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Oil India (Q2 FY13)

India Infoline Research Team / 16:49 , Nov 07, 2012

CMP Rs467, Target Rs535, Upside 14.5%

  • OIL India (OINL) reported its net sales for the quarter at Rs25,194mn down 24.5% yoy. The sales were below our estimates mainly due to lower crude realizations (on back of higher than estimated subsidy burden).
  • Crude realizations at $52.5/bbl declined by ~39% yoy in dollar terms, but 19% depreciation in Rupee against the US dollar on a yoy basis helped restricting the fall in revenues. The subsidy burden borne by OINL in the quarter was Rs20.7bn as compared to Rs8.4bn in Q2 FY12 and Rs 20.1bn in Q1 FY13.
  • Crude oil sales volumes declined by 2.4% yoy but recovered 1.5% qoq. Gas sales volumes increased 0.9% yoy and 13% on qoq basis (owing to resumption of normal operations at Numaligarh refinery). Total oil + OEG sales volumes declined by 1.2% on yoy basis but surged 5% on qoq basis.
  • OPM at 50.2% was higher by 502bps yoy was better than our expectations. However, operating profit was lower than estimates owing to high subsidy incidence. The statutory levies were higher by 948bps owing to the higher cess burden (Rs4,500/tonne cess from Q1FY13 onwards).
  • We maintain our BUY rating on the stock considering a steep discount to global peers on EV/BoE basis.
Result highlights
(Rs mn) Q2 FY13 Q2 FY12 % yoy Q1 FY13 % qoq
Net sales 25,194 33,382 (24.5) 24,396 3.3
Material costs 140 267 (47.5) (29) (582.4)
Personnel costs (3,093) (5,983) (48.3) (3,376) (8.4)
Statutory levies (7,810) (7,184) 8.7 (7,707) 1.3
Other overheads (1,783) (5,399) (67.0) (1,259) 41.5
Operating profit 12,649 15,082 (16.1) 12,025 5.2
OPM (%) 50.2 45.2 502 bps 49.3 92 bps
Depreciation (2,560) (2,457) 4.2 (2,025) 26.4
Interest (2) (5) (66.0) (3) (48.4)
Other income 4,025 4,498 (10.5) 3,772 6.7
PBT 14,112 17,119 (17.6) 13,769 2.5
Tax (4,567) (5,734) (20.4) (4,469) 2.2
Effective tax rate (%) 32.4 33.5   32.5  
Reported PAT 9,546 11,385 (16.2) 9,299 2.6
PAT margin (%) 37.9 34.1 378 bps 38.1 (23) bps
Ann. EPS (Rs) 63.5 75.8 (16.2) 61.9 2.6
Source: Company, India Infoline Research
 
Valuation summary
Y/e 31 Mar (Rs m) FY11 FY12 FY13E FY14E
Revenues 83,206 98,632 112,555 116,796
yoy growth (%) 5.3 18.5 14.1 3.8
Operating profit 42,721 46,747 50,812 52,889
OPM (%) 51.3 47.4 45.1 45.3
Reported PAT 28,877 34,469 36,695 37,828
yoy growth (%) 10.6 19.4 6.5 3.1
EPS (Rs) 48.0 57.3 61.0 62.9
P/E (x) 9.7 8.1 7.6 7.4
Price/Book (x) 1.8 1.5 1.4 1.3
EV/EBITDA (x) 4.1 3.2 2.9 2.5
Debt/Equity (x) 0.1 0.1 0.0 0.0
RoE (%) 19.7 20.1 19.2 18.5
RoCE (%) 26.4 26.2 25.4 25.3
Source: Company, India Infoline Research