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Oil India (OINL)
Energy
Strong operating results. OIL reported 2QFY12 adjusted EBITDA at `19.6 bn (+57.5%
qoq and +40% yoy), 3.3% higher than our estimate of `18.9 bn. The sharp qoq
improvement in performance was led by (1) higher net realized crude price at
US$86.3/bbl (+US$26.7/bbl qoq) and (2) higher gas sales at 543 mcm (+6.9% qoq). We
maintain our BUY rating with a revised target price of `1,720 (`1,750 previously) based
on 9X FY2013E EPS plus value of investments. The stock is trading at inexpensive 8.3X
FY2012E EPS and 4.8X FY2012E DACF.
Better-than-expected EBITDA; several one-off items in the quarter
OIL reported 2QFY12 EBITDA at `19.6 bn (+57.5% qoq and +40% yoy), 3.3% higher than our
estimate of `18.9 bn. The higher qoq EBITDA reflects (1) sharply higher net realized price at
US$86.3/bbl (+US$26.7/bbl qoq) and (2) higher gas sales at 543 mcm (+6.9% qoq). 2QFY12
reported net income was at `11.4 bn; the sharply higher reported other income at `6 bn (+97%
qoq) was offset by higher DD&A expense at `5.9 bn (+112% qoq). We highlight several one-offs
in OIL’s 2QFY12 results (1) prior-period adjustment of `1.4 bn for increase in transmission tariffs
included in ‘other income’, (2) provision of `2.5 bn on account of differential superannuation
benefits to employees adjusted in ‘other expenditure’ and (3) provision of `4 bn in DD&A expenses
for prospective liabilities relating to the Minimum Work Programme (MWP) of NELP blocks.
Stock discounting a fairly bleak scenario for net crude price realization for OIL
We admit that the uncertainty on the subsidy-sharing mechanism has impacted stock performance
over the past three months but we believe that the current stock price is discounting a bleak
scenario of net crude price realization of US$55/bbl versus US$58.5/bbl in FY2011 and
US$73.1/bbl in 1HFY12. For the purpose of this exercise, we assume (1) crude (Dated Brent) price
assumption of US$95/bbl and (2) exchange rate assumption of `49/US$. Also, we expect upstream
companies to benefit from any increase in prices of the regulated products which will lower the
gross under-recoveries and in turn, result in lower subsidy burden on upstream companies.
Maintain BUY with a target price of `1,720 (`1,750 previously)
We find OIL’s valuations attractive with the stock trading at 8.3X FY2012E EPS and 4.8X FY2012E
DACF on a conservative assumption of upstream companies bearing 45% of the gross underrecoveries.
We maintain our BUY rating on the stock with a revised target price of `1,720 (`1,750
previously) based on 9X FY2013E EPS plus value of investments.
Revised earnings for FY2012-14E; key risk stems from unfavorable subsidy, price formula
We have revised our FY2012-14E EPS to `156.3 (-9%), `186.6 (-1.9%) and `187.7 (-3.3%) to
reflect (1) higher subsidy sharing by upstream companies, (2) weaker exchange rate assumption
and (3) other minor changes. We assume that upstream companies will bear 45% of total underrecoveries
in FY2012E and 40% in FY2013E versus ~33.3% in 1HFY12 and 38.7% in FY2011.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Oil India (OINL)
Energy
Strong operating results. OIL reported 2QFY12 adjusted EBITDA at `19.6 bn (+57.5%
qoq and +40% yoy), 3.3% higher than our estimate of `18.9 bn. The sharp qoq
improvement in performance was led by (1) higher net realized crude price at
US$86.3/bbl (+US$26.7/bbl qoq) and (2) higher gas sales at 543 mcm (+6.9% qoq). We
maintain our BUY rating with a revised target price of `1,720 (`1,750 previously) based
on 9X FY2013E EPS plus value of investments. The stock is trading at inexpensive 8.3X
FY2012E EPS and 4.8X FY2012E DACF.
Better-than-expected EBITDA; several one-off items in the quarter
OIL reported 2QFY12 EBITDA at `19.6 bn (+57.5% qoq and +40% yoy), 3.3% higher than our
estimate of `18.9 bn. The higher qoq EBITDA reflects (1) sharply higher net realized price at
US$86.3/bbl (+US$26.7/bbl qoq) and (2) higher gas sales at 543 mcm (+6.9% qoq). 2QFY12
reported net income was at `11.4 bn; the sharply higher reported other income at `6 bn (+97%
qoq) was offset by higher DD&A expense at `5.9 bn (+112% qoq). We highlight several one-offs
in OIL’s 2QFY12 results (1) prior-period adjustment of `1.4 bn for increase in transmission tariffs
included in ‘other income’, (2) provision of `2.5 bn on account of differential superannuation
benefits to employees adjusted in ‘other expenditure’ and (3) provision of `4 bn in DD&A expenses
for prospective liabilities relating to the Minimum Work Programme (MWP) of NELP blocks.
Stock discounting a fairly bleak scenario for net crude price realization for OIL
We admit that the uncertainty on the subsidy-sharing mechanism has impacted stock performance
over the past three months but we believe that the current stock price is discounting a bleak
scenario of net crude price realization of US$55/bbl versus US$58.5/bbl in FY2011 and
US$73.1/bbl in 1HFY12. For the purpose of this exercise, we assume (1) crude (Dated Brent) price
assumption of US$95/bbl and (2) exchange rate assumption of `49/US$. Also, we expect upstream
companies to benefit from any increase in prices of the regulated products which will lower the
gross under-recoveries and in turn, result in lower subsidy burden on upstream companies.
Maintain BUY with a target price of `1,720 (`1,750 previously)
We find OIL’s valuations attractive with the stock trading at 8.3X FY2012E EPS and 4.8X FY2012E
DACF on a conservative assumption of upstream companies bearing 45% of the gross underrecoveries.
We maintain our BUY rating on the stock with a revised target price of `1,720 (`1,750
previously) based on 9X FY2013E EPS plus value of investments.
Revised earnings for FY2012-14E; key risk stems from unfavorable subsidy, price formula
We have revised our FY2012-14E EPS to `156.3 (-9%), `186.6 (-1.9%) and `187.7 (-3.3%) to
reflect (1) higher subsidy sharing by upstream companies, (2) weaker exchange rate assumption
and (3) other minor changes. We assume that upstream companies will bear 45% of total underrecoveries
in FY2012E and 40% in FY2013E versus ~33.3% in 1HFY12 and 38.7% in FY2011.
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