Business Desk – Strong buying was seen in the shares of oil sector government company Oil India on Tuesday i.e. 11th August. Following strong Q1 results, the stock rose nearly 6.8% during trade to reach an intra-day high of Rs 483.85. However, the stock was trading around 4.67% higher at Rs 473.70 after some profit booking at upper levels.
The main reasons for the rise in the stock were the company's better than expected quarterly results and the positive opinion of Elara Capital. The brokerage has given a target price of Rs 672 while maintaining the buy rating on the shares of Oil India. This indicates a potential upside of about 42% from recent prices.
Profit increased by 253% in Q1, results better than expected
Standalone profit of Oil India increased 253% year-on-year to Rs 2,900 crore in the June quarter. This is much higher than Elara Capital's estimate of Rs 2,300 crore. Standalone figures include the performance of the company's own businesses. At the same time, after including the earnings of Subsidiaries and Group Companies, the company's profit almost doubled to Rs 4,000 crore. The company's revenue stood at Rs 7,960 crore. At the same time, Oil Sales were also about 8% more than the brokerage estimate.
Gas business weak, sales 11% less than expected
However, the performance of the company's Gas Business was weaker than expected. The company's Gas Sales in the quarter stood at 0.92 MMT i.e. 0.62 BCM, which is about 11% less than Elara Capital's estimate. MMT and BCM are units for measuring the quantity of gas.
49% jump in Crude Realization
The most important positive sign for Oil India was the strong increase in Crude Realisation. Crude Realization means the average price the company gets per barrel from the sale of crude oil. In the June quarter it increased by 49% year-on-year to $ 99 per barrel. This gave a big support to the company's earnings. At the same time, Crude Production also increased by 11% to 0.95 MMT. This was about 2% more than Elara Capital's estimate.
Profit also benefits from less expenses and more other income
According to Elara Capital, better crude production and sales volumes strengthened the company's earnings. Apart from this, profit also benefited from lower operating expenses and increase in other income. However, high statutory levies put some pressure on the company's earnings.
Production expected to increase in FY27
Oil India Management has given positive indications regarding Crude Production in the financial year 2027 i.e. FY27. According to the management, the company's crude production can reach at least 3.9 to 4.0 MMT in FY27.
If production reaches this level, the company's operating income can benefit from the sale of more crude. This expectation is being considered as a big growth trigger for Oil India shares going forward.
Elara Capital gave target of Rs 672
Elara Capital has given a Buy rating on Oil India in view of strong Q1 results, better Crude Realization and expectations of increased production in FY27.
The brokerage has kept the target price of the share at Rs 672. This shows a potential upside of about 42% compared to the current price of around Rs 473.70.
However, target price is not a guarantee in the stock market. Crude Oil price, production, government charges and upcoming results of the company can affect the further movement of the stock.