LKP is bullish on OIL India and has recommended buy rating on the stock with a target of Rs 1487 in its June 1, 2011 research report.
“OIL India reported a good set of numbers in Q4 FY11 powered by higher APM gas price in spite of the adhoc hike in upstream subsidy burden. Total sales for the quarter increased 10.2% yoy but fell 15.5% qoq to Rs 20,189 mn: Q4 FY11 subsidy burden at Rs 16,054.3 mn (USD 51.1/bbl) was much higher compared to subsidy/bbl of USD 18.5/bbl in Q3 FY11. This resulted in the net realization dropping 21.2% q-o-q from USD 67.1/bbl in Q3 FY11 to USD 52.9/bbl in Q4 FY11. Q4 FY11 crude production at 0.94 MMT was the highest in FY11. Crude sales at 0.95 MMT was higher 4.1% q-o-q and 6.3% y-o-y.”
“Natural gas sales jumped 2.1 times y-o-y to Rs 2,404 mn.The jump in sales was primarily due to the hike in APM gas price from USD 1.8/mmBtu to USD 4.2/mmBtu in Jun 2010. However, natural gas production at 0.6 bcm was down 2.6% q-o-q but 2.6% higher y-o-y. Natural gas sales was also lower 2.9% q-o-q, but higher by 4% y-o-y.”
“Operating expenses fell by 26% q-o-q to Rs 2,196 mn. However, other expenses at Rs 2,411 mn tripled q-o-q driven by a jump in provisions & write-offs, which seems to be a regular occurrence in Q4 results. DD&A expense was up 58.2% at Rs 4,318 mn owing to dry wells written off in its overseas exploration blocks. Interest expense jumped to Rs 112 mn from Rs 12 mn q-o-q, which is a result of jump in debt on books from Rs 375 mn in FY10 to Rs 10,267.9 mn in FY11. Net profit for Q4 FY11 was up 28.5% yoy, but down 38% qoq, at Rs 5,626 mn. EPS for the quarter was Rs 23.4.”
“We estimate topline growth of 7.6% and 8.7% in FY12 & FY13 respectively. We estimate net sales of Rs 89,358.6 mn & Rs 97,129 mn in FY12 & FY13. We estimate capex of ~ Rs 30 bn going forward to be incurred in its mature fields, NELP blocks & international blocks. We estimate EPS of Rs 129.8 and Rs 132.5 in FY12 & FY13 respectively. We value OIL India using DCF valuation with WACC of 12% and terminal growth rate of 2%. We maintain our BUY rating with a target price of Rs 1,487. Our price target translates into EV/boe of USD 6.1/ boe and FY12E & FY13E P/E of 11.5x and 11.2x respectively,” says LKP Research Report.
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