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Oil India (OINL) - Qtr. Update - Dtd. - February 12, 2013




Axis Capital Limited


13 Feb 2013





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Oil India’s (OINL) PAT of Rs 9.4 bn (down 8% YoY) was in line with our and Street estimates. Oil and gas production declined 3% QoQ to 1.6 mnte as decline in matured reservoirs and civic unrest in North-East continues. Net realization stood at US$ 53/bl (flat QoQ). Dry well write-offs were lower at Rs 0.74 bn (Rs 1.1 bn in Q2FY13) implying lower exploration activity. Prefer ONGC over OINL due to better domestic production growth visibility and higher contribution from overseas business. However, OINL is the best play on domestic gas price hike. Doubling of gas prices to US$ 8/mnbtu could lead to 40% (32% for ONGC) growth in our FY15E earnings. Maintain BUY; multiple upside triggers Our TP of Rs 625 (17% upside) factors in robust oil production CAGR of 5%, leading to earnings CAGR of 7% over FY12-15E. Also, diesel deregulation along with direct cash subsidy for cooking fuels may eliminate under-recoveries over the next few years (not factored in). Elimination of subsidies for OINL could improve its fair value to Rs 825, which implies 54% upside from CMP. Domestic gas price hike (to US$ 8/mnbtu as per Rangarajan Committee) remains the biggest trigger. At CMP of Rs 534, the stock trades at 7x FY14E EPS of Rs 72 and 7x FY15E EPS of Rs 70. Key Assumptions: Crude at USD 110/ bbl for FY14 and USD 90/ bbl for FY15. INR/USD at 53 for FY14 and 51.4 for FY15. Regards, Amit Mishra, CFA (Sr VP – Energy) Institutional Equity Research Axis Capital Limited Tel: +91 22 4325 1142 Prashant Tarwadi (AVP – Energy) Institutional Equity Research Axis Capital Limited Tel: +91 22 4325 1113

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