Oil India rating – Sell: Firm’s results were muted yet again

Internet crude realisations have been in keeping with our assumption at $59.8/bbl and fuel realisation remained regular q-o-q at $2/mn BTU.

OIL’s EBITDA was sharply under our expectations in Q4FY21 led by decrease oil and fuel volumes and better working bills; internet earnings was boosted by larger dividend earnings. We elevate our FY2022-23 estimates factoring in larger international crude costs and home fuel costs. Nonetheless, we retain our Promote ranking with a revised SoTP-based Honest Worth of Rs 125 (6X standalone FY2023e EPS plus the worth of investments), noting an uninspiring manufacturing monitor report, weak free money circulate era and muted return ratios.

Q4FY21 outcomes impacted by decrease volumes and better different bills
Income was 3% under our estimate at Rs 25.8 bn. Ebitda was 33% under our estimate at Rs 4.17 bn reflecting sharp 26% q-o-q and 31% y-o-y soar in different bills on account of larger value of help companies and a pointy soar in miscellaneous gadgets. Reported internet earnings of Rs 8.48 bn (EPS of Rs 7.8) was boosted by (i) larger different earnings together with dividends from IOCL and NRL and (ii) decrease DD&A bills. OIL accounted distinctive value of Rs 701 mn pertaining to the blowout at Baghjan.

Crude oil gross sales volumes declined 6% y-o-y to 0.703 mn tons reflecting 5.4% decline in manufacturing to 0.717 mn tons. Fuel gross sales quantity elevated 4.5% y-o-y to 555 mcm, larger than 0.6% enhance in manufacturing to 649 mcm. Internet crude realisations have been in keeping with our assumption at $59.8/bbl and fuel realisation remained regular q-o-q at $2/mn BTU.

Decrease volumes & realisations mar FY21
In FY2021, revenues declined 29% y-o-y to Rs 86.18 bn and recurring Ebitda declined 60% y-o-y to Rs 18.85 bn underpinned by (i) a pointy plunge in oil and fuel realisations; (ii) decrease oil and fuel volumes; and (iii) larger working bills. Reported internet earnings fell by 33% y-o-y to Rs 17.42 bn (EPS of Rs 16.1). Crude oil realisations declined 28% y-o-y in keeping with benchmarks to $44/bbl. Pure fuel realisations declined 40% to $2.3/mn BTU. Crude oil gross sales volumes declined 5.8% y-o-y and fuel gross sales quantity declined 5.6% y-o-y, each in keeping with the manufacturing trajectory. Internet debt elevated to Rs 146.5 bn from Rs 53.1 bn a yr in the past, on acquisition of further 54.16% stake in NRL.

Increase FY2022-23e EPS on larger oil and fuel costs; retain SELL with FV of Rs 125
We elevate FY2022-23e EPS to Rs 16.6 and Rs 16 respectively from Rs 8.3 and Rs 9.4 factoring in —(i) larger oil worth of $65/bbl and $60/bbl and fuel worth of $2.7/mn BTU and $4/mn BTU;, (ii) larger working bills; and (iii) larger debt and capex. We retain Promote and suggest buyers to keep away from upstream PSUs given—(i) uninspiring manufacturing report regardless of a sustained enhance in capex and working prices and (ii) restricted FCF era and deteriorating returns.