Fueling Optimism: I-Sec Still Bullish on Oil India With a Target of Rs 530

Updated: May 27, 2025 12:50

Image Source: The Economic Times

Oil India continues to be in the limelight as ICICI Securities (I-Sec) remains bullish on the stock, raising its target price to Rs 530. Despite dull fourth-quarter performance in FY25, the brokerage expects strong upside, underpinned by growth in production, favorable valuations, and healthy expansion plans.

Q4FY25 Performance Overview

Oil India reported a subdued Q4FY25, with standalone EBITDA and PAT falling 16% and 22% year-on-year, respectively, to INR 21.3 billion and INR 15.9 billion—slightly lower than I-Sec estimates.

Reduced oil and gas production for the quarter was partly offset by increased other income and lower interest expenses.

Consolidated EBITDA and PAT also reduced, with NRL (Numaligarh Refinery Limited) witnessing a decline in net Gross Refining Margins (GRMs) by USD 4/bbl year-on-year.

Production and Growth Projections

Q4 oil and gas production was 1.7 million tonnes of oil equivalent (mtoe), while FY25 production was 6.8 mtoe, marking humble rises of 0.2% and 2.4%, respectively.
I-Sec sees better growth in the future, based on:
NRL's 6mt capacity expansion, which will generate ~1.5 million metric standard cubic meters per day (mmscmd) of demand.
IGGL pipeline commissioning, which will unlock new sources of demand for gas.

Valuation and Target Price Update

Target price is updated to Rs 530 (from Rs 580), which reflects a 24% premium over the current market price.
Oil India is available at favorable valuations: 7x FY27E Price/Earnings Ratio (PER), 5x EV/EBITDA, and 1.1x Price/Book Value (P/BV).
Even at the updated target price, the implied P/E is 8.6x FY27E EPS, and EV/EBITDA is 6.1x FY27E, which I-Sec finds attractive.

Earnings and Realisations

Oil realisation forecasts have been lowered to USD 67/69/73 per barrel for FY26/27/28E, capturing the softer pricing environment.
EPS for FY26/27E has been cut by 16.2% and 9.1%, respectively, but a solid EPS CAGR of 22% is anticipated during FY26–28E.

Strategic and Financial Strengths

Robust cash flow will be underpinning higher capex through FY26–28E.
The stock price of the company has fallen by approximately 12% over the last half a year, and hence, valuations now are more favorable for investors.

Risks and Considerations

Major risks are volatile oil and gas prices, policy risks, operational problems, and geopolitical tensions that may affect future performance.

Conclusion

In spite of near-term headwinds and a downward target price revision, ICICI Securities is positive on the medium-term outlook of Oil India. The brokerage points towards strong expansion plans, favorable valuations, and the possibility of earning strong growth as reasons to keep a "Buy" rating, with a new target price of Rs 530, which commands a considerable premium from present levels.

Sources: ICICI Securities, Republic World, Moneycontrol

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