IOC Ltd normalized EBITDA, adjusted for inventory/forex movement, was ~Rs. 10,100 cr in Q4FY20, reflecting higher realized refining and marketing margins and lower operating expenses.
Chirag Batavia • 20 July 2020
Indian Oil Corporation Ltd
IOCL’s normalized EBITDA, adjusted for inventory/forex movement, was ~Rs. 10,100 cr in Q4FY20, reflecting higher realized refining and marketing margins and lower operating expenses. Inventory-adjusted refining margins increased by US$6.2/bbl qoq to US$8.2/bbl turning significant premium to benchmark margins.
In Q4FY20, Inventory-adjusted marketing margins also jumped 21% qoq to Rs2,082/ton, contrary to stable margins reported by BPCL and HPCL. Reported EBITDA was modestly positive ~ Rs210 cr, including inventory loss of ~Rs7,160 cr and forex loss of ~Rs2,720 cr.
In FY20, IOCL’s normalized EBITDA declined to ~Rs.27,400 cr from ~Rs.31,300 cr in FY19. Reported EBITDA was sharply lower at Rs18,160 cr including inventory loss and forex loss. Adjusted net income declined 69% yoy to ~Rs.5,200 cr (EPS of Rs.5.7). Gross debt increased to Rs.1,17,000 cr as on FY20 end from Rs.86,400 cr in FY19 led by increase in working capital deployment.
In the post result conference call of Q4FY20, IOCL indicated that refining utilization had recovered to 90% in Jun’20 from ~55% in May'20, while auto fuel demand was ~85-90% of normal volumes from about 45-70% in Apr'20 and May'20.
The recent hikes in auto fuel prices allay concerns on marketing margins for now. The SoTP-based fair value is Rs.115 based on 6x FY22E EV/EBITDA for standalone business plus the value of investments.
Indian Oil Corporation Ltd: BUY
Dated: 20th July 2020
CMP: Rs.87
Fair Value: Rs.115
Potential Upside: 32.1%
Market Cap: Rs.81809 Cr
Time Frame: 12 months
Note: Note: The above is a brief note on the company, based on the inputs of KIE research report dated 26th June, 2020, which is available on their website at: https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamental.
Disclaimer: http://bit.ly/2n5AxIE
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