Indian Oil Corporation Limited - Technofunda | Globe Capital
16-Sep-2021
Indian Oil Corporation Limited – Technofunda

The Company’s nationwide presence as the leading player in petroleum product markets across the downstream value chain is its key advantage.

Overview and Recommendation

Brief:

The Company’s nationwide presence as the leading player in petroleum product markets across the downstream value chain is its key advantage. It positions itself for a future where India will be leading the global oil demand growth. At the CMP of Rs 113, the stock is trading at P/E multiple of 4.5x with ttm EPS of Rs 25.

Profile:

Indian Oil Corporation Limited (IndianOil) is the country’s largest integrated and diversified energy company. IndianOil’s presence across the entire hydrocarbon value chain allows it to create sustainable business outcomes. Today, it accounts for nearly half of India’s petroleum products market share, with sales of 78.54 million metric tonnes (MMT) in the year 2020-21. Over 32% national refining capacity and 71% downstream sector pipelines throughput capacity are with IndianOil. Its 14,670-km cross-country pipelines network facilitates the transportation of crude oil to refineries and finished products to high-demand centres in an efficient, economical and environment- friendly manner. Its throughput capacity of throughput capacity of 94.56 MMTPA for crude oil & refined products and 21.69 MMSCMD for gas makes it one of the largest pipeline networks in the world.

Key Triggers:

tronarning Indian Oil reporte a three-fold jump in th quarterl profi o inventory gains and higher petrochemical margins. The profit climbed to Rs 5,941 crore in the April-June quarter from Rs 1,911 crore in the year-ago period. Revenue rose 74% to Rs 155,056 crore. The gross refining margin (GRM) jumped to $6.58 per barrel from a negative

$1.98 per barrel a year earlier. The core GRM after offsetting inventory gains comes to $2.24 per barrel.

The company has witnessed a strong recovery in fuel demand following the easing of lockdown restrictions. The demand for petrol is already above the pre-pandemic level expected the demand for diesel to reach normalcy by Diwali if there is no outbreak of the third Covid wave. The demand for jet fuel may fully recover by the end of the current financial year. As per the management, Indian Oil’s refineries may start operating at full capacity by Diwali from the current nearly 90%.

Valuation & View:

The Company’s nationwide presence as the leading player in petroleum product markets across the downstream value chain is its key advantage. It positions itself for a future where India will be leading the global oil demand growth. At the CMP of Rs 113, the stock is trading at P/E multiple of 4.5x with ttm EPS of Rs 25.

Key Risk:

The emergence of multiple waves of the pandemic have prolonged the lockdowns in different parts in country may dent profitability

Technical View:

IOC has been trading in a broader congestion zone (70-118 levels) for last One and a Half year. is a bullish reversal pattern.

Hence, we suggest traders to go long as we are expecting it to test 135 levels in near term.

Summary:

Considering both the factors fundamental & technical parameter, we recommend a ‘BUY’ in IOC at current level for the target price of Rs. 135 with close below stop loss of Rs. 108.

Disclosure

Globe Capital Market Limited (“GCML”) is a Stock Broker registered with BSE, NSE, USE and MSEI in all the major segments viz. Capital, F & O and CDS segments. GCML is also a Depository Participant and registered with both the Depositories viz. CDSL and NSDL. Further, GCML is a SEBI registered Portfolio Manager. GCML includes subsidiaries, group and associate companies, promoters, directors, employees and affiliates.

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