Indian Oil rating – Hold: Inventory gain gave earnings a boost

We have now minimize IOC’s FY22E GRM to $3/bbl from $3.4/bbl earlier however raised petrochem Ebitda estimate by 45% to Rs 70 bn. The online impression is an improve in FY22E EPS by 4%

Indian Oil Corporation’s (IOC’s) Q4FY21 recurring EPS is up 4x y-o-y pushed by stock achieve vs loss, petrochemical Ebitda bounce and fall in curiosity price. FY21 recurring EPS can also be up 4x y-o-y pushed by similar components as in This autumn moreover 37% y-o-y rise in auto gasoline web advertising margin. We have now raised FY22E EPS by 4% and TP by 5% to Rs 110 (3% upside) primarily on improve in petrochemical Ebitda to mirror the latest margin energy and outlook.

Web advertising margin is weak in FY22-TD at Rs 0.43/l. Rs 2.05-2.5/l worth hike is required to spice up it to Rs 2.5/l, which is our FY22 estimate. We’re optimistic about future hikes given the federal government’s observe report. IOC’s GRM is weak in FY22-TD and restoration in diesel cracks is vital to GRM rising to our FY22 estimate of $3/bbl. We downgrade IOC to Maintain from ADD as we await GRM and advertising margin restoration.

This autumn EPS surge pushed by stock achieve and petrochemical Ebitda bounce: Standalone Q4FY21 recurring EPS is up 4.3x y-o-y pushed by (i) estimated crude and product stock achieve of Rs 84 bn vs lack of Rs 185 bn in Q4FY20; (ii) 4.7x y-o-y bounce in petrochemical Ebitda to Rs 22.5 bn; and (iii) 42% y-o-y fall in curiosity price (debt is down 12% y-o-y however up 41% q-o-q to Rs 1,023 bn in end-Mar’21). Reported GRM was $12.5/bbl vs minus $9.6/bbl in Q4FY20 whereas core GRM at $4.5/bbl is down 44% y-o-y vs $8.2/bbl in Q4FY20.

Web advertising margin was down 61% y-o-y at Rs 1.2/l. Excluding stock achieve/loss, This autumn standalone EPS is down 84% y-o-y. Consolidated recurring This autumn revenue stood at Rs 90.3 bn vs lack of Rs 5.5 bn in Q4FY20; share of revenue from JV/associates is up 6% y-o-y pushed by subsidiary Chennai Petroleum’s recurring revenue of Rs 2.3 bn vs lack of Rs 16.4 bn in Q4FY20.

Auto gasoline advertising margin weak in FY22-TD: Auto gasoline web advertising margin was up 37% y-o-y at Rs 3.05/l in FY21. It’s weak at Rs 0.66/l on 19-Might’21 and Rs 0.43/l in FY22-TD regardless of petrol and diesel price hikes of Rs 2.5-2.8/l within the final two weeks. Web margin is estimated at Rs 0.39/l on 1-Jun’21 and Rs 0.79/l on 16-Jun’21.

Core GRM up q-o-q in Q1FY22-TD: We estimate IOC’s Q1FY22-TD GRM at $0.79/bbl. Gradual restoration in world demand as vaccines are rolled out might assist diesel cracks and GRM recuperate.

Increase FY22E EPS and goal worth: We have now minimize IOC’s FY22e GRM to three/bbl from $3.4/bbl earlier however raised petrochemical Ebitda estimate by 45% to Rs 70 bn to mirror the energy in petrochemical margins as a result of snowstorm within the US gulf coast in Feb’21; we estimate IOC’s petrochemical Ebitda at Rs 23 bn in Q1FY22E. The online impression is an improve in FY22E EPS by 4% and TP by 5% to Rs 110. Restoration in auto gasoline advertising margin and GRM is vital to enchancment in IOC’s inventory efficiency.