Sharekhan's research report on Indian Oil Corporation
Q4FY22 PAT at Rs. 6,022 crore (up 2.7% q-o-q), missed consensus estimates primarily due to weak marketing margin and sharp decline of 26% q-o-q in petchem EBIT which offset robust refining performance. Reported/core GRM of $18.5/$13.6 per bbl was significantly above our/consensus estimate led by a sharp rise in product cracks as well as benefit of inventory gain of $5/bbl. Refining/marketing/pipeline volumes beat estimates at 18.3 mt/21.7 mt/22.1 mt, up 4.9%/4.3%/1.3% q-o-q. Record Singapore GRM of >$20/bbl in Q1FY23 QTD would help cushion against negative motor-spirit/high-speed diesel’s marketing margin of Rs. 9/litre to some extent. Thus, a fall in crude oil prices or likely steep HSD/MS retail price hike and MS/HSD excise duty cut remain key for improvement in marketing margins.
Outlook
We maintain a Buy on IOCL with an unchanged PT of Rs. 150, given attractive valuation of 4.4x/0.7x its FY24E EPS/BV, strong RoE of 18% and a high dividend yield of ~10%.
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