Indian Oil result: Should you buy, sell or hold stock as IOC Q4 result misses estimates

Indian Oil Corporation (IOC), the state-run oil refiner, reported a 40% sequential fall in its standalone net profit for the quarter ended March 2024. IOC posted a net profit of ₹4,837.69 crore in Q4FY24 as against ₹8,063.39 in the previous quarter.

IOC’s revenue from operations for the quarter declined 1.4% to ₹2.19 lakh crore from ₹2.23 lakh crore, QoQ.

The refiner’s EBITDA fell 33% QoQ to ₹10,435 crore, missing consensus estimates by 33%. This was led by weak refining and petchem partially offset by strong retail margins.

Read here: IOC Q4 Results: Net profit drops 40% QoQ to ₹4,838 crore; declares dividend of ₹7

Gross Refining Margins (GRM) fell 45% YoY and 38% QoQ to $8 per barrel led. 

IOC’s Petroleum Products segment EBIT declined to ₹7,271.57 crore from ₹11,428.88 crore, sequentially, while Petrochemicals segment reported EBIT loss of ₹399.75 crore from ₹196.21 crore, QoQ.

The company’s board recommended a final dividend of ₹7 per equity share and also approved an investment of ₹1,303.75 crore as equity in its subsidiary for implementation of 1 GW installed capacity of Renewal Energy.

IOC share price ended over 4% lower on Tuesday after its Q4 results missed Street estimates. IOC shares have gained over 30% in 2024 so far and the stock has risen more than 107% in one year.

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Here’s what brokerages have to say on IOC Q4 results and IOC share price.

Nuvama Institutional Equities

Nuvama Institutional Equities expects near-term weak GRMs on likely weak demand but maintains long-term Golden refining era thesis. IOCL reported a chemical EBIT loss of ₹400 crore on weak margins offset by 21% YoY and 19% QoQ volume rise. Following a 2x YoY rise in stock price, the brokerage firm believes high valuations now bake in strong earnings growth of the past few quarters. 

“IOCL shares are currently trading at 7x 2-year forward EV/EBITDA (above +1 SD) even above highly complex US refineries. We believe a couple of past strong quarterly performances has likely peaked (reflecting in current high valuation),” Nuvama Equities said.

It believes risk-reward is less favourable at current valuation and retains ‘Reduce’ rating with an unchanged IOC share price target of ₹151 apiece.

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Emkay Global Financial Services

IOC’s marketing segment posted steady performance, despite ₹10.2 billion negative LPG buffer with seemingly better core marketing margin partly offset by higher opex. Domestic sales grew 3% YoY, while diesel was down 5%. Petchem EBIT losses expanded to ₹400 crore versus ₹200 crore QoQ, due to weak deltas. Net debt grew 10% QoQ to ₹1.09 lakh crore, bettering our estimate, Emkay Global Financial Services said.

Post-election cycle, it expects OMCs’ marketing business to improve as price action resumes, supporting healthy margins. The brokerage attributed higher earnings to the marketing segment, while cutting refining profitability, besides factoring-in lower net debt in FY25E. It retained blended target EV/EBITDA of 6.2x. 

Emkay Global slightly tweaked FY25-26 EPS estimates by 2-3% each. It retained an ‘Add’ rating on the stock and revised March-2025 target price by 13% to ₹180 per share. 

On Tuesday, IOC shares ended 4.44% lower at ₹168.95 apiece on the BSE.

Read all Q4 results here

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.