New Delhi, 31st July 2023: The release of Indian Oil Corporation’s (IOC) Q1 results led to a decline of over 2% in the company’s share price on Monday. The share price dropped by 2.38% to Rs 93.01 per share on the BSE.
During the April-June quarter, IOC reported a significant increase in its net profit, rising by 37% to Rs 13,750.44 crore compared to Rs 10,058.69 crore in the previous quarter. The company’s consolidated net profit for the first quarter of FY2023-24 stood at Rs 14,735 crore, a notable improvement from the net loss of Rs 883 crore in the same period in FY23, which was primarily due to high international crude oil prices.
Despite the increase in net profit, the revenue from operations in the June quarter witnessed a decrease of 12%, amounting to Rs 2.25 lakh crore, as opposed to Rs 2.55 lakh crore in the year-ago period. Additionally, there was a 2.36% decrease in the revenue from operations during the first quarter of FY24, amounting to Rs 1.98 lakh crore, compared to Rs 2.02 lakh crore recorded in the fourth quarter of FY23.
However, despite the challenges, IOC witnessed a notable enhancement in its operational performance for the quarter. The company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) experienced a substantial surge, rising by 44.5% to reach Rs 22,163 crore compared to the previous quarter’s Rs 15,340 crore. The Average Gross Refining Margin (GRM) for the period April-June 2023 was $8.34 per bbl, compared to $31.81 per bbl in the June 2022 period.
Investment recommendations for IOC vary among different market experts. Nomura downgraded IOC to ‘Neutral’ due to Q1 results falling below their estimates, mainly due to lower-than-expected refining margins. They set a target price of Rs 105 per share and expect oil prices to remain elevated in the coming months, potentially impacting the contribution from the segment over H2FY24. Nuvama Institutional Equities remains cautious about any potential price cuts by the government ahead of upcoming elections, which could pose a risk to margins. On the other hand, ICICI Securities believes that the market will likely tighten in H2FY24. As a result of their findings, they have decided to uphold their ‘Buy’ rating on the stock while increasing the target price to Rs 120 per share, up from the previous Rs 115.
