Oil India Q3 Results Review - Production Outlook Remains Robust Going Forward: Motilal Oswal

Motilal Oswal Report

Oil India Ltd. reported an Ebitda of Rs 21.1 billion in Q3 FY24, which was 8% lower than expected and down 26% YoY. This decrease was primarily due to higher other expenses compared to the previous year. Total sales volumes were in line with our estimates, with net oil realisation at $ 74.3/ barrel of oil. Reported profit after tax, at Rs 15.8 billion (down 9% YoY), was above our estimate due to higher-than-expected other income and lower tax rate.

Management highlighted that there was accelerated drilling in some of the fields. It expects to double the number of wells in FY25 and incremental wells to be drilled in FY26 as well, which would take oil production to 4 million metric tone in FY26.

Management guided oil production of 3.35-3.40 million metric tone in FY24, and 3.8 million metric tone in FY25 (after taking into account the natural decline of 8-10% from existing fields in all three years).

Our revised production volume assumptions for FY26 for oil and gas remains at 3.68 million metric tone for oil and 4.22 billion cubic meters for gas, still 8/16% below company guidance.

Our crude assumption remains at $ 85/ bbl for FY25/26.

We raise our earning per share by 8% for FY24E and increase the revenue/Ebitda/EPS for FY25E and FY26E by 4%/8%/13% and 5%/10%/14%, respectively, fueled by the strong outlook for oil and gas production.

The stock currently trades at a price/earning multiple of 7.2 times FY25E EPS and 5.5 times FY25E enterprise value/Ebitda. We value the stock at 7 times December- 25E standalone adjusted EPS and add investments to arrive at our target price of Rs 650. Reiterate 'Buy'.

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