Oil India - Valuations Attractive; Volume Outlook Strong: Motilal Oswal

Motilal Oswal Report

Amid weak crude oil prices, the share price of Oil India Ltd. has declined 22% in the last five weeks. However, we reiterate our Buy rating on the stock and highlight the following:

1. we estimate that the Standalone business (adjusted for investments and Numaligarh refinery stake) trades at seven times FY27E price/earning, which we believe is inexpensive;

2. Oil India’s strong production growth outlook (9% CAGR over FY24-FY27) hedges against the risk of lower oil/gas prices; and

3. the capacity expansion for Indradhanush gas grid and Numaligarh refinery, remains in line with the guided schedule, and will be instrumental in unlocking value in FY26 and beyond.

Lastly, even in the unlikely scenario of crude prices declining to $60/barrel of oil (and gas prices correcting to $6/metric million British thermal unit), our target price will be Rs 563/share (2% downside at current market price), while the return on equity will correct modestly from 15.6% (FY27E) to 11.5%. As such, we believe there is a limited downside for the stock from current levels.

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