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Oil India Ltd. (OIL) | Q3FY14 Result Update




IndiaNivesh Securities Pvt Ltd


12 Feb 2014





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Oil India Ltd. (OIL) | Q3FY14 Result Update | PAT above our expectation Oil India reported Q3FY14 PAT above our expectation due to higher margin from natural gas segment and lower DD&A cost. Revenue increased by 8% y-o-y (down 4% q-o-q) to Rs 27.30 bn (in line our expectation of Rs 27.32 bn) driven by higher than expected natural gas off take coupled with Rupee depreciation. Revenue from crude oil increases by 8% y-o-y (down 4.9% q-o-q) to Rs. 21.45 bn and natural gas increases by 17% y-o-y and 5% q-o-q to Rs. 4.6 bn. Net realization stood at USD 52.1/bbl v/s USD52.6/bbl in Q3FY13 and USD 52.3/bbl in Q2FY14. In Rupee term net realization increased by 14% y-o-y to Rs 3233/bbl due to Rupee depreciation against USD. Oil India shared subsidy burden of Rs 21.73 bn vs. Rs. 22.3 bn Q2FY14 and Rs. 19.48 bn in Q3FY13. On operational front, crude oil production de-grew by 2.93% y-o-y to 0.894 MMT while natural gas production increased by 0.6% y-o-y to 0.679 BCM. EBITDA margin contracted 135 bps y-o-y to 49.5 % due to higher other expenditure and staff cost. Other expenditure increased (as a percentage of Net Sales) from 8.4% in Q3FY13 to 10.65% in Q3FY14. Net profit decreased by 4 % y-o-y (flat q-o-q) to Rs 9.03bn (above our expectation of Rs 8.6 bn) on account of lower DD&A cost. DD&A cost decreased by 1% y-o-y to Rs. 2.2 bn. Valuation: Though the Indian govt. continued on its promised path of increasing diesel retail prices and also proposed to increase in natural gas prices as expected, announcement of higher subsidy sharing by upstream companies is a concern for investors. However, we believe that the recent reforms undertaken by the Indian government in pricing of petroleum products is expected to be positive for OIL and significant benefits to accrue in FY15. At the CMP of Rs 461, the stock is trading at 6.5x FY15E EPS. Considering the cash outflow due to stake buy in Mozambique field (Rs. 63.37 bn) and dividend payout (Rs. 7.73 bn), we reduce our target price to Rs. 560.

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