EBITDA beat driven by petchem-pipeline outperformance
Emkay Global Financial Services recommends BUY of IOCL
CMP: Rs99 | Target Price: Rs110
■ Q3FY21 standalone EBITDA/PAT came in at Rs96.2/49.2bn, up 41%/110% yoy (up 2%/ down 21% qoq). EBITDA beat estimate by 15%, driven by higher petchem margins and pipeline volumes. PAT was a 7% miss due to higher taxes/interest; lower Other Income.
■ Refining inventory gain was Rs9.2bn, implying core GRM of USD1.2/bbl (vs. USD1 est). Blended marketing margin fell 1% qoq to Rs5.8/kg (5% miss) but inventory gains were high at Rs17.1bn (Rs10bn est). Total/domestic sales fell 1.6/2.0% yoy to 23.0/21.4mmt.
■ Petchem EBITDA jumped 61% qoq to Rs19.5bn due to a 10% rise in volumes and a 48% uptick in margin. Pipeline EBITDA rose 32% to Rs17bn on 26% volume growth. Gross debt fell 21% qoq to Rs725bn (down 4% yoy). Core EPS in Q3 stood at Rs3.9/sh, a 12% beat.
■ We raise FY21E EPS by 17% as we build in higher GRM/Other Income and lower interest. We cut FY22/23E EPS by 8%/6%, assuming low marketing margins. We retain our TP at Rs110 with Mar'23E rollover and valuing IOCL at 6x EV/EBITDA. Maintain Buy/EW in EAP.