The shares of the prominent crude oil manufacturer gained up to 6 percent after the company’s net profit magnified multifold times by 223 percent on a YoY basis in Q2FY25.
With a market capitalization of Rs 85,291.18 crore, the shares of Oil India Ltd were trading at Rs 523.75 per share, increasing around 5.71 percent as compared to the previous closing price of Rs 495.45 apiece.
Reason For Rise:-
The company shares have seen a bullish movement after Oil India Ltd announced financial performance in which revenue plummeted by 3 percent on a yearly basis from Rs 7,497 crore in Q2FY24 to Rs 7,247 crore in Q2FY25, however, on a Quarterly basis revenue slipped by 11 percent from Rs 8,120 crore in Q1FY25 to Rs 7,247 crore in Q2Y25.
Moreover, net profit is magnified drastically by 223 percent on a yearly basis from Rs 640 crore in Q2FY24 to Rs 2,069 crore in Q2FY25, meanwhile on a quarter-on-quarter basis net profit jumped by 3 percent from Rs 2,016 crore in Q1FY25 to Rs 2,069 crore in Q2FY25.
Brokerage Coverage:-
Recently, one of the well-known brokerages in India, Motilal Oswal, gave a ‘Buy’ call on the maharatna stock with a target price of Rs 720 apiece, indicating a potential upside of 37 percent from Wednesday’s price of Rs 525.35 per share.
Rational:-
As per brokerage, OINL plans to drill 78 wells in FY25 and 100 wells in both FY26 and FY27, which is expected to drive production volumes in the long run. The management has guided for a 6% p.a. growth in oil production over the next few years. With regard to gas production growth, the management guides to maintain the current trajectory of 10% p.a.
Moreover, OINL’s production growth has been historically limited by low demand in the North East. However, the IGGL start-up will boost demand, with gas consumption at NRL rising due to capacity expansion. Upcoming City Gas Distribution (CGD) networks may generate an additional 3-3.5 bcm in gas demand.
Management guidance:-
Management remains committed to achieving 4 million tonnes of oil and 5 BCM of gas production within 2-3 years, with plans to drill 78 wells this year and 100 next year. Current production is impacted by underperforming subsidiaries, but improvements are expected with the North East Gas Grid’s completion.
Expansion Plan:-
The NRL expansion project, with a total investment of ₹28,000 crore, has reached 65% physical progress and is expected to be completed by December 2025. Oil India has already invested around ₹19,000 crore in the project, underscoring its commitment to expanding refining Capacity.
Market Conditions:-
Crude oil prices are currently around $80 per barrel, with upstream expenses expected to rise by 5% to 6% due to inflation. Including crude oil and natural gas under GST could lead to substantial savings through input tax credit benefits, improving cost efficiencies for companies.
Company snapshot:-
Oil India Limited is an integrated upstream exploration and production firm established in India that produces crude oil and natural gas. Crude Oil, Natural Gas, LPG, Pipeline Transportation, Renewable Energy and Others are among the company’s business segments.
Written by:- Abhishek Singh
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