Oil India Ltd (Q1 FY13)

CMP Rs480, Target Rs563, Upside 17.2%

• OIL India (OINL) reported its net sales for the quarter at Rs24,396mn up 8.2% yoy. The sales were below our estimates mainly due to lower crude realizations (on back of higher than estimated subsidy burden) and lower than estimated crude sales volumes.
  

• Crude realizations at $53.9/bbl declined by ~10% yoy in dollar terms, but 21% depreciation in Rupee against the US dollar on a yoy basis, drove topline growth for OINL (realizations 9% up yoy in rupee terms). The subsidy burden borne by OINL in the quarter was Rs20.2bn (back to 13% levels, following a spurt in its subsidy share to 16% in Q4FY12 but similar to FY12 average levels).
  

• Crude oil sales volumes declined by 3.3% yoy and 3.6% on qoq basis. Gas sales volumes also declined by 4.5% yoy and 2.6% on qoq basis. Total oil + OEG volumes declined by 3.7% on yoy basis and 3.2% on qoq basis. Volumes were lower on the back of shutdown at the Numaligarh refinery.
  

• The OPM at 49.3% was 91bps lower yoy but in line with our estimates.  The statutory levies were higher by 669bps owing to the higher cess burden (Rs4,500/tonne cess from Q1FY13 onwards). The OPM decline was partly offset by lower other overheads incurred during the quarter. Depreciation charges were higher by 21.6% on back of higher dry well expenditure (60% up yoy).
  

• Lower interest expenses and higher other income further helped the PAT to grow a healthy 9.5% yoy and 109% on qoq basis.
  

• The sharp qoq improvement in performance is primarily due to extraordinarily high subsidy burden observed in Q4FY12 for OINL.
  

• We maintain our BUY rating on the stock considering a steep discount to global peers on EV/BoE basis.