Oil India shares price rallied about 10 per cent in the last four days to Rs 250 apiece on BSE after the company reported its highest-ever profit at Rs 1,630.01 crore in the January-March quarter. The fourth-quarter net profit was almost double of Rs 847.56 crore profit in the same period last year as the oil major got nearly $100 per barrel price for oil produced and sold. The board of the company also recommended a final dividend of Rs 5 per share for FY22. It had earlier paid an interim dividend of Rs 9.25 a share for the same fiscal. The total dividend for the year will be Rs 14.25 per share.
Oil India Ltd is India’s second-largest national oil and gas business and a Navratna company. It is a government-owned firm under the administrative jurisdiction of the Ministry of Petroleum and Natural Gas.
Analysts at Prabhudas Lilladher believe that Oil India’s earnings will ride on improving crude oil and gas realization, along with expansion of Numaligarh refinery (NRL) by 6 MTPA. “We cut our target multiple due to concerns of subsidy sharing given large marketing losses which should come off as global refiners come back from maintenance shutdown,” it said. The brokerage firm has pegged a target of Rs 344 apiece, an upside of 37 per cent.
Turnover increased by 27 per cent in the fourth quarter to Rs 4,972.91 crore, and by 55 per cent in the fiscal year to Rs 16,427.65 crore. Oil India’s revenue from operations in March 2022 was Rs 4,478.61 crore, up 73.62 per cent from Rs 2,579.50 crore in March 2021, while the company’s EPS climbed to Rs. 15.03 from Rs. 7.82 in March 2021.
According to the brokerage firm Sharekhan, the company’s operational performance was mixed with in line with crude oil realisation of $98.1/ bbl (up 24.8 per cent q-o-q) while oil sales volumes of 0.73 mmt (up 0.8 per cent q-o-q). However, gas sales volume disappointed sharply with a 11.9 per cent q-o-q decline to 0.56 bcm. Oil division’s EBIT grew strongly by 74.2 per cent q-o-q to Rs. 2,089 crore reflecting the benefit of higher oil prices and gas EBIT turned positive to Rs. 77 crore (versus EBIT loss of Rs. 108 crore in Q3FY22), as per the brokerage.
The brokerage has said in a report that “The recent sharp surge in crude oil prices and expectation of further steep hike in domestic gas prices from October 2022 would drive an 11 per cent CAGR in OIL’s standalone PAT over FY2022-FY2024E and improve RoE to 14.3 per cent. Moreover, the recent stake increase in Numaligarh Refinery Ltd (NRL) could create long term value for OIL. Hence, we maintain a Buy rating with an unchanged SoTP-based PT of Rs. 290.”
The stock is trading at 3.5x its FY2023E EPS (including earnings contribution from NRL). Likely windfall tax on upstream PSUs or LPG subsidy burden is key risk our earnings and valuation, says Sharekhan. The company’s Board of Directors has also recommended a final dividend of Rs. 5/- per share, or 50 per cent, for the fiscal year 2021-22, subject to shareholder approval at the next Annual General Meeting (AGM). The company’s dividend yield for the financial year 2021-22 is 6.40 per cent. The stock closed today at Rs 246 in the market, up 3.17 percent from yesterday’s close of Rs 238.45.
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