CMP Rs248, Target Rs265, Upside 6.8%
The upstream sharing of subsidy burden has been observed at ~33-34% of the total under recoveries. Not only IOC has not received any payments from government in Q1 FY13, it is yet to receive ~Rs45bn which has been sanctioned towards a part of under recovery borne for FY12.
On petrol, the present under recovery for IOC is ~Rs1.37/ltr and the company lost Rs9.5bn in Q1 FY13 for the same.
With the timing of cash subsidy uncertain, the OMC’s are expected to report vastly fluctuating earnings going ahead. We maintain a Market Performer rating on the stock.