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Oil India Shares Surge Over 8%, Rallies 114% in One Year; What Should Investors Do?


Oil India shares on Thursday hit an over seven-year high of Rs 302.80 as it rallied 8 per cent on the BSE. The share of the state-owned oil exploration & production was quoting at its highest level since November 2014. It had hit a record high of Rs 334 on September 9, 2014. In the past one year, the stock has zoomed 114 per cent, as compared to a 5.5 per cent rise in the Sensex benchmark.

Analysts at HDFC Securities believe that Oil India is a favourable buy. “A target price of Rs 300 is premised on increase in crude price realisation and improvement in domestic gas price realisation,” the brokerage firm had said in a Q4FY22 result update report.

Oil prices jumped about 3 per cent to 13-week high levels on Wednesday, as US demand for gasoline continues to rise despite record pump prices on expectations that China’s oil demand will increase, and due to growing supply concerns in several countries.

In the past one month, the stock has rallied 27 per cent, as against a 1 per cent gain in Sensex, after the company reported strong earnings in March 2022 quarter (Q4FY22).

“Oil India management in its analyst meet guided strong volume growth FY25E to be a watershed year, driven by commissioning of major oil and gas expansion along with Numaligarh Refinery’s (NRL) expansion projects. Some key highlights include Oil and gas production to increase by 30 per cent and 70 per cent respectively post completion of major projects in Assam; NRL refinery’s expansion to 9MTPA from current 3MTPA to come on stream by FY25E; No imposition of windfall taxes after two years of depressed profits; and No price cap on gas prices,” Prabhudas Lilladher said in a note.

Analysts at Prabhudas Lilladher believe that Oil India is well placed to benefit from rising oil and gas prices and high GRMs. “We maintain our estimates and retain ‘BUY’ with a PT of Rs 344 based on 3.5x EV/E FY24E,” they said.

Brokerage firm Emkay Global has a buy call on Oil India with a target price of Rs 305. The time period given by the analyst is one year for when Oil India’s share price can reach the defined target. “We value OIL on a DCF-based SOTP that includes standalone, NRL (using DDM), and Mozambique upsides. Investments are valued at our TP or CMP, with a 30 per cent holdco discount,” it said. Adverse oil-gas prices, policy issues, local tensions, cost overruns, operational outages, and dry holes remain the key risks to the upside target. The brokerage lowered the target price by 9 per cent, factoring in lower dividends from NRL due to capex.

The views and investment tips by experts in this report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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