India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Essar Oil
Q3FY11 results surprise on the upside
Q3FY11: Beats consensus
Essar oil reported net profit of Rs2.7bn for Q3FY11 (UBS estimate Rs 1.9bn) as
against a loss of Rs2.3 bn in Q3FY10. EBITDA at Rs7.7bn grew 246% YoY, 25%
QoQ. EBITDA margin improved 60bps over Q2FY11 despite foreign exchange
and inventory losses in the current quarter (total loss of Rs3.5bn in Q3 vs. gain of
Rs4.6bn in Q2). PAT is higher than our estimate due to one-off award of Rs500m.
Other income at Rs620m increased 182% QoQ.
Refining margin was US$7.2/bbl vs. US$6.5 in 2Q11; higher than expected
Refining margin including sales tax for the quarter was US$7.2/bbl (US$2.2 in
Q3FY10) vs. Singapore complex GRM of US$5.5/bbl. Essar’s margins have
improved on the back of a) strong global GRMs b) improved crude slate. It
processed 23% ultra heavy crude in Q3FY11 vs. 17% in Q3FY10. Mangala crude,
one of the cheaper domestic crudes available to Essar from 2Q11 constituted 15%
of the crude basket. We expect modest improvement in GRMs going forward.
Project execution is on track; E&P progresses steadily
Essar increased its throughput to 3.73mmt in Q3FY11. The refinery upgrade to a
capacity of 375kbopd and Nelson complexity of 11.8 (currently 6.1) is on schedule
for June 2011. Production from Raniganj CBM block increased steadily and we
expect commercial sales to commence shortly.
Valuation: Reiterate Buy with a price target of Rs175
We value the stock on a sum-of-the-parts basis: refinery + retail + upstream. We
value core refining at Rs140/sh, retail at Rs17/sh and upstream assets at Rs 18/sh.
Essar Oil
Essar Oil is a part of Essar Holdings Limited, a subsidiary of Essar
Global Limited. It operates a 14mtpa refinery on the west coast of
India and plans to increase refining capacity to 18mtpa by March 2011
and to 36mtpa by March 2013. The company's assets include
developmental rights in proven exploration blocks, and it has over
1,200 retail outlets across India with plans to expand to 3,000 outlets.
Statement of Risk
We believe the company faces several risks: 1) bus risks such as
volatility in global and regional refining margins; and 2) project
execution risks.
No comments:
Post a Comment