Dalal Street Investment Journal - - QUERYBOARD -

What should be the strat­egy for In­dian Oil Cor­po­ra­tion Limited? - Deven­dra Ku­mar Singh

In­dian Oil Cor­po­ra­tion Limited (IOCL) is one of the big­gest oil re­fin­ery com­pa­nies in India and across the globe. The com­pany’s oper­a­tions in­clude sale of petroleum prod­ucts and petro­chem­i­cals. The com­pany’s other busi­nesses in­clud­ing sale of gas, ex­plo­sives and cryo­gen­ics, wind mill and so­lar power gen­er­a­tion, and oil and gas ex­plo­rations.

The com­pany’s busi­ness in­ter­ests also ex­tend to the hy­dro­car­bon value chain seg­ment. The com­pany has big en­ergy brands with wide-rang­ing pres­ence such as In­dane Liq­ue­fied Petroleum Gas (LPG) cook­ing gas, Servo lubricants, Xtramile diesel, among oth­ers.

On the fi­nan­cial front, IOCL posted a 19.58 per cent rise in its rev­enue from ₹1,07,197.10 crore in Q1FY17 to ₹1,28,190.50 crore in Q1FY18. How­ever, the com­pany’s profit be­fore in­ter­est, de­pre­ci­a­tion and tax (PBIDT) stood at ₹7,999.57 crore in Q1FY18, down by 41.52 per cent on a year-on-year ba­sis. The profit af­ter tax of the com­pany also de­creased by 44.99 per cent to ₹4,548.51 crore in the first quar­ter of FY18, against a PAT of ₹8,268.98 in Q1FY17.

On an an­nual ba­sis, the com­pany’s rev­enue in­creased 9.47 per cent to ₹4,45,372.91 crore in FY17 from ₹4,06,827.99 crore in FY16. The com­pany’s PBIDT stood at ₹31,781.06 crore in FY17, up by 50.99 per cent from ₹21,048.59 crore in FY16. The com­pany’s profit af­ter tax stood at ₹19,106.40 crore, up by 69.95 per cent in FY17 from ₹11,242.23 crore in FY16.

On the val­u­a­tion front, the share price of IOCL is trad­ing at PE of 13.47x as against its peers such as HPCL (13.39x) and BPCL (17.69x). The com­pany’s PE also seems to be slightly un­der­val­ued in com­par­i­son with the in­dus­try PE of 15.81x. The stock is on a growth mo­men­tum. We rec­om­mend read­er­in­vestors to Hold the stock.

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