An Indian Oil Corporation petrol station in New Delhi, India (Photographer: Amit Bhargava/Bloomberg News)

Brokerages Maintain Stance On Indian Oil After First Quarter Earnings Beat

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Most brokerages have maintained their stock rating for Indian Oil Corporation Ltd., after the country’s largest state-owned company reported first quarter earnings that surpassed analyst consensus estimates tracked by Bloomberg.

The net profit increased 22 percent year-on-year to Rs 4,549 crore on a sequential basis, driven by higher sales volumes and rising margins.

Shares of Indian Oil extended gains for the second day and rose as much as 3.9 percent to Rs 402.45 on Friday.

Here's what brokerages had to say about Indian Oil’s earnings:

HSBC

  • Stock Rating: Maintains ‘Hold’
  • Target Price: Unchanged at Rs 369
  • Only 20-25 percent of IOC’s earnings are from marketing, which is viewed as a steady and structural growth story
  • IOC has been losing market share to HPCL and BPCL for petrol and diesel. However, see limited downside hereon.
  • Expect petroleum product volume to grow 5-6 percent per year over FY17-20E
  • Expect oil marketing companies’ refining earnings to be steady over the next two years

Goldman Sachs

  • Stock Rating: Maintains “Neutral’
  • Target Price: Unchanged at Rs 410
  • Net income was a beat versus consensus due to one time provision
  • GRM was in-line with expectations
  • Refining and marketing margins are trending ahead of our expectation in Q2FY18
  • There is also uncertainty around potential negative earnings impact from GST

Deutsche Bank

  • Stock Rating: Maintians ‘Buy’
  • Target Price: Unchanged at Rs 530
  • Increase in refining segment contribution driven by ramp-up at Paradip refinery
  • Refinery throughput was higher at 17.5 million metric tonnes driven by higher capacity utilisation at the Paradip refinery
  • Improvement in marketing segment contribution led by higher margin and volumes

Credit Suisse

  • Stock Rating: maintains ‘Outperform’
  • Target Price: unchanged at Rs 455
  • EBITDA strength was likely driven by the Paradip refinery
  • Headline GRMs were weak at $4.3 per barrel, and an inventory loss of $3.4 per barrel.
  • Expect near-term headwinds on overhang of ONGC stake, large refining maintenance cost in H2CY17 and GST impact on EPS

Motilal Oswal

  • Stock Rating: Upgraded to ‘Buy’ from 'Neutral
  • Target Price: Unchanged at Rs 458
  • Adjusted EBITDA marginally above estimates
  • IOCL is expected to benefit from free cash flow generation over the next 2-3 years
  • Paradip refinery should help the company in a declining benchmark refining margin scenario.
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