MOSL: OIL INDIA (Buy)-EBITDA significantly above estimate led by lower opex

​Oil india: EBITDA significantly above estimate led by lower opex

(OINL IN, Mkt Cap USD4.4b, CMP INR363, TP INR418, 15% Upside, Buy)

• OINL’s revenue of INR24.7b (+6% YoY, +6% QoQ) was ahead of our estimate of INR23.1b, led by a higher sales-to-production ratio. Reported EBITDA of INR10.1b (+21% YoY, +16% QoQ) was significantly above our estimate of INR7.6b, led by lower other expenditure at USD4.7/boe v/s USD6.8/boe in 2QFY17 and USD5.4/boe in 1QFY18. PAT came in at INR6.5b (est. of INR5.4b; +11% YoY, +43% QoQ) – the difference at the PAT level declined due to lower other income of INR3.3b (est. of INR4.6b; -15% YoY, +115% QoQ).
  
• Realization at USD50.1/bbl: In 2QFY18, gross realization stood at USD50.1/bbl (est. of USD50.3; +12% YoY, +3% QoQ), led by rising crude oil prices. Production of crude oil stood at 0.85mmt (+5% YoY, +1% QoQ) and of gas at 0.76bcm (+3% YoY, +6% QoQ). Total production grew 4% YoY (+3% QoQ) to 1.62mmtoe. Sales of oil stood at 0.84mmt (+4% YoY, +3% QoQ) and of gas at 0.64bcm (+3% YoY, +7% QoQ). Total sales grew 4% YoY (+4% QoQ) to 1.48mmtoe.
  
• Raising estimates: We raise our earnings estimate by ~20% for FY19/20, led by an increase in Brent crude price assumption to USD60/bbl (v/s USD55/bbl earlier). We believe rising crude oil prices are positive for OINL, and may result in further re-rating of the stock, posing an upside risk to our call.