Motilal Oswal is bullish on Oil India recommended buy rating on the stock with a target price of Rs 110 in its research report dated June 29, 2020.
Motilal Oswal 's research report on Oil India
Oil India’s (OINL) 4QFY20 oil and gas sales were in line with estimates. However, EBITDA (excluding impairment) was 5% lower than estimates. The company recorded impairment and write offs of ~INR17.8b during the quarter. - For FY20, oil sales were down 5% YoY to 3.06mmt and gas sales were down 4% YoY to 2.4bcm, as operations were hampered due to (a) CAB (Citizen Amendment Bill) related protest for 10-15 days, and (b) lockdown in the last week of March. The company stated that current production is at ~90% of the normal levels. - Net oil realization for FY20 stood at USD60.8/bbl (v/s USD68.5/bbl in FY19), as crude oil prices declined sharply in 4QFY20 due to huge demand destruction led by the COVID-19 led lockdowns across the globe.
Outlook
We model in crude oil prices of USD40/50/bbl for FY21/FY22E. Note that a change of USD1/bbl in oil price impacts EBITDA by 4%. The stock trades at 5.6x FY22E EPS of INR17.1. We use an SOTP-based fair value of 8x FY22E adj. EPS of INR13.7 and add investments to arrive at a price target of INR110. Maintain Buy.
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