Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Indian Oil Corp.
Reforms stalled; cut PO by 11% to reflect de-rating
„9M EPS just Rs15 as government compensated 45% subsidy
Indian Oil Corporation (IOC) has reported a profit of Rs16.3bn (EPS: Rs6.7) in 3Q
FY11. Its 9M EPS is Rs14.6, which is just 42% of our FY11E EPS of Rs34.9.
Weak 9M EPS is due to the government compensating just 45% of 9M subsidy
against our assumption that 58.5% of FY11E subsidy would be compensated.
Government being generous in 4Q and FY11E EPS being in line with our
estimate is not ruled out. We retain Buy on IOC.
9M EPS Rs19-31 if government compensated 50-67% subsidy
The petroleum secretary had indicated in July 2010 that the government would
compensate 50-67% of FY11E subsidy of R&M companies like IOC. However, it
has compensated only 44.6% of 9M subsidy while another 33% was reimbursed
by the upstream companies. IOC’s 9M EPS would have been Rs18.6-31.1 if
government had compensated 50-67% of 9M subsidy. Our FY11E EPS estimate
of Rs34.9 assumes government compensates 58.5% of subsidy. IOC’s 9M EPS
would have been Rs24.9 if 58.5% of 9M subsidy was compensated.
FY11E EPS in line with estimate not ruled out
In 9M FY10, the government had compensated just 41% of subsidy. However, it
was generous in 4Q and compensated 56.5% of FY10 subsidy. Thus the
government being generous in 4Q FY11 cannot be ruled out. We have therefore
kept our FY11E EPS of Rs34.9 unchanged despite 9M EPS being just Rs14.6.
Cut PO by 11% to reflect de-rating on stalling of reforms
Reforms have stalled due to the surge in oil price. To reflect the consequent derating our PO is now based on P/E of 9x (10x earlier). Market value of IOC’s
investments in ONGC, Petronet LNG, GAIL and Oil India are lowered by
Rs14/share. The total impact is a cut in its PO by 11% to Rs413.
Price objective basis & risk
IOC (IOCOF)
Our PO of Rs413/share is based on a PE of 9.0x on IOC's FY12E consolidated
EPS (excluding dividend income from ONGC, PLNG, and GAIL) of Rs35.4/share.
Our PO also includes the market value of IOC's investments in ONGC, Petronet
LNG, GAIL and Oil India (OIL) of Rs94/share. Downside risks: (1) IOC has to bear
higher subsidy than assumed by us (2) government reverts to a cost-plus-based
regulated pricing mechanism, (3) steep decline in regional and, hence, IOC's
refining margins to levels below assumed by us, and 4) Lower-than-expected auto
fuel marketing margins 5) Steep decline in market price of ONGC, Petronet LNG
and GAIL. Upside risks: (1) IOC has to bear lower subsidy than assumed by us (2)
Government eliminates subsidies on all products, (3) Refining margins are higher
than forecast by us, (4) Sharp rise in market prices of ONGC and GAIL.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Indian Oil Corp.
Reforms stalled; cut PO by 11% to reflect de-rating
„9M EPS just Rs15 as government compensated 45% subsidy
Indian Oil Corporation (IOC) has reported a profit of Rs16.3bn (EPS: Rs6.7) in 3Q
FY11. Its 9M EPS is Rs14.6, which is just 42% of our FY11E EPS of Rs34.9.
Weak 9M EPS is due to the government compensating just 45% of 9M subsidy
against our assumption that 58.5% of FY11E subsidy would be compensated.
Government being generous in 4Q and FY11E EPS being in line with our
estimate is not ruled out. We retain Buy on IOC.
9M EPS Rs19-31 if government compensated 50-67% subsidy
The petroleum secretary had indicated in July 2010 that the government would
compensate 50-67% of FY11E subsidy of R&M companies like IOC. However, it
has compensated only 44.6% of 9M subsidy while another 33% was reimbursed
by the upstream companies. IOC’s 9M EPS would have been Rs18.6-31.1 if
government had compensated 50-67% of 9M subsidy. Our FY11E EPS estimate
of Rs34.9 assumes government compensates 58.5% of subsidy. IOC’s 9M EPS
would have been Rs24.9 if 58.5% of 9M subsidy was compensated.
FY11E EPS in line with estimate not ruled out
In 9M FY10, the government had compensated just 41% of subsidy. However, it
was generous in 4Q and compensated 56.5% of FY10 subsidy. Thus the
government being generous in 4Q FY11 cannot be ruled out. We have therefore
kept our FY11E EPS of Rs34.9 unchanged despite 9M EPS being just Rs14.6.
Cut PO by 11% to reflect de-rating on stalling of reforms
Reforms have stalled due to the surge in oil price. To reflect the consequent derating our PO is now based on P/E of 9x (10x earlier). Market value of IOC’s
investments in ONGC, Petronet LNG, GAIL and Oil India are lowered by
Rs14/share. The total impact is a cut in its PO by 11% to Rs413.
Price objective basis & risk
IOC (IOCOF)
Our PO of Rs413/share is based on a PE of 9.0x on IOC's FY12E consolidated
EPS (excluding dividend income from ONGC, PLNG, and GAIL) of Rs35.4/share.
Our PO also includes the market value of IOC's investments in ONGC, Petronet
LNG, GAIL and Oil India (OIL) of Rs94/share. Downside risks: (1) IOC has to bear
higher subsidy than assumed by us (2) government reverts to a cost-plus-based
regulated pricing mechanism, (3) steep decline in regional and, hence, IOC's
refining margins to levels below assumed by us, and 4) Lower-than-expected auto
fuel marketing margins 5) Steep decline in market price of ONGC, Petronet LNG
and GAIL. Upside risks: (1) IOC has to bear lower subsidy than assumed by us (2)
Government eliminates subsidies on all products, (3) Refining margins are higher
than forecast by us, (4) Sharp rise in market prices of ONGC and GAIL.
No comments:
Post a Comment