Nomura and UBS have buy recommendations for Indian Oil Corporation (IOC) post the Q1 numbers of the company, though their target prices and analysis present contrasting perspectives.
Nomura has set a target price of ₹195 per share, highlighting a surprisingly large crude inventory gain of ₹390 crore that bolstered IOC’s Q1 earnings. This gain came despite steady end-of-period crude prices. Nomura’s optimistic view is further supported by IOC’s attractive valuation, trading at just 1.2 times the FY26 book value. The firm’s earnings exceeded estimates, driven by the substantial inventory gain.
Conversely, UBS has a higher target price of ₹210 per share but notes several challenges. While the firm acknowledges the positive impact of refining inventory gains worth ₹390 crore and LPG inventory under-recoveries of ₹410 crore on earnings, it also points out significant shortcomings. UBS reports that IOC’s Gross Refining Margin (GRM) stood at $6.4 per barrel, falling short of the estimated $7.0 per barrel. Core GRMs were particularly disappointing at $2.8 per barrel, adversely affected by scheduled maintenance at the company’s refineries. Additionally, the petrochemical segment lagged, merely breaking even at the EBIT level.
IOC’s Q1 FY25 results showed a flat revenue of ₹1.93 lakh crore. EBITDA decreased by 17% to ₹8,636 crore from ₹10,435 crore. The operating profit margin (OPM) slipped to 4.5%, down from 5.3%. Profit after tax (PAT) plunged by 45% to ₹2,643 crore, compared to ₹4,838 crore in the previous quarter.
