Target: ₹140
CMP: ₹117.35
IOC posted Q4-FY22 standalone EBITDA/APAT of ₹12,800 crore/₹6,150 crore, up 36 per cent/12 per cent q-o-q. EBITDA was in line, while PAT missed our estimate by 10 per cent as finance costs were 49 per cent above expectation due to an increase in gross debt (up 8 per cent y-o-y/25 per cent q-o-q).
Reported GRM was $18.5/bbl (vs. $19.5 est), with core GRM at about $13.6/bbl (vs. $10 est). Refinery utilisation was healthy at 106 per cent in Q4. Total marketing volume was largely in line, with domestic sales up 2.8 per cent y-o-y vs. 3.1 per cent for the industry.
IOC has stopped disclosing segment-wise EBITDA. Assuming Rs35bn of marketing inventory gains, our blended margin comes at ₹802/mt, down 85 per cent q-o-q as auto fuel and LPG margins turned negative from RSP freeze. Core EPS is estimated to be ₹0.1/sh.
We cut our FY23EEPS by 20 per cent, lowering marketing margins ahead, though partly offset by higher GRMs.
We value IOC on a SOTP basis with investments at a 30 per cent holdco discount. IOC is at the top of our pecking order among OMCs and we retain Buy on reasonable valuations and about 7 per cent dividend yield.