Tue. Sep 29th, 2020

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Oil India’s valuations appeal but outlook slippery after dull Q1FY21

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Shares of Oil India Ltd are about 39% lower from their pre-covid highs of January on the NSE. True, valuations are attractive but muted June quarter results and weak oil price outlook are likely to keep meaningful upsides at bay in the near-to-medium term.

“Our reverse valuation exercise suggests that the stock is already discounting Dated Brent crude price recovering to about $50 per barrel, providing limited leverage to any improvement from current levels,” wrote analysts from Kotak Institutional Equities in a report on 23 August.

The company announced its June quarter results on Friday evening. Following which, shares traded over 2% lower in early deals on Monday, a day when the broader markets were marginally up.

The state-run oil and gas producer saw 48% year-on-year drop in revenues for the June quarter, reflecting the sharp drop in crude oil prices. The company’s realisations from oil declined 54% year-on-year and nearly 42% sequentially. The company said natural gas price realisation for the June quarter fell to $2.39 per million British thermal units (mmBtu) from $3.23 per mmBtu in the previous quarter. Year-on-year, crude and gas sales declined 7.5% and 4.2%, respectively.

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