Oil India Sees Target Price of Rs 550: Prabhudas Lilladher Recommendation
Oil India's Mixed Quarter: Crude Production Rises, EBITDA Falls Short
Oil India's latest research report by Prabhudas Lilladher highlights a mixed quarter for the company. Crude oil production grew 3.8% quarter-over-quarter (QoQ) to 0.9 million metric tons (mmt), while gas production declined 5.9% QoQ to 0.8 billion cubic meters (bcm).
The company's oil price realization improved QoQ to USD77.9 per barrel (bbl) versus USD62.8/bbl amid disruptions in West Asia. However, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) stood at Rs18.2 billion, missing estimates of Rs21.6 billion by Prabhudas Lilladher and Rs20.0 billion by Bloomberg Estimates (+60.6% year-over-year (YoY), +39.1% QoQ). This shortfall was attributed to an increase in other expenses, including an exchange loss of Rs4.9 billion and a write-off of Rs2.2 billion, higher levies, and contract costs.
Despite the miss on EBITDA, the company's Profit After Tax (PAT) stood at Rs17.9 billion, beating estimates due to high other income of Rs16.5 billion by Prabhudas Lilladher and Rs11.7 billion by Bloomberg Estimates (+12.5% YoY, +121.4% QoQ).
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| Company | Estimate (Rs billion) | Actual (Rs billion) | YoY Growth | QoQ Growth |
|---|---|---|---|---|
| Prabhudas Lilladher EBITDA | 21.6 | 18.2 | 60.6% | 39.1% |
| Bloomberg Estimates EBITDA | 20.0 | 18.2 | 60.6% | 39.1% |
| Prabhudas Lilladher Other Income | 16.5 | 16.5 | 12.5% | 121.4% |
| Bloomberg Estimates Other Income | 11.7 | 16.5 | 12.5% | 121.4% |
Recent revisions to royalty rates from 16.7% to 10% by the Ministry of Petroleum and Natural Gas (MoPNG) are expected to have a positive impact on the upstream sector.
The research report continues to maintain a conservative outlook, with oil and gas volume estimates of 3.6 mmt/3.3 bcm in FY27E (previously 3.6 mmt/3.4 bcm) and 3.7 mmt/3.4 bcm in FY28E (previously 3.8 mmt/3.6 bcm), reflecting lower-than-expected production trends.
Outlook
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The revision in FY27 estimates reflects higher crude realization assumptions, which outweigh the impact of lower production estimates. Valuing the standalone business at 10x FY28E Adjusted Earnings Per Share (Adj EPS) and adding the value of investment in Numaligarh Refinery Limited (NRL), the report arrives at a Target Price (TP) of Rs550 (earlier: Rs511) and maintains the rating at 'Accumulate'.
Investor Takeaway
Oil India's QoQ EBITDA missed estimates due to increased expenses, but PAT beat estimates due to high other income.
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