How Oil India's Market Capitalisation Surpassed Peers And Benchmark Index
Oil India's stock surged 35.71% year-to-date, in contrast with Nifty Oil and Gas, which has seen a decline of 6.02%.
Oil India Ltd. has recorded the highest year-to-date surge in market capitalisation at 41.16%, in sharp contrast with the collective market capitalisation drop of 3.42% seen in the Nifty Oil and Gas.
On Aug. 23, the company's market value stood at Rs 31,870.7 crore, marking a significant upturn from its initial market capitalisation of Rs 22,577.3 crore at the beginning of this calendar year.
By contrast, the company's counterparts in the upstream sector, like Reliance Industries Ltd. and Oil and Natural Gas Corp., registered market capitalisation expansions of 9.58% and 19.76%, respectively.
Stock Performance
Oil India's stock has experienced a year-to-date upsurge of 35.71%, in contrast with the Nifty Oil and Gas, which has seen a decline of 6.02%.
The company's shares have also risen by 13.54% within the previous month and 58% over the course of the past year.
In comparison, industry leaders such as Reliance Industries Ltd. and ONGC Ltd. have recorded relatively modest year-to-date stock gains of 1.7% and 2.81%, respectively. Hindustan Oil Exploration Co.'s stock performance declined 20.41%.
Earnings Report
The present calendar year notes the presence of two quarterly earnings cycles that might have influenced Oil India's stock performance this year:
Q1 FY24
All the significant upstream companies encountered a decrease in revenue this quarter, due to a substantial drop in crude oil prices and sluggish demand patterns in the downstream petroleum sector.
Destocking caused by recessionary fears, rising interest rates, and slower-than-expected development in Chinese markets reduced overall demand. Consequently, this led to decreased market expenses and the price realisation of downstream products.
Q4 FY23
Revenue grew marginally by 0.40% sequentially, while year-on-year they rose 20.53%. Ebitda also grew in the 10–20% range, both on an annual and quarterly basis, while net profit levels rose in single-digit percentages.
A prevailing pattern evident in both quarters was that, despite a decline in crude sales on a year-on-year basis, there was an expansion in crude production during both periods.
In Q1 FY24, there was a 5.26% year-on-year upswing in crude oil production, reaching 0.82 million metric tonne as compared with 0.7 million metric tonne from the previous year. Similarly, Q4 FY23 also exhibited a 6.95% rise in production.
Both quarters witnessed rise in sales of natural gas. Q4 FY23 observed a triple-digit percentage surge in natural gas sales, while Q1 FY24 saw 8.04% year-on-year increase in natural gas revenue.
The Way Ahead
On Aug. 8, the U.S. Energy Information Administration said that the agency expects higher oil prices—spurred by Saudi Arabia's extended voluntary production cuts—to create incentives for non-OPEC producers to ramp up their output, allowing growth in global oil production to continue in 2023 and 2024.
The agency raised its global oil demand outlook by 30,000 barrels per day for 2023 to 101.19 million barrels per day, while keeping its 2024 estimate unchanged at 102.8 million barrels per day. The EIA expects the increasing demand and production cuts to prompt a transition from global oil inventory builds to inventory draws during the latter half of the fiscal.
Anticipating a shift toward more constrained global oil market equilibrium, the EIA also increased its projection for Brent crude in 2023 by $3.28, now forecasting it to be $82.62 per barrel. Similarly, its projection for 2024 has been revised upward by $2.97 to $86.48 per barrel.
Brent crude prices have experienced a 5.54% year-to-date rise and a 2.19% increase within a single month, as of Aug. 23.
Shares of Oil India rose 0.70% to Rs 293.35 apiece, as compared with a 0.24% advance in the Nifty 50, as of 1:04 p.m.
