Oil India gains 3% post Q2 results, share buyback plan

For every $1 increase in crude oil prices, the impact on the current account deficit (CAD) is likely to be $1 billion
Shares of Oil India were up by 3% at Rs 205 per share on the BSE in early morning trade after the company reported a 33% year-on-year (Y-o-Y) growth in its standalone net profit at Rs 8.62 billion in September quarter (Q2FY19). The state-owned oil exploration & production firm had a profit of Rs 6.46 billion in the year-ago quarter.

The revenue from operations rose 51% Y-o-Y at Rs 37.44 billion against Rs 24.74 billion in the corresponding quarter of previous fiscal. The increase in the crude oil price has reflected in the earnings of the company.

EBITDA (earnings before interest, tax, depreciation and amortization) margin, however, declined 150 bps to 39.4% in Q2FY19 from 40.9% in Q2FY18.

Oil India said that the board of directors of the company is scheduled to meet on Monday, November 19, 2018, to consider the proposal for buyback of the fully paid-up equity shares of the company.

Last year, Oil India, the nation's second-largest state explorer, had bought back 44.9 million equity shares for Rs 15.27 billion at a price of Rs 340 per equity share (pre-bonus share in the ratio of 1:2).

According to analyst BOB Capital Markets, the stock offers deep value at current levels, factoring implied oil realisations of around US$ 40/bbl (net of a subsidy hit of US$ 10-14/bbl over FY19-FY21E).

“We continue to factor in a subsidy burden of US$ 10-14/bbl for Oil India over FY19-FY21 due to a lack of clarity from the government. Still, at 5.7x/5.5x FY20E/FY21E EPS, Oil India offers value and is pricing in the worst case (viz. an ad-hoc subsidy-sharing regime). The recent decline in oil price offers respite from subsidy concerns. In case of a confirmation of nil subsidies (clarity likely by Q3FY19 earnings),” the brokerage firm said result review with maintaining ‘buy’ rating on the stock.

At 09:41 AM; Oil India was trading 1.6% higher at Rs 202 on the BSE, as compared to 0.06% rise in the S&P BSE Sensex. A combined 701,342 equity shares changed hands on the counter on the BSE and NSE.

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