Production outlook remains robust going forward
Oil India (OINL) reported an EBITDA of INR21.1b in 3QFY24, which was 8% lower than expected and down 26% YoY. This decrease was primarily due to higher other expenses compared to the previous year. Total sales volumes were in line with our estimates, with net oil realization at USD74.3/bbl. Reported PAT, at INR15.8b (down 9% YoY), was above our estimate due to higher-than-expected other income and lower tax rate.
Management highlighted that there was accelerated drilling in some of the fields. It expects to double the number of wells in FY25 and incremental wells to be drilled in FY26 as well, which would take oil production to 4mmt in FY26. Management guided oil production of 3.35-3.40mmt in FY24, and 3.8mmt in FY25 (after taking into account the natural decline of 8-10% from existing fields in all three years).
Our revised production volume assumptions for FY26 for oil and gas remains at 3.68mmt for oil and 4.22bcm for gas, still 8/16% below company guidance. Our crude assumption remains at USD85/bbl for FY25/26.
We raise our EPS by 8% for FY24E and increase the revenue/EBITDA/EPS for FY25E and FY26E by 4%/8%/13% and 5%/10%/14%, respectively, fueled by the strong outlook for oil & gas production.
The stock currently trades at a P/E multiple of 7.2x FY25E EPS and 5.5x FY25E EV/EBITDA. We value the stock at 7x Dec’25E standalone adj. EPS and add investments to arrive at our TP of INR650. Reiterate BUY.
Miss on EBITDA; beat on PAT due to higher-than expected other income and lower tax
Revenue was in line with our estimate at INR58.2b (down 1% YoY). Oil sales stood at 0.85mmt (our estimate of 0.88mmt, up 10% YoY). Gas sales stood at 0.68bcm (our estimate of 0.68bcm, up 10% YoY).
Oil realization, net of windfall tax, stood at USD74.3/bbl (our estimate of USD72.5/bbl, down 4% YoY).
EBITDA was 8% below our estimate at INR21.1b (down 26% YoY). Reported PAT was above our estimate at INR15.8b (est. INR14.7b, down 9% YoY) due to higher-than-expected other income and lower tax.
PBT from refining products grew to INR11.3b (from INR9.9b in 2QFY24), driven by improvements in crude throughput and distillate yield. GRM stood at ~USD12.7/bbl in 3QFY24 (vs. USD16/bbl in 2QFY24).
For 9MFY24, revenue stood at INR163.7b (down 7% YoY); EBITDA stood at INR69b (down 6% YoY), while Adj. PAT was INR51b (up 2% YoY). Crude oil sales came in at 2.4mmt (up 6% YoY), while gas sales stood flat YoY at 1.9bcm.
Net realization was USD74.7/bbl (down 15% YoY).
Valuation and view
Production growth guidance remains robust, with drilling activity and development wells in old areas contributing to this growth. OINL is also applying new technologies to grow production. Capacity expansion for NRL (from 3mmt to 9mmt) would also be completed by Sep’25, which would help in further
upside.
OINL remains a strong conviction with a 1.2x FY25E P/B (standalone) valuation. It is a unique play to benefit from the strong multi-year upcycle in both upstream and refining. The stock currently trades at a P/E multiple of 7.2x FY25E EPS and 5.5x FY25E EV/EBITDA. We value the stock at 7x Dec’25E standalone
adj. EPS and add investments to arrive at our TP of INR650. Maintain BUY.
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