PAT to clock a CAGR of 34% and RoE to improve to 11.3% over FY21-24E. Increase in Numaligarh Refinery Ltd (NRL) stake is earnings accretive as GRMs would remain strong given excise duty benefit and 3x expansion in refinery capacity to create long-term value for OIL. The management expects combined oil & gas production to grow by 6-7% annually in the long term, but we believe majority of production growth to be back-ended and model an oil/gas production CAGR of 2%/4% over FY21-24E. Robust earnings recovery and dividend yield of ~6% makes risk-reward favourable.
Outlook
Hence, we upgrade OIL to Buy from Hold with a revised SoTP-based PT of Rs. 250. OIL is trading at 3.7x its FY23E EPS (including earnings contribution from NRL).
For all recommendations report, click here
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