Oil India Q4 Results Review - Volume Ramp-Up, NRL Startup Key Medium-Term Catalysts: Motilal Oswal

Motilal Oswal Report

At its analyst meet, Oil India Ltd.'s management reiterated its target of increasing production from 6.5 mmtoe in FY24 to 9 mmtoe by FY26. Oil production is expected to ramp up from 3.4 mmt in FY24 to 3.8 mmt and more than 4 mmt in FY25/FY26, while gas production is likely to be 5 bcm by FY26.

In contrast, we build in oil and gas production of 3.7 mmt and 4.2 bcm in FY26, respectively. FY25 capex guidance was Rs 69 billion, up from Rs 59 billion in FY24. Numaligarh refinery is slated to start in December 2025, with the Paradeep Numaligarh pipeline expansion set to be completed by September 2025.

Construction of the Rs 72 billion PP project (360 KTA capacity) at NRL will begin in Q2 FY25.

After a strong run-up, Oil India now trades at 8.4 times FY26E standalone PE and 1.3 times price-to-book. As such, we believe most of the valuation re-rating upside is behind now and volume delivery will be key to sustaining its outperformance.

We raise our production volume assumptions for FY25/FY26 by 2%/3%, still far below management guidance of 9 mmtoe by FY26.

We believe that building an exploration and development pipeline is instrumental in sustaining volume growth in the medium to long term, especially beyond FY26.

We raise the target price to Rs 775/share as we build in oil and gas production of 3.7 mmt and 4.2 bcm in FY26, respectively.

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