Aggressive capex plans are intended to gradually increase the share of petrochemical and specialty chemicals, shifting away Indian Oil's dependence from simple refining while investments in renewables, biomass and gas are intended to diversify the business mix materially over FY26-30.
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ICICI Securities Report
Driven by the 15% drop in the stock price in past 12 months, the stock currently trades at an attractive 8.4x FY27E PER, 0.9x FY27E price-to-book value and 6.4x EV/Ebitda.
Our SoTPbased valuation, assigning an EV/Ebitda multiple of 5.5x (FY28E) to consolidated Ebitda and valuing its listed investments at current market price, delivers a fair value of Rs 170, ~17% upside (from current market price). Maintain Buy.
Key downside risks:
Sharper-than-expected fall in gross refining margins;
sharper rise in crude prices; and
capex delays and execution challenges.
Key upside risks:
Fall in crude prices;
improvement in refining margins; and
stronger fuel consumption growth and petchem demand growth in India.
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