Stock gets 50% upside even after 87% drop in net profits; Here’s why

Indian Oil Corporation Limited had revenue from operations at Rs 2,32,303.20 crore in Q3FY23, rising 16.51 percent from Rs 1,99,371. 75 crore in the year-ago quarter. However, it reported an 87 percent decline in its consolidated net profit at Rs 773.23 crore as against Rs 6,143.08 crore in the same period last year. 

The company suffered under-recoveries from the sale of domestic LPG in the Financial Year 2021-22 and in nine months ended 31st December 2022, said the company in its regulatory filing. 

The decline in profits led the stock to decline by 2 percent on Thursday’s session and to reach an intraday low of Rs 78.15 till the afternoon. In the past five days, the scrip has fallen by approximately 5 percent. 

In the past six months, the stock has gained approximately 10 percent but on a yearly basis, it has declined by 5 percent. The scrip reached its 52-week high of Rs 90.70 in April last year and is currently trading 13 percent away from those levels. 

Indian Oil Corporation Limited is a Maharatna central public-sector undertaking that has business interests in the Refining and marketing of natural gas and petrochemicals. It stands as the Largest Refining Company in India. 

Indian Oil Corporation has a ‘Buy’ tag on the stock and has assigned a target price of Rs 118 per share which represents an upside of 51% from the current levels. 

“We cut our estimates of ‘other products’ marketing margin for FY23E to Rs1,000/t from Rs2,500/t earlier and also tweak our retail margin estimates sharply down for Q4, given the lack of any price changes in petrol and diesel,” the brokerage highlighted in its note. 

Written by Anoushka Roy