Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Oil India
1 QFY12: Jump in crude sales
Event: Results beat expectation on better crude sales
OIL reported better results than UBSe and much better results than street
expectations. While the company’s crude production surprised us on the upside we
believe the street was also expecting a higher subsidy burden, but this quarter the
upstream share is based on 33% rather than 38.75% of total under recovery. OIL’s
share of upstream subsidy burden this quarter at 12.3% is the highest ever.
Impact: Operations doing well; stock pricing in low realisations
The company produced 0.965 MMT, of crude in the quarter. We believe this was
due to better EOR/IOR efforts and hence is sustainable. At this run rate, there is
upside to our full year volume expectation of 3.76MMT. We factor in US$65/bbl
realisations in our numbers going forward. Though currently the subsidy sharing
formula for future is unclear, we believe various formulas are being worked out at
the ministry level. An unfavourable formula is a downside risk to our valuation
though the stock price currently reflects realisations below US$55/bbl.
Action: Maintain production/realisation estimates
We maintain our realisation and production/sale estimates. While the 26 June price
hikes/duty cuts would lead to OIL’s net realisation going up to US$75/bbl if
upstream share is 38.75%, we believe below US$65/bbl realizations are more
realistic and expect the govt to update the subsidy sharing formula accordingly.
Valuation: Reiterate Buy with PT of Rs 1615/share
We value the domestic assets at Rs1,118/share on a DCF-based methodology using
a 10% WACC and assuming the reserves will last another 19 years.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Oil India
1 QFY12: Jump in crude sales
Event: Results beat expectation on better crude sales
OIL reported better results than UBSe and much better results than street
expectations. While the company’s crude production surprised us on the upside we
believe the street was also expecting a higher subsidy burden, but this quarter the
upstream share is based on 33% rather than 38.75% of total under recovery. OIL’s
share of upstream subsidy burden this quarter at 12.3% is the highest ever.
Impact: Operations doing well; stock pricing in low realisations
The company produced 0.965 MMT, of crude in the quarter. We believe this was
due to better EOR/IOR efforts and hence is sustainable. At this run rate, there is
upside to our full year volume expectation of 3.76MMT. We factor in US$65/bbl
realisations in our numbers going forward. Though currently the subsidy sharing
formula for future is unclear, we believe various formulas are being worked out at
the ministry level. An unfavourable formula is a downside risk to our valuation
though the stock price currently reflects realisations below US$55/bbl.
Action: Maintain production/realisation estimates
We maintain our realisation and production/sale estimates. While the 26 June price
hikes/duty cuts would lead to OIL’s net realisation going up to US$75/bbl if
upstream share is 38.75%, we believe below US$65/bbl realizations are more
realistic and expect the govt to update the subsidy sharing formula accordingly.
Valuation: Reiterate Buy with PT of Rs 1615/share
We value the domestic assets at Rs1,118/share on a DCF-based methodology using
a 10% WACC and assuming the reserves will last another 19 years.
No comments:
Post a Comment