Result Update: Oil India Ltd - ACCUMULATE - TP Rs.392 - Kotak

Oil India's PAT for Q3FY18 is higher than our estimates. The company reported meaningful increase in PAT to Rs.7 bn (9% qoq and 55% yoy) mainly on account of higher crude oil realization, and lower other expenses. We expect the stock to remain in focus due to couple of triggers - Rising crude oil prices, potential increase in domestic gas price from 1st April 2018, and news flow of merger with IOC. The company has declared an interim dividend of Rs.14/share (yield 4%) and also recommended bonus share issue in the ratio of 1:2 i.e, one bonus for every two existing shares, subject to the approval of shareholders.

We have introduced FY20E earnings. We expect OINL to report an EPS of Rs. 36.6 FY18E (earlier Rs.34.7), Rs. 38.6 in FY19E and Rs.39.2 in FY20E reflecting higher oil and gas realization. On the basis of our estimates, we believe the stock is now fairly valued at 10.1x P/E and 6.0x P/cash earnings on the basis of FY20E. Due to recent run up in the share price, we maintain ACCUMULATE rating on OINL with a revised price target of Rs. 392 (earlier Rs.381). Improvement in crude oil/gas prices, production ramp-up and weak rupee due to geo-political risk will be key positives for the company which will improve the earnings going forward.

Shares of OIL INDIA LTD. was last trading in BSE at Rs.362.4 as compared to the previous close of Rs. 361. The total number of shares traded during the day was 56871 in over 1698 trades.

The stock hit an intraday high of Rs. 364.5 and intraday low of 357. The net turnover during the day was Rs. 20572962.

Source : Equity Bulls

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