IOC: Birds of a feather flock together - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

IOC: Birds of a feather flock together

Nov 27, 2001

Performance of India's only Fortune 500 company, Indian Oil Corporation (IOC), tripped in the quarter ended September '01. Sales for the half-year of FY02 have been salvaged by a 6.4% growth in 1QFY02. That said, the performance is better compared to the other oil refining & marketing (R&M) majors, which reported an 8% drop in topline for 2QFY02.

(Rs m)2QFY012QFY02Change1HFY011HFY02Change
Net Sales 300,796 287,668 -4.4% 578,931 583,711 0.8%
Other Income 1,530 4,219 175.7% 3,378 6,305 86.7%
Expenditure 281,887 278,727 -1.1% 547,697 563,325 2.9%
Operating Profit (EBDIT) 18,910 8,942 -52.7% 31,234 20,387 -34.7%
Operating Profit Margin (%)6.3%3.1% 5.4%3.5% 
Interest 4,113 4,185 1.7% 7,346 8,319 13.3%
Depreciation 5,520 3,614 -34.5% 11,103 7,150 -35.6%
Profit before Tax10,8075,362-50.4%16,16311,223-30.6%
Tax 1,027 712 -30.7% 1,287 1,028 -20.1%
Profit after Tax/(Loss) 9,780 4,650 -52.5% 14,875 10,194 -31.5%
Net profit margin (%)3.3%1.6% 2.6%1.7% 
No. of Shares 778.7 778.7   778.7 778.7  
Diluted Earnings per share*50.223.9 38.226.2 
P/E Ratio  5.8    5.3  

The industry sales were hit on two counts. With the slowdown intensifying in the September '01 quarter, growth in refinery throughput was significantly lower compared to the previous year. In fact, diesel and kerosene, which account for the biggest share in petroleum product consumption, reported negative growth over the concerned period. Further, the global economic downturn put pressure on petroleum product prices, as demand dwindled. This led to reduced realisations and lower gross refining margins (GRMs).

Reflecting the same -- reduced GRMs -- is the OPM, which was lower by 320 and 190 basis points respectively for 2QFY02 and 1HFY02. During the quarter, refining margins continued to remain under pressure, as oil prices ruled in the region of $26 / barrel similar to levels in the corresponding period of the previous year. Raw material expenses, which constitute 27% of operating costs, fell by only 1.1% YoY for 1HFY02. Staff costs for the quarter decreased by 14.3% YoY. The company had carried out a voluntary retirement scheme (VRS) last fiscal and Rs 1.7 bn in expenses are yet to be written off.

Interest costs, which had spiraled in the previous fiscal are showing signs of stabilising. Last year, working capital requirement of the company is likely to have increased due to higher crude & final product prices and blockage of funds in the oil pool account (OPA). Consequently, leading to higher interest costs. In the current fiscal, the YoY effect is nullified.

Although pre-tax profits are down sharply, the same have been lifted by a significant jump other income. Adjusting for other income -- indicator of earnings from core activity -- pre-tax profits are almost wiped away declining by 88% YoY. Tax provision in the current year includes deferred tax liability. Aggregate liability upto March '01 will be provided at the end of the current fiscal from reserves.

At Rs 138 the scrip is trading on a multiple of 5.3x 1HFY02 annualised earnings. The reduced earnings have led to the higher valuation. At the end of FY01 the scrip traded on a multiple of 4.7x FY01 earnings.

Equitymaster requests your view! Post a comment on "IOC: Birds of a feather flock together". Click here!


More Views on News

IOC 2020-21 Annual Report Analysis (Annual Result Update)

Oct 20, 2021 | Updated on Oct 20, 2021

Here's an analysis of the annual report of IOC for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of IOC. Also includes updates on the valuation of IOC.

IOC Announces Quarterly Results (1QFY22); Net Profit Up 172.1% (Quarterly Result Update)

Aug 3, 2021 | Updated on Aug 3, 2021

For the quarter ended June 2021, IOC has posted a net profit of Rs 58 bn (up 172.1% YoY). Sales on the other hand came in at Rs 1,565 bn (up 73.7% YoY). Read on for a complete analysis of IOC's quarterly results.

IOC Reports Highest Ever Annual Profit (Views On News)

May 20, 2021

Boosted by inventory gains, the state-owned refiner posted a record-breaking bottomline.

5 Green Energy Stocks to Watch as India Readies for a Revolution (Views On News)

Oct 13, 2021

The excitement around green energy stocks has opened up a huge contrarian opportunity in the traditional energy space.

Top Performing PSU Stocks over the Past One Year (Views On News)

Oct 1, 2021

After a decade of underperformance, PSU stocks have woken up. Here are the best performing PSUs of past twelve months.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

How to Find Your Next 10-Bagger in this Market (Profit Hunter)

Nov 19, 2021

The #1 make or break factor in your portfolio you shouldn't ignore.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Nov 30, 2021 (Close)