MOSL: IOC (Buy)-Adjusted EBITDA in-line-core GRM at USD6.1/bbl

IOC: Adjusted EBITDA in-line; core GRM at USD6.1/bbl

(IOCL IN, Mkt Cap USD21.3b, CMP INR154, TP INR263, 71% Upside, Buy)

IOCL’s adjusted EBITDA declined 10% YoY (grew 9% QoQ) to INR76b, in line with our estimate of INR75b. At INR110b, reported EBITDA beat our estimate of INR89b, led by higher inventory gain of INR34b. Reported PAT grew 40% YoY (declined 34% QoQ) to INR52b (our estimate: INR48b), led by (a) 13% YoY (99% QoQ) growth in interest outgo to INR13b (our estimate: INR6.8b, (b) 88% YoY (82% QoQ) decline in other income to INR2.5b (our estimate: INR7.5b), and (c) higher tax rate of 35% (our estimate: 33%).

• Core GRM was USD6.1/bbl v/s our estimate of USD5.6/bbl and SG GRM of USD7/bbl. Reported GRM was USD9.1/bbl due to inventory gain of USD3/bbl (INR24b). Refining throughput was 17.2mmt (flat YoY, -6% QoQ) and capacity utilization was 100.5%. Paradip Refinery was shut in March, which impacted GRMs.
• Strong marketing performance: While domestic sales of refined products grew 6% YoY (flat QoQ) to 19.7mmt, better than expected marketing margins boosted marketing segment performance. Marketing inventory gains were INR9.9b v/s INR9.6b in 3QFY18 and INR9.1b in 4QFY17. Implied gross marketing margin including inventory was up 16% YoY and 27% QoQ.
• Petrochemical EBITDA grew 8% QoQ (declined 17% YoY) to INR16.9b, led by sequential improvement in spreads.
• For FY18, EBITDA grew 32% to INR450b and PAT grew 11% to INR226b. Refinery throughput was 69mmt and marketing sales were 88.7mmt. Core GRM was USD7.37/bbl in FY18.